Oct. 20, 2023

Open enrollment issues

Open enrollment is rapidly approaching for employers with calendar-year employee benefit plans. Following are ten important issues for employers to consider for the 2024 open enrollment season:

1. Affordability of Group Health Plan. If the employer is an applicable large employer, make sure that the employee contribution for full-time employees for at least one of the health plan options is affordable under the Affordable Care Act ("ACA"). The affordability percentage dropped from 9.12% in 2023 to 8.39% in 2024, the lowest since the "offer of coverage" rules in the ACA became effective in 2015. The employee contribution for at least one health plan option for single coverage in 2024 must be no greater than one of the following safe harbors:

39% multiplied by the federal poverty level of $14,580, or $101.93 per month;
39% multiplied by the employee's rate of pay; or
39% multiplied by the employee's wages reported in Box 1 of Form W-2 for the year.

Before making the final decision on employee contributions for 2024, confirm that at least one option is affordable to avoid significant penalties under Section 4980H of the Internal Revenue Code

2. HDHP and HSA Limits. If the employer offers employees a high deductible health plan ("HDHP") with a health savings account ("HSA"), confirm that the HDHP complies with the adjusted limits announced by the IRS, and communicate the annual HSA contribution limit to employees:

Limits in 2023 and 2024

HSA Contribution Limit: Self-Only $3,850 in 2023 and $4,150 in 2024, Family $7,750 in 2023 and $8,300 in 2024

HSA Catch-Up Contribution: Age 55 & Older $1,000 in both 2023 and 2024

HDHP Minimum Deductible: Self-Only $1,500 in 2023 and $1,600 in 2024, Family $3,000 in 2023 and $3,200 in 2024

HDHP Maximum Out-of-Pocket Limit: Self-Only $7,500 in 2023 and $8,050 in 2024, Family $15,000 in 2023 and $16,100 in 2024

3. Updated CHIP Notice. The Department of Labor issued an updated CHIP Notice effective July 31, 2023, which may be found here. Make sure that the most up-to-date CHIP notice is part of the annual compliance notices included in the open enrollment materials.

4. HIPAA Notice of Privacy Practices. If the employer's group health plans are all fully insured, the insurance carrier is generally responsible for providing the HIPAA Notice of Privacy Practices. However, if any of the employer's group health plans are self-insured, including a health flexible spending account ("FSA") or a health reimbursement arrangement ("HRA"), the employer should, among other items, provide plan participants with a Notice of Privacy Practices (unless the plan has fewer than 50 participants and is administered by the employer.) The Notice of Privacy Practices should explain the uses and disclosures of protected health information ("PHI") that the plan can make; explain the individual's rights concerning PHI; acknowledge the plan's duties regarding PHI; describe a complaint procedure; and disclose a contact person and effective date. The Notice of Privacy Practices must be provided:

To new enrollees at the time of enrollment; and
Notice of availability of the Notice must be given at least once every three years to covered persons.

Many employers provide a copy of the Notice of Privacy Practices to covered persons every year during open enrollment to remember to provide the "notice of availability" every three years.

5. Summary of Benefits and Coverage. Provide employees an updated copy of the Summary of Benefits and Coverage for each group health plan.

6. Annual Compliance Notices. Provide annual compliance notices, including:

Notice of HIPAA special enrollment rights
Women's Health and Cancer Rights Act notice
Medicare Part D Notice of Creditable Coverage (Note: due by October 15 to each Medicare-eligible person)
Notice of Patient Protections (if the group health plan requires or allows for the designation of a primary care physician).

7. Wellness Program Notices. Suppose the employer offers employees a health-contingent wellness program that requires employees to satisfy a standard relating to a health factor to obtain a reward (such as achieving a certain number of points on a health risk assessment and/or biometric screening). In that case, the wellness program materials should describe the availability of a "reasonable alternative standard" to achieve the reward. If the employer has 15 or more employees and is subject to the Americans with Disabilities Act, and the wellness program includes any health-related questions or medical exams, the employer must give employees a notice that tells them what information will be collected as part of the wellness program, with whom it will be shared and for what purpose, any limits on disclosure and the way information will be kept confidential.

8. Life Insurance Evidence of Insurability. If an employee is electing life insurance that exceeds the guaranteed amount and is required to provide evidence of insurability to the insurer, the employer should have a process in place to track when the evidence of insurability is approved by the insurer, and the elected level of insurance and related premium payments can become effective, with related communications to the employee.

9. Premium Payments for Fixed Indemnity / Specified Disease Insurance. Many employers offer employees the opportunity to purchase supplemental, specified disease insurance (such as cancer insurance) or fixed indemnity insurance (which pays a specific dollar amount upon the occurrence of pre-specified health conditions). Under proposed regulations issued in July 2023, the IRS proposed that any payments received by an employee under these types of supplemental insurance policies would be taxable income to the employee if the employee paid the premiums for coverage on a pre-tax basis. The proposed regulations may become effective as soon as January 1, 2024. Therefore, it would be prudent to have employees pay premiums for these types of supplemental insurance on an after-tax basis and not a pre-tax basis through a Section 125 cafeteria plan.

10. Coordinate with Insurer / TPA on Certain Legal Requirements. The employer should check with its health insurer or third-party administrator ("TPA") to determine whether the insurer or TPA:

Is preparing the non-quantitative treatment limitations (NQTL) comparative analysis required by the Mental Health Parity and Addiction Equity Act on behalf of the group health plan; and
Will submit the gag clause prohibition compliance attestation to CMS on behalf of the group health plan by December 31, 2023.

If the TPA of a self-insured plan indicates that the employer is responsible for these items, the employer should take steps to prepare the NQTL comparative analysis or engage a third-party to assist it in doing so. The employer should also review its agreements with providers, TPAs, and provider networks to ensure that the agreements do not contain any provisions restricting the plan from providing provider cost or quality of care information to referring providers, participants or beneficiaries; accessing de-identified claims data; or sharing such information with business associates. These types of restrictions are commonly called "gag clauses." Once the review is complete, the attestation form - which must be submitted electronically - and other helpful information can be accessed here.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Article by Cynthia Moore of Dickinson Wright PLLC, (c) Mondaq Ltd, 2023

Tags: Employers' Blog Posts