Annual PCORI Fee and Filing Reminder

Payment of the annual PCORI fee together with the Form 720 filing deadline is approaching. The fee is required to be reported and paid by its due date, July 31st (August 1, 2022, since July 31st is a Sunday).

The PCORI fee is assessed on the average number of lives covered under the policy or plan. For policy and plan years ending between October 1, 2020, and October 1, 2021, the fee is $2.66 per covered life.  For policy and plan years ending between October 1, 2021, and before October 1, 2022 (applicable for a 2021 calendar year plan) the fee is $2.79 per covered life.

As background, the PCOR fee is assessed on the average number of lives covered under the policy or plan.  Virtually, all health plans, whether insured or self-funded are subject to the PCORI fees.  With regard to reimbursement type plans, health reimbursement arrangements (HRA) and medical flexible spending account (FSA) plans are subject to these fees.  However, FSA plans that qualify as HIPAA-excepted plans are not subject to these fees.  The PCORI fee does not apply to stand alone dental or vision plans.

The PCORI fees are assessed on the insurer of an insured plan.  For a self-funded plan, the plan sponsor is required to pay the fee on behalf of its plan.  Because the law provides that the PCORI fees are to be paid by the plan sponsor, at least for plans subject to ERISA, the fees cannot be paid from plan assets.

Additional information about the PCORI fee is available on the IRS’ dedicated PCORI webpage and Questions and Answers webpage.

CMS Benefit and Payment Parameters for 2023

On May 6, 2022, the Centers for Medicare & Medicaid Services (CMS) published Notice of Benefit and Payment Parameters for 2023. These uniform standards, as required under the Affordable Care Act (ACA), are intended for health insurers and the marketplace to ensure health coverage options for consumers, as well as provide planning guidance for insurers and employers. These regulations take effect on July 1, 2022.

Following are highlights of the final rules of interest to employers:

2023 Out-of-Pocket Cost sharing Limits

In its 2022 Notice of Benefit and Payment Parameters the Department of Health and Human Services (HHS) provides that going forward the out-of-pocket cost sharing limits will be announced in January for the following benefit year. To that end, in January 2022, HHS announced the 2023 cost-sharing limits.

These annual out of pocket limits are applicable to insured plans offered through the marketplace, and non-grandfathered insured and self-funded plans offered outside the marketplace. Below are cost sharing limits for 2022 and 2023:

Note: no individual can be subject to an out-of-pocket limit greater than the single limit.

As a reminder, the out-of-pocket limits applicable to high deductible health plans (HDHP) used in conjunction with health savings accounts (HSA) differ from these ACA-imposed cost sharing limits. Below are the OOP limits for HDHP plans for 2022 and 2023:

Federal Exchange User Fees

The ACA permits an Exchange to charge assessments or user fees on health insurance issuers offering a qualified health plan through a federally facilitated exchange or a state-based exchange on the federal platform as a means of generating funding to support its operations.

For the 2023 plan year, the user fee rates for insurers offering qualified health plans through the federally facilitated exchanges or through state-based exchanges on the federal platform will remain the same as 2022, 2.75% and 2.25% respectively, of total monthly premiums.

EHB Nondiscrimination and Use of Clinical Data

As a reminder, insured plans offered through the marketplace or outside the marketplace must cover ten classifications of essential benefits. This final notice of benefit and payment parameters for 2023 provides some guidance on how to ensure that essential benefits are administered in a nondiscriminatory way.

The 2023 final notice indicates that a nondiscriminatory benefit design that provides EHB is one that is clinically based, incorporates evidence-based guidelines into coverage, and relies on current and relevant peer-reviewed medical journal articles, practice guidelines, or recommendations from reputable governing bodies.

The 2023 final notice also provides the following examples of health plan designs that HHS would deem to be presumptively discriminatory:

• A plan that covers medically necessary hearing aids as an EHB in its health plan but limits such coverage to a subset of individuals, such as enrollees who are 6 years of age or younger, since hearing aids may be medically necessary for enrollees over the age of 6.
• A plan that covers routine foot care as an EHB in its health plan but limits such coverage based on a health condition to only apply to individuals diagnosed with diabetes despite clinical evidence demonstrating that routine foot care may also be medically necessary for treatment of other conditions, such as metabolic, neurologic, or peripheral vascular disease.

Because proposed regulations are expected imminently, the 2023 final notice does not address discrimination based on sexual orientation and gender identity. In the meantime, HHS will continue to interpret and enforce Section 1557 (the anti-discrimination provision of the ACA) in a way that protects individuals from discrimination based on sexual orientation or gender identity.

Further, plan sponsors will want to be aware of a recent court decision.

In Lange vs. Houston County, GA, et al., Anna Lange, a transgender woman and deputy with the Houston County Sheriff’s Office, sued her employer and the County due to the County’s health insurance plan excluding coverage for sex change surgery, which Lange contends violates Title VII of the Civil Rights Act.

During the renewal process in late 2016, the County’s insurance broker was informed of Anthem’s Nondiscrimination in Health Programs and Activities Rule which removed the exclusion for gender identity disorders and sex change surgery from both fully insured and administrative services only plans. Despite Anthem’s recommendation to do so, the County chose not to accept the nondiscrimination mandate and the exclusion remained in place.

The Court found that the exclusion is facially discriminatory to transgender individuals and thus violates Title VII.

A Family Glitch Fix, Maybe

The Biden administration is proposing modifications to the premium tax regulations that would fix the so-called “family glitch.”

As a reminder, certain individuals are entitled to a Premium Tax Credit (PTC) to help pay for qualifying health coverage purchased through the Marketplace. Under the current regulations, an individual and their tax family are ineligible for the PTC if adequate, affordable coverage is offered by an employer.

The determination of employer-sponsored coverage affordability is based on the cost of coverage for a single individual. As such, an individual and their tax family may be deemed ineligible for the Premium Tax Credit if the cost of single coverage through an individual’s employer is deemed affordable, even though the cost of family coverage is unaffordable.

These proposed regulations seek to change this such that the determinations of (1) affordability, and (2) minimum value, are determined separately for the individual and the family. If the coverage is affordable and meets minimum value for the individual/employee, but not for the remaining members of the tax family, the remaining members of the tax family could qualify for premium assistance.

For the 2022 tax year, employer-sponsored coverage is deemed affordable if the cost of self-only coverage does not exceed 9.61% of the individual’s income.

Many commenters on the proposed regulations have asked for clear guidance affirming that employer shared responsibility will not be impacted by any final regulations.

The regulations are proposed to apply to taxable years beginning after the date the regulations become final. Thus, if these regulations become final in 2022, they would be applicable beginning in 2023. HHS, IRS, and the Treasury Department hope to be ready to implement the proposed changes before the 2023 open enrollment period.

Grandmother Plans, Indefinite Extension

Certain so-called “grandmother” policies in the individual and small group markets have been exempt from certain ACA market provisions since January 1, 2014, including

• Fair health insurance premiums;
• Guaranteed availability of coverage;
• Guaranteed renewability of coverage;
• Prohibition of pre-existing condition exclusions or other discrimination based on health status with respect to adults, except with respect to group coverage;
• Prohibition of discrimination against individual participants and beneficiaries based on health status except with respect to group coverage;
• Non-discrimination in health care;
• Comprehensive health insurance coverage; and
• Approved clinical trials.

The exemption comes in the way of non-enforcement guidance issued by the CMS Center for Consumer Information and Insurance Oversight (CCIIO). CCIIO has extended this non-enforcement exemption several times.

In January 2021, CMS announced that grandmother plans could be renewed until as late as October 1, 2022, as long as they terminate by the end of 2022 or were brought into compliance with the ACA by January 1, 2023. On March 23, 2022, CMS announced that grandmother plans could renew for policy years on/after October 1, 2022, and the exemption would remain in place indefinitely, until further announcement by CMS.

About the Author

Karen McLeese is Vice President of Employee Benefit Regulatory Affairs for CBIZ Benefits & Insurance Services, Inc., a division of CBIZ, Inc.  She serves as in-house counsel, with particular emphasis on monitoring and interpreting state and federal employee benefits law. 

Ms. McLeese is based in the CBIZ Kansas City office.

The information contained herein is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations. The information contained herein is provided as general guidance and may be affected by changes in law or regulation. The information contained herein is not intended to replace or substitute for accounting or other professional advice. Attorneys or tax advisors must be consulted for assistance in specific situations. This information is provided as-is, with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.