The IRS has released new FAQs to clarify which medical expenses can qualify as “medical care” under the tax code, and thus should be covered by HSAs, health FSAs, HRAs and Archer MSAs. Some of the expenses discussed in the new guidance include foods that are diet specific for diabetes management or weight loss. These items were aggressively marketed as covered expenses when in fact, they are not.

New York has enacted a bill that will require additional transparency regarding prescription drug prices effective June 19, 2024. This bill will amend the New York Insurance Law to require drug manufacturers to inform the New York Department of Financial Services (NYDFS) of a change in their drug prices greater than 10%. NYDFS will make this information public within five days of notification so that consumers have time to prepare for the price increase. This will apply to any drug that is purchased or reimbursed in the state of New York. The new law aims to make drug costs and their causes more transparent, as well as help consumers and potentially plan issuers, prepare for and/or adjust to higher costs.

The IRS has updated the ACA’s penalty stating what an Applicable Large Employer (ALE) would be liable for under its Employer Shared Responsibility rules (“Employer Mandate”). The updated 2025 penalties are $2,900 per full-time employee for not offering minimum essential coverage (MEC) to at least 95% of the ALE’s full-time employees and dependent children (down from $2,970 in 2024) and $4,350 per full-time employee that receives subsidized Exchange coverage due to lack of affordability (down from $4,460 in 2024). Notably, for the first time since its inception, both ACA penalty amounts decreased from

A group of employees participating in the Johnson & Johnson (“J&J”) employee and retiree medical plans have filed a class action lawsuit against J&J and its plan fiduciaries alleging ERISA fiduciary breach violations related to the management and administration of prescription drug benefits offered through these plans. The complaint alleges that the plans drastically overpaid for drugs through the plans’ pharmacy benefit manager (PBM). Among other allegations, it is alleged that the company paid $10,000 for a 90-day supply of a generic multiple sclerosis drug that would have cost just $28 if the person went into a pharmacy and paid out of pocket. The complaint argues that these breaches cost J&J’s plans and employees millions of dollars in the form of higher payments for prescription drugs, higher premiums, higher deductibles, higher coinsurance, higher copays and lower wages. While there have been a growing number of ERISA lawsuits challenging the costs and fees paid by health plans, this case is unique in that it is the first to directly take aim at plan fiduciaries for PBM contracting allegedly resulting in increased costs to plan participants and beneficiaries.

* posted on our site on 02.19.24

The Departments of Labor, Health and Human Services and Treasury (“Agencies”) issued new FAQ guidance (“Guidance”) regarding the Transparency in Coverage regulation (“TiC Rules”). As background, under the TiC Rules, non-grandfathered group health plans and issuers must make certain cost-sharing and pricing information available to participants and beneficiaries by, among other methods, a self-service cost estimator tool. These requirements first applied to 500 specified medical items and services in 2023, and then expanded to all covered medical items and services for plan years beginning on or after January 1, 2024. The new Guidance discusses compliance with cost sharing disclosure requirements where a plan is providing cost estimates based on claims data but there is extremely low utilization of the item or service at issue, and thus, the estimates may not be accurate. In such cases, the new Guidance clarifies that the Agencies are likely to exercise discretion on a “case-by-case basis” as to whether they will bring an enforcement action where a plan fails to provide the required information for these types of items and services. However, the Guidance notes that this exercise of discretion is limited to cost sharing information otherwise required to be disclosed (via the self service tool, in hard copy or by phone) where: (i) the cost estimate would need to be based on past claims data, and (ii) there have been fewer than 20 claims in the past three years. In cases involving the self-service cost estimator tool, the tool should indicate that the item or service is covered, but that a cost estimate is not available due to insufficient data and should encourage the individual to contact the plan for more information on applicable cost sharing requirements.

* posted on our site on 02.19.24

The U.S. Department of Labor (DOL) has issued updated civil monetary penalties for health and welfare plans for 2024. These penalties adjust annually for inflation and must be released by January 15^th of each year. The penalty amounts are effective for any civil penalties assessed after January 15, 2024 by the Employee Benefits Security Administration (EBSA), the enforcement division of the DOL. The maximum penalty for a failure to file a Form 5500 has increased to $2,670 per day, the maximum penalty for a failure to file a Form M-1 increased to $1,942 per day, and the penalty for a failure to provide requested documentation to the DOL increased to $190 per day, not to exceed $1,906 per request. Other penalty increases include a failure to provide required CHIP notices, now $141 per day, and a failure to provide a Summary of Benefits and Coverage to participants increased to $1,406 per day.

The U.S. Department of Labor (DOL), through its Wage and Hour Division, issued a final regulation pertaining to worker classification, and specifically, for determining whether a worker is considered an employee or independent contractor under the terms of the Fair Labor Standards Act (FLSA). The new final regulation rescinds and replaces previously issued regulations in 2021, and goes into effect on March 11, 2024. The regulation restores the worker classification method previously used, which requires a “totality of the circumstances” approach to determining the nature of the employer-worker relationship.

The U.S. Food and Drug Administration (FDA) has approved Florida’s request to import certain drugs from Canada, marking the first time a state has been authorized to buy lower-cost medications in bulk from abroad. Florida’s plan calls for importing medications for several illnesses, including chronic illnesses, for residents covered by public programs such as Medicaid enrollees and inmates. The state would make the imported drugs available to patients at county health departments managed by the state Department of Health. Florida expects to save $180 million in the first year and approximately $183 million annually once the program is fully implemented.

The U.S. Departments of the Treasury (IRS), Labor, and Health and Human Services (“Departments”) collectively issued final rules amending existing regulations under the No Surprises Act (NSA), as established in the Consolidated Appropriations Act, 2021. The final rules grant rulemaking authority to these Departments to establish the fee amounts to participate in the federal independent dispute resolution (IDR) process established by the NSA and to set ranges for certified IDR entity fees for single and batched determinations. Further, the rules expand on the methodology used to determine fees, outline the amount of the fees, and finalize the certified IDR entity fee ranges for disputes initiated after the effective date of the rules.

The U.S. Department of Labor (DOL) issued a proposal to rescind 2018 regulations issued by the Trump Administration that expanded the availability of association health plans (AHPs). The 2018 regulations created a “commonality of interest” test and other rules and standards that relaxed requirements for establishing a “bona fide association” for purposing of creating an AHP. These 2018 rules were partially vacated in 2019, additional AHP guidance was issued and a limited nonenforcement policy was put into place. The DOL intends to fully rescind the AHP regulations and ensure that guidance on this issue aligns with the text, purpose and policies contained within ERISA.

The IRS has issued Notice 2024-1 which sets forth the indexing factor required to be used by group health plans and insurers to calculate the qualifying payment amount (QPA) under the No Surprises Act. This indexing factor or percentage increase for 2024 is 1.0543149339. The factor should be used to determine costs for items or services provided on or after January 1, 2024, and before January 1, 2025. Those responsible for calculating QPAs on behalf of group health plans and insurers should familiarize themselves with the table and calculation methods as outlined in the Notice.

The IRS has issued a final regulation regarding the penalties for failure to file correct information returns or payee statements under Internal Revenue Code (Code) Sections 6721 and 6722. These Code Sections specifically pertain to information reported on Forms 1094/1095-C relevant to ACA information reporting. They also apply to Forms W-2 and 1099. The final regulation includes safe harbor rules that mitigate penalties for information returns and payee statements which have erroneous dollar amounts if the errors are considered ‘de minimis’ in dollar amount. The error is considered de minimis if the difference between any single error and the correct amount does not exceed $100 or, for tax withheld, the difference is no more than $25.

The Transportation Benefits Program Act (the Act) was signed into law by Governor J.B. Pritzker. It requires covered employers (generally, employers with 50 or more employees in Cook County or 37 designated townships) to implement a pre-tax transportation benefits program that allows employees to pay for transit passes with pre-tax dollars up to the federal limit.

California’s State Disability Insurance (SDI) program has historically been capped. For 2023, the contribution rate was 0.9% on wages up to $153,164. Starting in 2024, the contribution will now take into account all taxable wages per California Senate Bill-951. The SDI tax will now be calculated using that total taxable wage. Employers should ensure that their payroll system is updated to reflect the wage cap removal. They should also communicate this increase to employees and provide updated resources for the program.

San Francisco’s Office of Labor Standards Enforcement has released the updated employer expenditure rates and the exemption wage threshold required by the Health Care Security Ordinance (HCSO) effective January 1, 2024. The HCSO requires covered employers in the City or County of San Francisco to meet a certain health care expenditure amount for each covered employee. The 2024 expenditure rates by employer size have increased to $3.51 (100 or more employees), $2.34 (20-99 employees or 50-99 for non-profits) respectively. Additionally, employees who are considered managerial, supervisory and confidential, and who make more than $121,372 per year ($58.35 per hour), are exempt from the expenditure requirement in 2024.   Covered employers should ensure they are using the updated rates in 2024.