Consider These 5 Health Insurance Changes for 2020 Benefits Planning

5 Compliance Changes to Review for 2020 Benefits Planning | Dan Kuperstein | Corporate Synergies
ERISA attorney Dan Kuperstein is a national expert on health & welfare benefits compliance. Here’s his guidance on changes that impact 2020 benefits planning.

While the media focuses on big potential healthcare policy changes like the Medicare for All proposals by presidential candidates, or the potential Supreme Court case that could overturn the Affordable Care Act (ACA), there are a number of less headline-grabbing regulatory changes. Here are 5 to consider for 2020 benefits planning:

1. New treatments for ongoing conditions are considered “preventive care” benefits for HDHPs.

In July 2019, 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. Second, 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 have been made to 6 individual state mandates and 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 January 1, 2020.

That will bring us to a total of six state healthcare individual mandate laws; the others are New Jersey; Massachusetts, Vermont and the District of Columbia. More state individual mandates means more healthcare reporting requirements for HR and benefits managers.

3. The IRS lowered the ACA affordability percentage for 2020 based upon a 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.

How does insurance plan affordability impact 2020 benefits planning?

Specifically, employer-sponsored coverage will satisfy the affordability requirement 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 U.S. Department of Health and Human Services (HHS), tweaked its inflation calculation methodology; this means that, even though the 2020 affordability percentage is down from 2019, we can expect greater 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 U.S. Food & Drug Administration (FDA) 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 are expected.

In 2019, employers struggled to make sense of a court decision that invalidated 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 (EEOC) issued final regulations for employer-sponsored health & 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 health & 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 the end of 2019.

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 health insurance issues discussed above are likely to have a direct impact on employers as they engage in 2020 benefits planning.

Dan Kuperstein, Senior Vice President of Compliance, is an attorney with 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. Dan is a respected thought leader on Healthcare Reform and has published articles on the Affordable Care Act and other laws and regulations.


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