This year’s twin health and economic crises caused by the COVID-19 pandemic continue to produce unprecedented challenges for employers 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. This article summarizes the top 10 compliance developments to address or monitor when planning group health benefits and paid leave programs for the upcoming year.

Outlook, planning altered by COVID-19 pandemic

US policymakers have moved swiftly since the novel coronavirus outbreak began to provide aid that includes a wide range of new health and paid leave policies, and more changes are possible through this year into 2021. The important role of these programs figures prominently in congressional talks on the next recovery package that could pass this summer. Those negotiations, the divided Congress and an election-shortened legislative calendar dim the odds for major changes to the Affordable Care Act (ACA) and other initiatives unrelated to the pandemic and economic crises.

Meanwhile, President Trump and federal agencies are pressing forward with numerous regulatory proposals that predate the pandemic, including initiatives aimed at lowering prescription drug costs and improving the transparency of healthcare cost and quality information. However, legal challenges may stop some initiatives from taking effect before a potential change in administrations next year.

Congress

Employers should keep a close eye on the next COVID-19 relief package as negotiations between the Democrat-controlled House and the Republican-controlled Senate intensify over the coming weeks. Although the timing and contents of the package are up in the air, numerous health and paid leave proposals are in the mix, and some could land in a final bill. For example, COVID-19 relief legislation (HR 6800) that passed the House in May would create an array of new requirements extending through 2021, including:

• Fully subsidized continuation of employer-sponsored health coverage under the Consolidated Omnibus Budget and Reconciliation Act (COBRA) of 1985
• Eased restrictions on cafeteria plans and flexible spending arrangements (FSAs)
• Reinsurance for certain COVID-19-related costs incurred by employer plans
• New health plan mandates
• Enhancement and extension of the health, emergency paid leave and other workplace programs enacted earlier this year

The House bill has no chance of enactment but provides a blueprint for negotiations with Senate Republicans and the White House on a final package. Achieving bipartisan consensus will be difficult, but enacting more relief may become a political imperative for both parties. Other policy priorities that could advance in a relief package include measures to end surprise medical bills, speed generic drugs to market, increase price transparency and enhance employers’ ability to offer telehealth services.

Elections could bring new policy agenda

While structural changes to the ACA are not in the cards this year, healthcare is again a major campaign issue that bears watching for potential implications in 2021. Presumptive Democratic presidential nominee Joe Biden and many congressional Democrats are making ACA expansion a core tenet of their healthcare platforms. Biden is also proposing to lower the Medicare eligibility age and create a public option that could compete against private insurance plans. Biden has reached out to progressives and set up task forces that include top advocates of Medicare for All, an idea that has gained public support since the pandemic disrupted or ended coverage for many.

Enacting a public option or expanding Medicare will prove difficult in the next Congress even if Democrats keep control of the House and win the White House and the Senate. Besides intraparty disagreements, other obstacles include intense opposition to a public option by many employer groups and others in the healthcare industry. However, the pandemic’s ongoing effects cloud the outlook and continue to raise difficult questions for many employers trying to maintain coverage and plan ahead for 2021. Close monitoring of health policy developments this year is especially important.

President Trump has yet to lay out a detailed healthcare agenda for the next four years. He has called for repealing the ACA, and his administration recently filed a Supreme Court brief supporting a lawsuit to eliminate the entire law (California v. Texas, 945 F.3d 355 (2019); cert. granted, No. 19-840 (U.S. March 2, 2020)). However, Republicans have not come up with an alternative. The administration so far has pursued regulatory initiatives aimed at unwinding parts of the law, lowering drug prices and requiring more price transparency. A second term could give Trump more time to battle the legal challenges that have beset his agenda and work with congressional Republicans on a broader plan.

Agencies

COVID-19 relief. Federal agencies have issued various forms of pandemic relief, and employers should monitor what additional relief may be needed or extended for next year. Possibilities include:

• Relief to allow carrying over balances in health and dependent care FSAs into 2021 — beyond the 2.5-month grace period now allowed for FSA carryovers and the $550 cap on health FSA carryovers
• Continued ability to offer COVID-19 testing in an excepted-benefit employee assistance plan (EAP), even after the public health and national emergencies officially end
• ACA reporting relief for forms due in 2021

Regulatory changes to enhance the availability of telehealth, especially for behavioral healthcare, during the pandemic are expected to continue into 2021, with some made permanent. Guidance addressing return-to-work employer initiatives will evolve as the pandemic continues. COVID-19 legislation imposing the first federal paid leave requirement is scheduled to sunset at the end of this year. However, Congress could extend that mandate into 2021 and/or expand it to include large employers with more than 500 employees. Any extension or expansion will likely trigger more implementation guidance from the Labor Department’s Wage and Hour Division.

Transparency. Agencies will advance key administration priorities like the transparency rules for group health plans and insurers, which probably will get finalized by year-end, with compliance potentially required by the first plan year starting one year after publication of the final rule. Similar transparency rules require hospitals to disclose information like payer-negotiated rates by Jan. 1, 2021, although a legal challenge to that rule is ongoing. Litigation and a potential change in administrations will impact how both transparency rules move forward.

Account-based plans. Transparency rules are just one item coming out of President Trump’s June 2019 executive order on improving price and quality transparency in healthcare. Other guidance has aimed to promote the use of account-based plans and other alternative arrangements to pay for healthcare. Policy changes have eased predeductible coverage under high-deductible health plans (HDHPs) for the chronically ill who have health savings accounts (HSAs), increased health FSA carryovers, and proposed revised tax treatment of direct primary care arrangements and healthcare sharing ministries. Initiatives in 2020 to expand employers’ use of health reimbursement arrangements (HRAs) probably won’t see much takeup in 2021, these alternative HRA designs might garner interest in future years, regardless of 2020 election results.

Data privacy and security. New information technologies (IT) allow quick access to data protected by the Health Insurance Portability and Accountability Act (HIPAA). As a result, health plan sponsors must evaluate each new IT vendor relationship for compliance with evolving guidance. Even if HIPAA doesn’t apply, other federal and state data-protection and privacy laws may have implications for emerging health and wellness applications (apps) and software. While the new data interoperability rules taking effect in 2021 for health IT developers and healthcare payers and providers do not apply to employer group health plans, the resulting changes in how participants access their health data could have indirect effects on plans.

Ongoing ACA compliance. ACA rules will continue to play a large part in compliance activities for employer health plans. Continued enforcement of the employer shared-responsibility (ESR) and related reporting rules, updates to the summary of benefits and coverage (SBC) for 2021, handling of medical loss ratio (MLR) rebates from insurers, and continued payment of the Patient-Centered Outcomes Research Institute (PCORI) fee are just a few ongoing ACA compliance matters to keep in mind for 2021.

Wellness and mental health parity. While these issues are not among the top 10 compliance items for 2021, employers should continue to ensure their health plans meet wellness program requirements and mental health parity obligations, if applicable. Wellness programs will need review once the Equal Employment Opportunity Commission (EEOC) issues revised rules to replace its rescinded regulations on financial incentives in employer-sponsored wellness programs under the Americans with Disabilities Act (ADA) and Genetic Information Nondiscrimination Act (GINA). Enforcement of the Mental Health Parity and Addiction Equity Act (MHPAEA) will get ongoing attention, with the Department of Labor (DOL) slated to finalize an updated draft 2020 MHPAEA self-compliance tool recommending that plans have a formal internal compliance program for mental health parity.

Courts

Action in the courts also has the potential to reshape benefits and program administration. The US Supreme Court’s recent decision in Bostock v. Clayton County, Ga., should trigger plan sponsors to evaluate how their benefit offerings for LGBTQ employees comply with federal sex discrimination protections under Title VII of the Civil Rights Act of 1964. This decision also has implications for the recently revised final nondiscrimination regulations under ACA Section 1557, which remove the transgender protections outlined in the 2016 final regulations.

The Supreme Court’s decision in Little Sisters of the Poor v. Pennsylvania indicates that employers may be able to assert a religious or moral objection to providing contraceptive coverage as preventive-care benefits. However, ongoing litigation on the 2018 final regulations and the potential for a new administration to amend these rules in 2021 leave some uncertainty about these exemptions.

In the coming months, the justices will hear arguments in the latest challenge to overturn the entire ACA, with a decision likely in 2021 (California v. Texas, 945 F.3d 355 (2019); cert. granted, No. 19-840 (U.S. March 2, 2020)). Other ongoing legal challenges seek changes to specific ACA regulations, such as the association health plan (AHP) rules (New York v. US Dep’t of Labor, No. 18-1747 (D.D.C. March 28, 2019)) and the hospital transparency rules (Am. Hosp. Ass’n v. Azar, No. 1:19-cv-03619 (D.D.C., June 23, 2020), motion for expedited appeal filed (D.C. Cir. July 3, 2020).

Employers should also keep an eye on recent litigation alleging plans and/or their vendors have violated benefit rules, such as COBRA notice requirements or mental health parity regulations.

States

COVID-19 and the related public health emergency sidelined states’ agendas and drained their budgets. As 2021 approaches, states may look to health plan assessments as new funding sources for healthcare.

The expected US Supreme Court decision on state regulation of pharmacy benefit managers (PBMs) could have broad implications for plan sponsors that rely on PBMs (Rutledge v. Pharm. Care Mgmt. Assoc., 891 F.3d 1109 (2018); cert. granted, No. 18-540 (U.S. Jan. 10, 2020). Plan sponsors will need to work with PBMs to determine to what extent, if any, a given state’s PBM standards may apply to a self-insured plan.

Although action on ACA Section 1332 innovation waivers has slowed during the pandemic, states will likely renew studying options to broaden health coverage, including individual mandates that require plan sponsor and insurer reporting. Employers will need to provide timely reports in 2021 for the existing individual-coverage mandates in California, Massachusetts, New Jersey, Rhode Island and Washington, DC. (Vermont also has an individual-coverage mandate, but the law currently does not require any employer reporting.)

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. Download the full 59-page print-friendly PDF for detailed information and resources related to each compliance priority:

1. 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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.
7. 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.
8. 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.
9. 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.
10. 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.