September 2024 HR Update

Medicare Part D Notices Are Due Before Oct. 15, 2024

Each year, Medicare Part D requires group health plan sponsors to disclose to Medicare Part D-eligible individuals and to the Centers for Medicare and Medicaid Services (CMS) whether the health plan’s prescription drug coverage is creditable. Plan sponsors must provide the annual disclosure notice to Medicare-eligible individuals before Oct. 15, 2024 — the start date of the annual enrollment period for Medicare Part D. CMS has provided model disclosure notices in English and Spanish for employers to use.

This notice is important because Medicare beneficiaries who aren’t covered by creditable prescription drug coverage and don’t enroll in Medicare Part D when first eligible will likely pay higher premiums if they enroll later. Although there are no specific penalties associated with this notice requirement, failing to provide the notice may be detrimental to employees.

To make the process easier, employers often include Medicare Part D notices in open enrollment materials sent out annually. If a plan sponsor provides the disclosure notice with other plan participant information, the creditable coverage disclosure must be prominent and conspicuous. This means that the disclosure notice portion of the document or a reference to the section in the document that contains the disclosure notice must be prominently referenced in at least 14-point font in a separate box, bolded or offset on the first page of the provided plan participant information. Also, as a practical matter, group health plan sponsors often provide creditable coverage disclosure notices to all plan participants. Additionally, plan sponsors may use the electronic disclosure standards under Department of Labor (DOL) regulations to send the creditable coverage disclosure notices electronically.

Pay-or-Play Affordability Percentage Will Increase for 2025

On Sept. 6, 2024, the IRS released Revenue Procedure 2024-35 to index the contribution percentage in 2025 for determining the affordability of an employer’s plan under the Affordable Care Act (ACA). For plan years beginning in 2025, employer-sponsored coverage will be considered affordable under the ACA’s “pay-or-play” rules if the employee’s required contribution for self-only coverage does not exceed 9.02% of their household income for the year.

Affordability Test

The ACA’s pay-or-play rules require applicable large employers (ALEs) to offer affordable, minimum-value health coverage to their full-time employees (and dependents) or risk paying a penalty. The affordability of health coverage is a key point in determining whether an ALE may be subject to a penalty. An ALE’s health coverage is considered affordable if the employee’s required contribution to the plan does not exceed 9.5% (as adjusted annually) of the employee’s household income for the taxable year. This percentage is adjusted annually based on health plan premium growth rates in relation to income growth rates.

In recent years, the affordability percentage has been adjusted to:
9.12% for plan years beginning in 2023;
8.39% for plan years beginning in 2024; and
9.02% for plan years beginning in 2025.

The affordability test applies only to the portion of the annual premiums for self-only coverage and does not include any additional cost for family coverage. Also, if an employer offers multiple health coverage options, the affordability test applies to the lowest-cost option that provides minimum value.

Because an employer generally will not know an employee’s household income, the IRS has provided three optional affordability safe harbors that ALEs may use to determine affordability based on information that is available to them: the Form W-2 safe harbor, the rate of pay safe harbor and the federal poverty level safe harbor.

Final Rule Makes Extensive Changes to Mental Health Parity Requirements

On Sept. 9, 2024, the Departments of Labor, Health and Human Services, and the Treasury (Departments) released a final rule to strengthen the requirements of the Mental Health Parity and Addiction Equity Act (MHPAEA). According to the Departments, the final rule is designed to achieve MHPAEA’s purpose of ensuring individuals with private health coverage do not face greater restrictions to obtaining mental health and substance use disorder (MH/SUD) benefits than they would face for medical/surgical (M/S) benefits.

Significantly, the final rule adds protections against more restrictive non-quantitative treatment limitations (NQTLs). For example, the final rule requires group health plans and health insurance issuers to collect and evaluate data related to the NQTLs they place on MH/SUD care and make changes if the data shows they are providing insufficient access.

The final rule generally applies to health plans and issuers for plan years beginning on or after Jan. 1, 2025; however, certain key requirements, such as NQTL data evaluation requirements, apply for plan years beginning on or after Jan. 1, 2026.

MHPAEA

MHPAEA requires parity between a group health plan’s M/S benefits and MH/SUD benefits. MHPAEA’s parity requirements apply to:

• Financial requirements, such as deductibles, copayments and coinsurance;
• Quantitative treatment limitations, such as day or visit limits; and
• NQTLs, which generally limit the scope or duration of benefits, such as prior authorization requirements, step therapy requirements and standards for provider admission to participate in a network.

• Define whether a condition or disorder is an MH condition or SUD in a manner that is consistent with the most current version of the International Classification of Diseases or Diagnostic and Statistical Manual of Mental Disorders;
• Offer meaningful benefits (including a core treatment) for each covered MH condition or SUD in every classification in which M/S benefits (a core treatment) are offered;
• Not use factors and evidentiary standards to design NQTLs that discriminate against MH conditions and SUDs;
• Collect and evaluate relevant outcomes data and take reasonable action, as necessary, to address material differences in access to MH/SUD benefits as compared to M/S benefits; and
• Include specific elements in documented comparative analyses and make them available to the Departments, an applicable state authority, or individuals upon request.

NQTL Data Requirements

Comparative Analysis of NQTLs

1. A description of the NQTL, including identification of benefits subject to the NQTL;
2. Identification and definition of the factors and evidentiary standards used to design or apply the NQTL;
3. A description of how factors are used in the design or application of the NQTL;
4. A demonstration of comparability and stringency, as written;
5. A demonstration of comparability and stringency in operation, including the required data, evaluation of that data, explanation of any material differences in access and description of reasonable actions taken to address such differences; and
6. Findings and conclusions.
   • Issuers and third-party administrators will prepare comparative analyses for employer-sponsored health plans. However, the final rule requires the comparative analyses for ERISA-covered plans to include a plan fiduciary’s certification that they have engaged in a prudent process and monitored their service providers.