New guidance issued by the IRS expands the types of preventive care benefits that high-deductible health plans are required to cover with no out-of-pocket costs on the part of plan enrollees.
The changes are aimed at reducing out-of-pocket costs for diabetes-related expenses, certain cancer screenings and contraceptives. The guidance, released in two notices — N-2024-71 and N-2024-75, — can result in real savings for Americans.
Benefits under HDHPs typically do not kick in until the enrollee has met their deductible. However, these plans are required to cover a number of preventive care services, as outlined by the Affordable Care Act, without any cost-sharing on the part of the health plan enrollee.
Under notice 2024-75, the following are considered “preventive care,” meaning that HDHPs will be required to cover them at no cost to their enrollees and even before they’ve reached their deductible:
Breast cancer screenings for individuals who have not been diagnosed with this type of cancer.
Continuous glucose monitors for individuals diagnosed with diabetes. Covered monitors must measure glucose levels using a similar detection method or mechanism as other glucometers.
Insulin products, whether they are prescribed to treat an individual diagnosed with diabetes, or prescribed for the purpose of preventing the exacerbation of diabetes or the development of a secondary condition.
Oral contraceptives (including emergency contraceptives) and condoms.
The above will be added to the other preventive care expenditures that health plans are required to cover under the ACA.
Under notice 2024-71, flexible spending arrangements, health reimbursement accounts and health savings accounts will be required to reimburse for the cost of condoms.
The takeaway
If you offer HDHPs, HSAs, HRAs or FSAs, consider sending out a memo informing your employees of the changes, which are designed to help reduce their out-of-pocket medical expenses.
You should also add the changes to your benefits manual so that your staff know what they are entitled to.
If you are a self-insured employer, you should ensure that your third party administrator is aware of the changes to coverages by HDHPs. As well, plan materials for employers who choose to reimburse the cost of male condoms should ask their administrator to update the plan materials for FSAs, HRAs and HSAs.
When Donald J. Trump was president during his first term, he tried but failed to repeal the Affordable Care Act, but succeeded in efforts to expand short-term health plans.
His administration also attempted to make it easier to form an association for the purposes of purchasing health insurance that was exempt from many of the ACA’s requirements for health plans, an effort that was beaten back by the courts.
Now that he’s on his way back to the White House, what can we expect for health insurance coverage and regulations during his second term? For certain, there will be a focus on deregulation and efforts to lower costs.
Pundits from various trade publications have weighed in on what areas could be ripe for changes under a Trump presidency.
The ACA
While Trump previously tried but failed to get the ACA repealed, he has indicated that he doesn’t want to repeal it but make changes to it this time around.
Absolute repeal is likely a non-starter considering that residents in a number of Republican-led states are heavy users of ACA marketplace plans, including Florida, Texas and Idaho, the latter of which runs its own ACA exchange. Florida and Texas residents purchase coverage on HealthCare.gov.
The Biden administration has focused on boosting enrollment in marketplace plans and the president signed legislation in 2022 that extended until the end of 2025 enhanced federal subsidies from the COVID era to help individuals purchase plans.
Thanks to those subsidies, people at the lower end of the income spectrum are often paying no or very low premiums for plans with generous coverage, such as low deductibles and copays, but even middle-income individuals see significant benefits.
With Trump in the White House, and the GOP in a majority in both the House and Senate, those subsidies may not be extended again.
Will alternative plans rise again?
The Biden administration repealed Trump-era regulations that significantly eased restrictions on short-term health plans, multi-state association health plans and hospital indemnity insurance.
For example, the first Trump administration rules allowed individuals to purchase short-term health plans and keep them in place for up to 364 days, which could be renewed or extended for roughly three years. The Centers for Medicare and Medicaid Services in September 2024 issued new final rules that limit short-term health insurance to up four months at most, without the possibility of renewal.
When originally floated about 10 years ago, short-term health plans were intended to provide temporary coverage for people in between group health plans.
Also, the Trump administration introduced a rule in 2018 that lowered the barriers to entry to association health plans that would be considered single employer plans (and exempt from individual and small-group market rules).
The U.S. District Court for the District of Columbia in 2019 overturned the regulation and in 2023, the CMS repealed the regulation altogether.
Trump might attempt to rewrite the regulation in a way that may pass legal muster. Sen. Rand Paul (R-Kentucky) recently reintroduced legislation that would let any membership organization provide a self-insured, multi-state health plan.
Drug costs
Trump in the past has supported plans to negotiate for lower pharmaceutical prices and make it easier to import drugs from lower-cost countries. He also advocated during his first term for pharmacy benefit manager reform.
Under the Biden administration, the CMS has started negotiating with drug makers for price reductions of commonly prescribed drugs for Medicare beneficiaries. The first round of negotiations took place earlier this year, helping reduce the prices that Medicare pays for 10 high-cost drugs.
The CMS under Trump 2.0 may end up floating new regulations changing the parameters of the negotiations, and he may push again for government programs to import drugs from lower-cost countries, like Canada.
The takeaway
Trump is entering office on the back of his populist policies, and that means making the working class happy.
He will have to work with two types of Republicans in Congress: traditional, establishment members and the ones who are not skeptical of the traditional GOP pro-big business and small-government ideology.
The president-elect will have the power to implement certain regulations that can change the health insurance marketplace, but they have to be written within the parameters of existing law and many changes can, and will, be challenged in court.
There are typically two approaches to securing health coverage for your staff — group health insurance or self-funding.
Self-funding, however, can be costly and risky and is usually only done by larger organizations with thousands of employees. But there is a hybrid model that can help small and mid-sized employers provide their staff with affordable health coverage: partial self-insuring.
To understand how partial self-insuring works, we should start with the basics of what a self-insured plan is. In a fully self-insured plan, the employer bears the risk of all costs incurred under the plan for claims and administration.
In essence, the employer acts as the insurer and pays claims from a fund that it pays into along with employees, who pay their share of premiums into the fund.
Also, the employer will usually contract with a third party administrator or an insurance company to process claims and provide access to a network of physicians and other health care providers.
How partial self-insuring works
Partially self-insured arrangements provide some of the benefits of being self-funded but without all the risks, while plans will have the same employee benefits as insured plans have. Here’s how they work:
Employers and their employees still pay premiums, a portion of which goes into an account that will be tapped to pay the first portion of claims that are filed. That means that the employer is acting as the insurer for those claims.
The other portion of the premium is paid to an insurance company. This is sometimes known as a stop-loss policy.
Plans have an aggregate deductible for all claims filed by employees, meaning that once that deductible is reached an insurer starts paying the claims instead.
Premiums are calculated to fund the claims to the aggregate deductible amount. In other words, the employer and employees are paying for the worst-cast scenario in each policy year.
The employer can get a refund at the end of the policy year if the total claims come in at a level that is less than expected. The employer can either be reimbursed for this amount or use those funds for the next policy year.
Lower risk than fully self-insured plans
Typically, an employer should have at least 25 workers if it is considering a partial self-funded arrangement, but we’ve seen plans with fewer enrollees.
Many employers will opt for a partially self-insured plan to save money, but these types of plans also allow a business to design a more useful and valuable plan for its workers.
The key to making this work is cost control, without which claims can spiral and drive up premiums at renewal.
Knowing exactly how much to set aside for reserves and how much you should set your employees’ premiums, deductibles and other cost-sharing, can be complicated.
But with the right mixture of benefits, plan design and education, you can control behavior, which drives claims, in order to keep renewal rates from increasing too much each year.
The fine print
That said, there are some reasons partial self-insuring isn’t for all companies:
There is additional responsibility, as the employer basically becomes an insurer of
There is additional paperwork, since the employer also becomes a payer.
There are compliance issues that the employer needs to consider (ERISA and the Affordable Care Act, for example).
There is some additional risk to the business, as it is paying claims.
If you have too many claims, you could face a non-renewal by your stop-loss insurer. If you are cancelled, it may be difficult to seamlessly enter the insured market.
A new wave of class-action lawsuits is targeting group health plan tobacco surcharges, accusing employers of discrimination and violating the Employee Retirement Income Security Act (ERISA), according to two new blogs by prominent law firms.
The lawsuits, according to a blog by Chicago-based Thompson Coburn LLP, assert that the surcharges are violations of fiduciary duty rules under ERISA, as well as discrimination regulations under the Health Insurance Portability and Accountability Act (HIPAA).
The law firm says these cases are being filed across the country on an almost daily basis and to date no courts have ruled to have the cases dismissed.
The fast-developing lawsuit trend is notable, considering that tobacco surcharges are widely used, and if any of the new lawsuits are successful, they could set a precedent that could expose thousands of employers to legal action. Most of the lawsuits are against self-insured plans, but even employers who purchase health insurance and also impose surcharges for tobacco use could be targeted as they are considered “fiduciaries” under ERISA.
The lawsuits hinge, in part, on a HIPAA prohibition on group health plans and wellness plans discriminating on the basis of health status. For example, health plans are barred by the law from charging higher premiums to group health plan participants with pre-existing conditions.
However, HIPAA has one exception to the rule: It allows plans to charge different premiums for employees who enroll in and adhere to “programs of health promotion and disease prevention.”
You can find HIPAA’s non-discrimination rules for wellness plans here.
The lawsuits target a common practice: requiring employees who use tobacco to pay higher health plan premiums than their colleagues who certify that they don’t use tobacco products (cigarettes, e-cigarettes, chewing tobacco and similar products).
Common themes
The lawsuits have two common themes. They allege that the plan:
Did not provide an alternative standard for tobacco users to obtain a discount because the premium reductions for participating in the wellness plans are only available on a prospective basis, in violation of ERISA Section 702, and
Failed to provide information on the existence of such alternatives in “all plan materials.”
The lawsuits typically seek several of the following remedies:
Declaratory and injunctive relief.
An order instructing the employers to reimburse all persons who paid the surcharges, with interest.
Disgorgement of any benefits of profits the businesses received as a result of the surcharges.
Restitution of all surcharge amounts charged.
It should be noted that as of the end of October 2024, no court has ruled on a motion to dismiss a case, according to the blog. At least one case has settled as a class action and the employer and plaintiffs in another class-action case had informed the court that they were working on a settlement agreement and would both ask the court to dismiss the case.
In addition to these private actions, the Department of Labor has sued several employers targeting premium surcharges, including in 2023 when it brought action against a firm whose health plan was charging tobacco users a $20 per month surcharge, according to a blog by Washington, D.C.-based Groom Law Group.
The takeaway
Thompson Coburn said in its blog that these types of cases are snowballing: “Given the number of complaints being filed weekly — at times daily — it is highly possible that any group health plan that applies tobacco surcharges as discussed faces the possibility of a class action lawsuit.”
The law firm recommends that businesses consider reviewing their health plans to ensure that they comply with HIPAA’s non-discrimination rules for wellness plans, which allow tobacco surcharges when applied properly, such as charging different premiums for workers who enroll in and adhere to a program that’s focused on promoting health and preventing disease.
This is a newly evolving threat to employers. We’ll provide future updates after courts rule on the merits of the cases, which will provide more guidance on when tobacco surcharges can be applied.
Employers helping their workers cope with experiencing a disaster will generally find that having an employee assistance program (EAP) in place is invaluable.
Natural disasters, such as hurricanes and earthquakes, cause extensive property damage, physical injuries and loss of life. The distress might not end there, however.
Mental health experts say that many victims of disasters experience post-traumatic stress disorder, depression and anxiety in the months following these events. The loss of loved ones, jobs, material goods and livelihoods are all traumatic experiences for victims, according to one Red Cross official.
An EAP is an intervention program designed to help employees resolve personal problems that might be affecting their work performance. Many employers make EAP services available to employees’ family members, as well.
The problems do not necessarily have to be related to natural disasters – health, marital, financial and parenting issues are also among the problems an EAP can address. However, the program can be especially valuable for an employee who has suffered significant losses in a disaster such as a hurricane, earthquake or wildfire.
After a traumatic event like one of these, an EAP can provide the employee with:
Counseling and other forms of emotional support
Referrals to sources of food, shelter and clothing
Emergency care and boarding for pets
Opportunities for charitable donations
Assistance locating loved ones
Community-based recovery resources
An employee feeling overwhelmed in the aftermath of a disaster can use these services to return a small amount of stability and normalcy to their life. They help take care of short-term concerns, such as finding a place to stay and care for children and pets, allowing the individual to focus on longer-term problems such as repairing or replacing the home and obtaining financial assistance.
These programs have great benefits for employers, as well. Happy and healthy employees are productive employees.
A study by the University of Warwick in the U.K. found that satisfied workers are 12% more productive and provide better customer service than their less happy peers. Employers who implement EAPs experience:
Reduced absenteeism
Fewer workplace accidents
Lower medical and workers’ compensation costs
EAPs also help managers to become more effective. They can help them develop skills in consulting with employees, managing workplace stress, maintaining drug-free workplaces, responding to crises, and helping employees achieve an appropriate work-life balance.
EAP options
Employers have several options for establishing EAPs.
They can run them with their own staff or outsource them to third party providers. Providers can be hired on a fee-for-service basis or for a fixed fee.
They can be arranged by single employers, groups of small employers banding together, or by unions. Some employers or unions even train employees to provide peer counseling to their fellow workers.
EAP providers should meet the standards set by the Employee Assistance Professionals Association. These include standards for program design; management and administration; confidentiality; direct services; drug-free workplace and substance-abuse professional services; partnerships; and evaluation of the program.
The takeaway
Even without catastrophic weather events, employees are subject to the stresses of day-to-day living, and their paths are often bumpy. Family members can develop substance-abuse problems, parents grow old and need care; unexpected financial shocks occur; and marriages often deteriorate.
By implementing an EAP, an employer can help make these problems, and the shock of a natural disaster, a little easier for their employees to manage.
EAPs can help retain good employees, make them more productive, and make their lives a little better. In turn, this can make a business more profitable and a better place to work.
More than half of employees regret the coverage decisions they make during open enrollment, according to a new study.
Part of the problem may be that the average employee spends only 30 to 60 minutes selecting their benefits during open enrollment, which typically lasts about two weeks in most workplaces, according to the study by financial service firm Equitable. For perspective, the average American spends 120 minutes a day on social media.
The findings in the study underscore the importance for continuing education and outreach on their benefits and providing your workers the opportunity to ask questions in a private setting.
The top reasons employees cited for regretting their decisions include:
25% said they failed to adjust their benefits to match their lifestyle changes.
20% forgot to make changes to their benefit selections by the deadline.
19% did not understand the options available or the benefits they selected.
It should be noted too that sometimes the regret comes after the plan year starts and an employee in a high-deductible plan, low- or no-premium plan has a health issue that crops up or an accident, and has to pay thousands out of pocket. At that point they may rue their choice, even though they would have paid more in premiums.
One of the more disturbing findings from the study is that nearly 25% of workers said they go to social media to educate themselves about employee benefits. The numbers were highest among Gen Z workers (43%) and millennials (37%).
On the other side of the spectrum, 67% of baby boomer employees and 60% of Gen X workers were more likely than younger generations to rely on information provided to them by their employer and benefits broker when making health plan and other coverage decisions during open enrollment.
How you can help
Employers can help their employees make smart health plan decisions by:
Not inundating them with lengthy educational materials. Often clear and concise materials are best, especially ones that use bullet points and infographics. Benefits experts recommend providing employees bite-sized information that can help them whittle down their choice.
The materials should give different scenarios for workers to help them decide on a plan, such as:
A 27-year-old single female employee with no health problems, spouse or dependents.
A 46-year-old married father of three young kids.
A 58-year-old divorced woman with high blood pressure and asthma.
Keeping the open enrollment period short. Many brokers will tell you that the longer the open enrollment period, the more likely it is that employees will procrastinate on choosing their plan(s) and rush at the last minute. For best results consider a two-week period, and a run-up that includes education and outreach.
Helping them prioritize the basics. There are a few areas that they should review to make sure they choose wisely.
Some areas they can focus on include:
Retaining their doctor — Even if you are offering the same plan as last year, it’s a good idea to tell your employees to check the plan to see if their physician or their kids’ pediatricians are on the list of providers. Health plans make changes every year, so it’s important to check.
Getting the financial balance right — Many people end up spending more up-front on higher premiums in exchange for lower out-of-pocket maximums and/or deductibles, when they shouldn’t.
A young, healthy person that rarely visits the doctor may be better off with a plan that has lower premiums and a higher deductible, which they will not likely reach.
Worst-case-scenario calculation — Your employees should understand the implications if they suffer a medical crisis. For a full perspective, they can:
Calculate the total premium they will pay for the entire year (their monthly premium contribution x 12), and add
