To prepare for open enrollment, group health plan sponsors should be aware of the legal changes affecting the design and administration of their plans for plan years beginning on or after Jan. 1, 2020. Employers should review their plan documents to confirm that they include these required changes.
In addition, any changes to a health plan’s benefits for the 2020 plan year should be communicated to plan participants through an updated summary plan description (SPD) or a summary of material modifications (SMM).
Health plan sponsors should also confirm that their open enrollment materials contain certain required participant notices, when applicable—for example, the summary of benefits and coverage (SBC). There are also some participant notices that must be provided annually or upon initial enrollment. To minimize costs and streamline administration, employers should consider including these notices in their open enrollment materials.
Links & Resources
Revenue Procedure 2019-25, which includes the inflation-adjusted limits for HSAs and HDHPs for 2020
Model notices for group health plans, including the Women’s Health and Cancer Rights Act (WHCRA) Notice
Model COBRA notices for group health plans
Plan Design Changes
ACA Affordability Standard
Under the ACA’s employer shared responsibility rules, applicable large employers (ALEs) are required to offer affordable, minimum value health coverage to their full-time employees (and dependent children) or risk paying a penalty. These employer shared responsibility requirements are also known as the “employer mandate” or “pay or play” rules.
Under the ACA, an ALE’s health coverage is considered affordable if the employee’s required contribution to the plan does not exceed 9.5 percent of the employee’s household income for the taxable year (as adjusted each year). The adjusted percentage is 9.86 percent for 2019.
For plan years that begin on or after Jan. 1, 2020, the affordability percentage is 9.78 percent. This means that employer-sponsored coverage for the 2020 plan year will be considered affordable under the employer shared responsibility rules if the employee’s required contribution for self-only coverage does not exceed 9.78 percent of the employee’s household income for the tax year.
If you are an ALE, confirm that at least one of the health plans offered to full-time employees (and their dependent children) satisfies the ACA’s affordability standard (9.78 percent for 2020 plan years). Because the affordability percentage significantly decreased from 2019 when it was 9.86 percent, employers may need to reduce their employee contributions for 2020 to avoid a penalty under the pay or play rules.
Non-grandfathered health plans are subject to limits on cost sharing for essential health benefits (EHB). The annual limit on total enrollee cost sharing for EHB for plan years beginning on or after Jan. 1, 2020, is $8,150 for self-only coverage and $16,300 for family coverage.
Review your plan's out-of-pocket maximum to make sure it complies with the ACA's limits for the 2020 plan year ($8,150 for self-only coverage and $16,300 for family coverage).
If you have a high deductible health plan (HDHP) that is compatible with a health savings account (HSA), keep in mind that your plan's out-of-pocket maximum must be lower than the ACA's limit. For 2020 plan years, the out-of-pocket maximum limit for HDHPs is $6,900 for self-only coverage and $13,800 for family coverage.
If your plan uses multiple service providers to administer benefits, confirm that the plan coordinates all claims for EHB across the plan's service providers or divides the out-of-pocket maximum across the categories of benefits, with a combined limit that does not exceed the maximum for 2020.
Preventive Care Benefits
The ACA requires non-grandfathered health plans to cover certain preventive health services without imposing cost-sharing requirements (that is, deductibles, copayments or coinsurance) for the services. Health plans are required to adjust their first-dollar coverage of preventive care services based on the latest preventive care recommendations. If you have a non-grandfathered plan, you should confirm that your plan covers the latest recommended preventive care services without imposing any cost sharing.
Health FSA Contributions
The ACA imposes a dollar limit on employees’ salary reduction contributions to a health flexible spending account (FSA) offered under a cafeteria plan. An employer may impose its own dollar limit on employees’ salary reduction contributions to a health FSA, as long as the employer’s limit does not exceed the ACA’s maximum limit in effect for the plan year.
The ACA set the health FSA contribution limit at $2,500. For years after 2013, the dollar limit is indexed for cost-of-living adjustments. For 2019 plan years, the health FSA limit is $2,700. The IRS has not yet announced the health FSA limit for 2020 plan years.
Watch for IRS guidance on the health FSA limit for 2020 plan years.
Once the 2020 health FSA limit is announced, confirm that your health FSA will not allow employees to make pre-tax contributions in excess of that limit.
Communicate the health FSA limit to employees as part of the open enrollment process.
HDHP and HSA Limits for 2020
If you offer an HDHP to your employees that is compatible with an HSA, you should confirm that the HDHP’s minimum deductible and out-of-pocket maximum comply with the 2020 limits. The IRS limits for HSA contributions and HDHP cost-sharing increase for 2020. The HSA contribution limits will increase effective Jan. 1, 2020, while the HDHP limits will increase effective for plan years beginning on or after Jan. 1, 2020.
Check whether your HDHP’s cost-sharing limits need to be adjusted for the 2020 limits.
If you communicate the HSA contribution limits to employees as part of the enrollment process, these enrollment materials should be updated to reflect the increased limits that apply for 2020.
New HRA Design Options for 2020
Employers have two new health reimbursement arrangement (HRA) design options for plan years that begin on or after Jan. 1, 2020—an individual coverage HRA (ICHRA) and an excepted benefit HRA (EBHRA).
Review the new HRA design options for 2020 and decide whether to adopt either of these options for your employees (or a group of your employees).
If you adopt an ICHRA for 2020, provide the required employee notice at least 90 days before the beginning of the plan year.
Wellness Plan Design – ADA Compliance
The Americans with Disabilities Act (ADA) applies to employer-sponsored wellness plans that ask for health information or include medical exams (for example, biometric testing). In May 2016, the Equal Employment Opportunity Commission (EEOC) issued final rules addressing the ADA’s requirements for employer-sponsored wellness programs. The final rules included a 30% limit for wellness incentives. A federal court vacated this incentive limit, effective Jan. 1, 2019. Consistent with this court ruling, the EEOC removed the incentive limit from its final wellness rules.
Due to the lack of guidance from the EEOC, it is currently unclear what level of incentive, if any, is permissible under the ADA for employer-sponsored wellness plans that ask for health information or include medical exams. The EEOC has indicated that it may issue new proposed wellness rules by the end of 2019.
If you sponsor a wellness program that asks for health information or includes medical exams, you should carefully review any incentive associated with the program (due to the lack of guidance from the EEOC).
Watch for any developments related to the EEOC’s wellness rules.
If the EEOC issues proposed wellness rules before the start of the 2020 plan year, review your wellness incentives and consider whether to make any adjustments.
This Compliance Overview is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.