On December 27, 2020, President Trump signed the “Consolidated Appropriations Act, 2021” (CAA) into law. The almost 5,593-page long measure includes $900 billion of coronavirus-related economic relief. It extends many existing COVID-19 assistance programs with an employee benefits impact, like the Paycheck Protection Program loans and paid leave requirements and tax credits. The law also contains comprehensive surprise billing protections, significant broker compensation requirements, and health plan transparency and reporting provisions.
Flexible Spending Account Relief
The legislation allows employers to make significant changes to their health and dependent care flexible spending arrangements (FSAs) to help employees get through child care and healthcare changes caused by the global pandemic. The new law allows but does not require employers who offer employees the opportunity to pay for specific health and dependent childcare expenses on a pre-tax basis through FSAs to:
- Permit employees to carryover unused funds from 2020 to 2021 and from 2021 to 2022.
- Extend a spending grace period for up to 12 months for plan years ending in 2020 or 2021.
- Allow participants in a health flexible spending arrangement who were terminated from employment in either calendar year 2020 or 2021 to spend down their account balances through the end of the plan year, including any extended grace period.
- Allow prospective change in election amounts during the 2021 plan year, without a corresponding status change.
- Temporarily extends the age of qualified dependent beneficiaries from age 13 to 14 in certain circumstances.
Employers do not need to make any of these changes, but if they choose to, a Section 125 plan amendment is required by the last day of the first calendar year beginning after the end of the plan year in which the amendment is effective. In other words, an employer with a calendar year plan that adopts changes for 2021 will need to execute a plan amendment by December 31, 2022.
Expanded PPP Forgiveness Rules and “Second Draw” Opportunity
In addition to allocating $284 billion additional dollars in funding for the Paycheck Protection Program, the new bill liberalizes the PPP forgiveness rules. It provides many businesses with a second bite at the apple.
The requirement that 60% of any PPP forgiveness package go towards payroll expenses remains in effect. However, the list of “other” expenses that can count towards forgiveness has grown. It now includes many operating expenses (including supplies under certain circumstances) and many of the costs associated with retrofitting the workplace for safety concerns arising due to COVID-19. Of note, these expenses will be forgivable for both existing PPP loans and “second draw” loans.
The new law also gives existing PPP loan recipients another funding opportunity. “Second draw” loans of up to the lesser of 2.5 times monthly payroll (3.5 times for hospitality and restaurants) or $2 million will be available. For a business to qualify for a second loan, it must have fewer than 300 employees and will be required to show a loss of at least 25% in gross profit over a comparable quarter before COVID-19. Once issued, “second draw” loans will be subject to substantially the same rules as the original PPP loans.
Also notable is relief for employers with either new or existing loans of less than $150,000. These employers will not be required to submit documentation along with their application for forgiveness. A new “hold harmless” provision that allows banks to rely on loan holders’ certifications may also make the forgiveness process easier for borrowers.
Finally, the bill includes tax relief for PPP participants. Specifically, it provides that the expenses credited towards PPP forgiveness are now tax-deductible, which essentially means that businesses will not be required to pay taxes on the PPP money.
Extension of FFCRA Paid Sick Leave Post Consolidated Appropriations Act
The Families First Coronavirus Relief Act (FFCRA), enacted in March of 2020, created new requirements for certain employers to provide their employees with paid sick leave and family leave for certain qualifying events related to COVID-19 exposure and school and child care closures. Refundable tax credits for employers have helped offset the cost of employee salaries and health benefits during periods of paid leave. The FFCRA paid leave provisions were set to expire on December 31, 2020. However, the Consolidated Appropriations Act extends both the employer requirement to provide paid leave and the related tax credits through March 31, 2021.
The FFCRA also includes related tax relief for self-employed individuals who were sick with COVID-19, had to quarantine, or needed to care for children home from school or childcare due to public safety closures. The new law extends that tax relief through March 31, 2021, and allows self-employed people the opportunity to use 2019 wages, rather than 2020 earnings, to calculate their tax credit.
Both of these parts of the law are retroactively effective back to March 31, 2020, just as if they were part of the original FFCRA paid leave requirements.
Reauthorization and Expansion of the Retention Tax Credit
Beyond the Paycheck Protection Program, the most significant economic relief created by earlier COVID-19 laws for employers is the Retention Tax Credit. The new law extends the tax credit, set to expire on December 31, 2020, and improves upon it. More businesses may qualify, and employers can get tax relief for larger amounts of employee wage and benefit costs.
The original credit gave qualified businesses a refundable payroll tax credit for 50% of qualified wages (including eligible benefit costs) of up to $10,000 per employee (meaning the maximum credit amount was $5,000 per employee) for both currently working and furloughed individuals. The new law improves the credit by:
- Extending its duration through June 30, 2021.
- Increases the amount to 70% of qualified wages from 50%.
- Expands eligibility for the credit by reducing the amount of revenue decline an employer needs to demonstrate to qualify
- Increases the limit on per-employee creditable wages from $10,000 for the year to $10,000 for each quarter
- Allows certain public employers and businesses not in existence for all or part of 2019 to claim the credit.
- Makes improvements to the credit for businesses with 500 or fewer employees.
- Provides for a small business public awareness campaign regarding the availability of the credit.
Surprise Balance Billing Provisions
The legislation includes a section creating a federal solution to the issue of surprise balance billing. Surprise billing happens when individuals go out-of-network to receive care, and their provider and health plan cannot agree on a payment amount acceptable to the provider. In those cases, patients often get a “surprise” bill for the balance not paid by their health plan. Under the new law, in a dispute, a provider can request to be paid the “qualifying payment amount,” which is also known as the median amount the plan has contracted to pay in-network providers in the same geographic area for the service or item. If the provider finds that amount, or an amount resulting from subsequent negotiations insufficient, they can request a special arbitration. The arbiter must start with the qualifying payment amount as the basis for payment and consider both sides’ evidence. The arbiter then gets to pick between each of the two sides, “baseball style,” with no room for further compromise. The loser of the arbitration pays for the cost of the procedure.
From the patient’s perspective, the law caps out-of-network cost-sharing for particular out-of-network care at in-network rates. Plans must make up the difference in any provider payments. There will be caps on cost-sharing for:
- Emergency services by an out-of-network provider and/or facility, including post-stabilization care for patients that cannot move;
- Certain non-emergency services performed by out-of-network providers at in-network facilities; and
- Out-of-network air ambulance services.
How much a patient owes an out-of-network provider in these cases depends on if there is an existing state balance-billing law or not or if the state uses an all-payer model for provider reimbursement.
This section of the law will take effect in one year, meaning that the soonest these provisions could impact group health plans is the January 1, 2022 renewal cycle. Over the next several months, the Biden Administration will need to engage in an extensive regulatory process to implement it.
Extensive broker compensation disclosure provisions were an unexpected addition to the new law’s surprise balance billing section. The requirements apply to direct and indirect compensation if the broker contracts with a group plan and expects to get at least $1000 of direct or indirect payment for a broad range of broker and consulting services. The disclosure must be in writing to the plan fiduciary “not later than the date that is reasonably in advance of the contract date.” It must include:
- A description of services, including, if applicable, that the broker/consultant will offer fiduciary services to the plan.
- Descriptions of all direct and indirect compensation the broker expects to receive.
- Any transaction-based compensation (commissions, finders fees), including the payers and direct recipients.
- Compensation arrangements upon the termination of the contract
- “Any other information relating to the compensation received in connection with the contract or arrangement” requested by a plan administrator or fiduciary.
Group health plans will need to report non-compliant brokers and consultants to the Department of Labor for enforcement purposes.
Just like the surprise billing requirements, this section of the law will take effect one year from today, so the earliest it could affect you would be with group clients that renew on January 1, 2022. However, extensive implementation details are needed to carry out these requirements. The Biden Administration will need to go through a detailed regulatory process over the next few months to develop the reporting mechanism, fully define terms, and establish clear deadlines and expectations.
Plan Transparency Requirements After Consolidated Appropriations Act
The law requires health insurance issuers and group health benefit plans to make some changes for plan years beginning on or after January 1, 2022, to help individuals and their providers better understand plan cost-sharing requirements. Starting then, they must include the following information on their health insurance identification cards:
- Any applicable deductible;
- Any applicable maximum out-of-pocket cost limit; and
- A telephone number and Internet address where a participant can get assistance finding in-network facilities and providers.
Issuers and group health plans must also make advance cost information available to participants ahead of procedures scheduled in advance. Depending on when the procedure is, they have between 1-3 days to provide clear and understandable notification of:
- If the facility or provider participates with the plan in terms of coverage;
- The contracted rate that will be paid to the provider or facility (based on billing and diagnostic codes)
- For non-participating providers, information on how the plan participant can get information about available participating providers and facilities;
- Good faith estimates of how much of the costs the plan and the enrollee will be responsible for related to the item or service;
- Where the individual is in terms of their cost-sharing requirements to-date.
- If there are any medical management requirements related to the item or service (such as preauthorization requirements).
- A disclaimer that the information is just an estimate.
The Consolidated Appropriations Act also requires group health plans and health insurance issuers to annually report extensive plan information to the federal government within one year of enactment. Reporting must include:
- Enrollee information
- The geographic reach of the plan
- Detailed pharmacy claim data
- Detailed claim spending and other cost data for all services
- Premium information
The law requires PBMs, TPAs, and issuers to release negotiated rate and claims data to plans and their business associates to carry out these requirements. Similar to the broker disclosure and balance billing sections of the law, the Biden administration will need to issue regulations next year to provide implementation details.
Economic Stimulus Relief for Individual Taxpayers
The Consolidated Appropriations Act law provides an additional round of direct economic stimulus relief to qualified federal taxpayers. The payments will be $600 per individual and eligible child dependents. The stimulus payments are means-tested based on 2019 income and begin to phase out at income levels of $75,000 for single filers, $112,500 for heads of household, and $150,000 for people who are married and filing jointly. The cut-off income levels to get a stimulus payment are those whose annual income level exceeds $87,000 for single filers with no qualifying dependents and $174,000 for those married filing jointly with no qualifying dependents. The Trump Administration indicates taxpayers may begin to get their stimulus payments as soon as next week.
The CAA extends federal pandemic unemployment assistance by $300 a week for 11 more weeks, through at least March 14, 2021. Earlier federal coronavirus economic relief legislation created expanded federal pandemic unemployment insurance of up to $600 beyond specific state benefits through July 31, 2020. Then, a presidential executive order allowed people to claim an additional $300 per week in unemployment compensation through December 27, 2020, once their $600 benefit ran out. This law will allow unemployed individuals to claim federal benefits for up to 50, rather than 39 weeks. So, if a person still has weeks of assistance left on March 14, 2021, they can continue to claim benefits through April 5, 2021.
In addition to the benefit expansion, the law creates new substantiation requirements for people accessing benefits after January 31, 2021, and updates rules and reimbursement frameworks for states for specific programs. The Consolidated Appropriations Act also establishes procedures to handle situations when people receiving expanded unemployment benefits refuse to return to work or accept a new job offer without good cause.
Extension of the Payroll Tax Credit
For any employer that elected to postpone withholding and paying the employee’s share of payroll taxes, as President’s Trump Executive Order authorized in August of 2020, the Consolidated Appropriations Act extends the repayment period through December 31, 2021. Also, penalties and interest will not start to accrue until January 1, 2022.