Bloomberg Law
Dec. 10, 2019, 9:00 AM

INSIGHT: Five Health Insurance Changes Employers Should Watch in 2020

Dan Kuperstein
Dan Kuperstein
Corporate Synergies

While the media focuses on big potential health care policy changes like the Medicare for All, proposals from presidential candidates, or the potential U.S. Supreme Court case that could overturn the Affordable Care Act, a number of less headline-grabbing regulatory changes are more likely to directly impact employers in 2020.

Here are five health insurance changes affecting employers and employees in the near term.

1. New Treatments for Ongoing Conditions are Considered ‘Preventive Care’ Benefits for HDHPs

In July, the Treasury Department and IRS added new treatments for chronic conditions to the list of “preventive care” benefits that, if offered by an employer, can be paid without application of the deductible on a high-deductible health plan (HDHP). This is a significant change.

Under the new “preventive care” list, employers can include treatments for 14 conditions, including asthma, diabetes, heart disease and others.

There are two important things to understand about these new rules. First, this is not a mandate—employers are not required to offer them.

Secondly, these rules are very different from the “preventive care” benefits rules under the ACA, which require that certain preventive services be offered on health plans without cost sharing. This is good news for employers and employees, as it makes the combination of a HDHP with a health savings account (HSA) more attractive for those diagnosed with chronic conditions.

2. Changes to Individual State Mandates and New Reporting Requirements

Two more states, Rhode Island and California, enacted individual mandates requiring individuals to carry health insurance. Both mandates were modeled after the federal individual mandate under the ACA, which Congress effectively eliminated when it lowered the penalty to $0 as part of tax reform legislation in December 2017. Both of these state laws will go into effect Jan. 1, 2020.

That will bring us to a total of six state health care individual mandate laws—the others are New Jersey; Massachusetts, Vermont and the District of Columbia.

More state individual mandates means more health care reporting requirements for HR and benefits managers.

3. The IRS Lowered the ACA Affordability Percentage for 2020 Based On New Calculation Methodology

Each year, the IRS defines what “affordable” coverage means for purposes of the ACA’s employer mandate. This percentage dictates how much employers can charge for their health plans and still meet the ACA requirement for having an “affordable” plan.

Specifically, employer-sponsored coverage will satisfy the affordability requirement in 2020 if the lowest-cost, self-only or single tier coverage option available to employees does not exceed 9.78% percent of an employee’s household income. While these percentages usually go up each year, for 2020, the IRS lowered the rate from 9.86% to 9.78%.

Notably, even though the rate went down for 2020, the Department of Health and Human Services, tweaked its inflation calculation methodology; this means that, even though the 2020 affordability percentage went down from 2019, we can expect greater affordability percentage increases in future years.

This is expected to lead to more people being considered to have an affordable offer of employer-sponsored coverage in the future.

4. Prescription Drug Reform May Lower Costs in 2020

2019 brought many new proposed rules on prescription drug reform. One of the more interesting proposals involves drug importation as a method of reducing prescription drug costs for both employers and employees.

Specifically, HHS and the Food & Drug Administration released a roadmap for new proposed regulation in this area. The “Safe Importation Action Plan” outlines two options that would lay the foundation for the safe importation of certain drugs. This is an exciting development for employers because it appears to be a practical way to lower prescription drug costs, even though a lot of the details are still in the works.

5. New Wellness Incentive Rules Expected

In 2019, employers struggled to make sense of a court decision that invalidated wellness regulations pertaining to wellness plans’ maximum incentives under the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA).

In 2016, the Equal Employment Opportunity Commission issued final regulations for employer-sponsored wellness programs that set a maximum 30% incentive limit on wellness plans subject to the ADA and GINA. This was necessary to ensure wellness plans would be “voluntary.”

In 2017, a federal district court ruled that the EEOC had not justified its conclusion that a 30% incentive level is a reasonable interpretation of the term “voluntary,” and ultimately invalidated the incentive provisions of the 2016 regulations effective January 1, 2019.

This left employers with wellness programs subject to the ADA and GINA’s requirements in a cloud of uncertainty, with the main question being “should we still comply with the 30% incentive cap or reduce our incentives?” Many employers decided to play it safe and reduce their incentives considerably in 2019. Fortunately, the EEOC recently announced it expects to have updated rules by year’s end.

While there may be bigger picture changes that will affect employers and employees on the horizon, it’s important to know about the changes happening now. The five health insurance issues discussed above are likely to have a direct impact on employees and employers in 2020.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Dan Kuperstein is an attorney and senior vice president, compliance, with Corporate Synergies and has experience in a broad array of sophisticated employee benefits and labor and employment matters, including ERISA, the Affordable Care Act, COBRA, HIPAA and GINA compliance. His experience includes representation of both public and private companies and health and pension plans.

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