The Pandemic’s Impact on Employer-Provided Medical Plans

The Pandemic’s Impact on Employer-Provided Medical Plans
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The COVID-19 pandemic has created a “new normal” for employers operating in these uncertain times. In the realm of employer-provided medical plans (“plans”), several COVID-related mandates apply, and opportunities are available for employers to expand coverage and provide cost-saving opportunities to employees. If not done already, employers should work now with their brokers and benefit advisors to confirm their compliance for 2020 and 2021, and they should take advantage of available opportunities.

The most publicized mandate affecting plans is the requirement to cover diagnostic tests without charging the employee. Examples include certain testing approved, cleared or authorized by the FDA, tests not yet approved by the FDA under its emergency use application (assuming application was made and not denied), and state-authorized tests. To increase cost transparency, test providers are required to post the “cash price” of tests on their website and charge this price to plans unless a lower price was negotiated prior to March 13, 2020. 

Looking forward to the time when a vaccine becomes available, another mandate requires that qualifying COVID-19 vaccines and treatments (i.e., evidence-based items or services with an “A” or “B” rating intended to prevent or mitigate COVID-19 and immunizations recommended by the Advisory Committee on Immunization Practices of the CDC) also be covered by plans without charging the employee. This coverage must take effect within 15 days after the U.S. Preventive Service Task Force first recommends the vaccine or treatment.

Employers should keep in mind that while most deadlines for coverage change, COBRA continuation elections and claims appeals have been suspended during the pandemic period. This means an employee who terminated employment in April 2020 needs not decide whether to elect COBRA coverage until after the national state of emergency ends, which could be six months or more after the employee’s employment termination. This ability to “wait and see” if medical costs will warrant spending the money to purchase COBRA is likely to increase net plan costs for 2020. It could also make it more difficult for employers, stop-loss carriers, and advisors to analyze claims costs as they budget for 2021, especially if the plan is self-insured.

Insurers of fully insured plans should automatically implement these mandates, but employers with self-insured plans may need to confirm that necessary updates are made proactively. In all cases, employees must be timely notified of the changes.

As for opportunities available to employers, health savings accounts (HSAs), health reimbursement accounts (HRAs) and health flexible spending accounts (FSAs) can be expanded to reimburse over-the-counter medications and supplies (OTCs) purchased in 2020 and later. This change helps employees access available funds to pay for thermometers, cough or fever medications and other supplies needed by those suffering from COVID-19.

In addition, high deductible health plans (HDHPs) may pay for 2020 and 2021 telehealth services without jeopardizing employees’ ability to contribute to HSAs. This temporary suspension helps accommodate the need to social distance or quarantine during the pandemic. 

To help those employees who may have failed to enroll in medical coverage for 2020, a second mid-year opportunity can be made available to add medical coverage or health FSA. Employers who wish to save employees from forfeiture of their health and dependent care FSA dollars due to cancellation of procedures and closures of childcare facilities may extend the grace period to use FSA funds, increase the annual FSA carryover, or permit mid-year changes to FSA elections.

Finally, employers can allow employees to change from one medical coverage option to another under their plan or drop medical coverage if they have found qualifying coverage elsewhere (perhaps through a spouse’s plan). 

These optional changes can generally be implemented without amending plan documents until the end of 2021. Employers considering these mid-year changes should be mindful of the HR burden of allowing changes to be made at any time elected by the employee. A short “window” of opportunity may be easier to manage.

While employer-provided medical plans may not provide the same kind of dollar savings or attract the media attention that Paycheck Protection Act loans garnered, they could still have a meaningful impact on the workforce.

Ann E. Murray is a partner at Nelson Mullins in Atlanta, and she focuses her legal practice on employee benefits and executive compensation. She may be reached at [email protected].