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New Requirements for Health Coverage
Part of the Families First Coronavirus Response Act (FFCRA) imposes new requirements on health plans in response to the COVID-19 pandemic. These new requirements became effective immediately when President Trump signed the FFRCA into law.
Under the new health coverage requirements, all group health plans, whether fully insured or self-insured, must provide coverage for COVID-19 diagnostic testing at no cost to covered individuals and without prior authorization or other medical management requirements. COVID-19 diagnostic testing includes items and services furnished to the individual during healthcare provider office visits (which include in-person visits and telehealth visits), urgent care center visits and emergency room visits that result in an order for administration of COVID-19 diagnostic testing, but only to the extent that it is determined that such items or services are needed. This provisions means that where such services, items, or diagnostic tests are determined to be needed, there must be no copayments, no coinsurance deductibles, and no other form of cost to the covered individual.
These provisions apply to all group health plans with almost no exceptions. Governmental plans, private employer plans, self-insured plans, and fully-insured plans must all comply with this new requirement. The only exceptions seems to be plans that provide only “excepted benefits” such as limited dental or vision coverage, Medicare supplemental coverage, long-term care insurance, and most health FSAs.
Although health plans are required to cover diagnostic testing going forward, it does not appear that they are required to cover treatment of COVID-19. Further, to the extent that an employer health plan does cover treatment, there is no requirement that it be covered on a no-cost basis to the covered individual.
IRS NOTICE 2020-15
A High Deductible Health Care Plan is one where the monthly premium is usually lower, but the covered individual pays a higher deductible at the time of treatment before your health insurance provider starts to pay its share. For 2020, the IRS defines a high deductible health care plan as any plan with a deductible of at least $1,400 for any individual or $2,800 for a family. A high deductible health care plan can be combined with a health savings account.
In general, the normal rule with regard to high deductible health care plans is that providing any no-cost coverage to an induvial under a high deductible health care plan will disqualify the accountholders from eligibility to contribute to their health savings account. However, the IRS recently issued Notice 2020-15, which assures high deductible health plan sponsors and participants that any no-cost testing coverage required by the FFCRA will not disqualify the accountholder from contributing to their health savings account.
The CARES Act which was signed into law on March 27, 2020 also contained several provisions that provided individuals with greater access to COVID-19 related health care:
- High Deductible plans may waive participant cost-sharing requirements for all telehealth and other remote care services—i.e., including services not related to COVID-19—without interfering with the participant’s ability to make health savings account contributions;
- All plans are required to pay out-of-network providers of COVID-19 testing the “cash price” for such testing;
- All group health plans must provide coverage at no cost to the plan participants for “qualifying coronavirus preventative service,” including a COVID-19 vaccine, within 15 business days after the service is recommended by the United States Preventative Task Force or the Advisory Committee on Immunization Practice;
- Health savings accounts, flexible spending accounts, and health reimbursement arrangements may reimburse over-the-counter drugs purchased without a prescription, effective for expenses incurred after December 31, 2019.
Retirement Plan Relief under the CARES Act
The CARES Act also contains provisions that allows participants affected by COVID-19 to have greater access to their retirement funds. Only certain individuals are qualify for relief:
- Persons diagnosed with COVID-19;
- Persons with a spouse or tax dependent diagnosed with COVID-19;
- Persons experiencing financial consequences as a result of:
- Being quarantined due to COVID-19
- Being furloughed or laid off for having work hours reduced due to COVID-19
- Being unable to work due to lack of childcare due to COVID-19, or
- The closing or reduction in hours of a business owned or operated by the participant due to COVID-19.
A plan administrator can rely on a participant’s certification that the participant satisfies the requirements to be a qualified individual without requesting documentation.
A qualified individual can receive favorable ta treatment on “coronavirus related distributions,” which are any distributions made to a qualified individual between January 1, 2020 and December 31, 2020. There is no requirement that the distributions be limited to the amount of actual need, but there is a cap of $100,000 for distributions that are eligible for favorable tax treatment. This $100,000 can be distributed from one or multiple sources.
For these coronavirus related distributions, up to the $100,000 cap, the CARES Act:
- Eliminates the regular 10% early distribution penalty that generally applies to distributions before age 59.5.
- Exempts distributions from the 20% federal tax withholding that normally applies to distributions paid directly to participants;
- Allows participants to avoid taxation by repaying distributions within 3 years; and
- Allows participants to elect to spread the inclusion of income from distributions over 3 years.
For retirement plan loans made to qualified individuals between March 27, 2020 and September 23, 2020 the Act increases the maximum loan amount from $50,000 to $100,000 and allows participants to take the full amount of their vested benefit as a loan.
The CARES Act also eliminates the requirement that required minimum distributions (RMDs) be made to all plan participants and IRA owners (not just qualified individuals) during 2020. This is intended to avoid the need to liquidate investments at a time when the stock market reflects the economic impact of COVID-19.
Given the evolving news and updates around the spread of COVID-19 (Coronavirus), Howard, Stallings, From, Atkins, Angell & Davis remains open for business, and our offices remain staffed appropriately to meet your needs. While many of our attorneys and staff will be working remotely during the coming weeks, rest assured that we are still available to you, our phone numbers and emails are still the best way to reach us. We understand that you may have legal questions as we forge the path ahead. We remain dedicated to your success and are here for you. Let us know how we can help.
For your reference, we are compiling and analyzing state and federal legal updates here, which may effect your business. Visit our Business Legal Resource Center for updates.