On May 14, the Department of Health and Human Services (HHS) published in the Federal Register its Notice of Benefit and Payment Parameters for 2021 final rule and posted an accompanying fact sheet. The 2021 annual out-of-pocket (OOP) maximums for non-grandfathered group health plans will increase by approximately 4.9 percent over this year’s limits: Self-only coverage: $8,550 in 2021, up from $8,150 in 2020. Other than self-only coverage: $17,100, up from $16,300. These limits apply to all OOP costs for in-network essential health benefits. HHS and IRS Out-of-Pocket Limits Differ There are two sets of limits on out-of-pocket expenses for health plans, determined annually by federal agencies, which can be a source of confusion for plan administrators. The first is the HHS’s annual OOP limits for all non-grandfathered Affordable Care Act-compliant plans, noted above. The second is the IRS’s out-of-pocket limits for health savings account (HSA)-qualified high-deductible health plans (HDHPs), which are expected to be released shortly. Drug Coupons Won’t Count Toward Deductible Drug companies make discounts at the pharmacy counter or post-purchase rebates available for brand-name prescription drugs by issuing coupons or cards that consumers can use to buy the specified medications. Under the 2021 benefit parameters final rule, a group health plan will be permitted, but not required, to count toward annual limits on cost-sharing amounts (such as plan deductibles and out-of-pocket maximums) the value of a drug manufacturer’s payment assistance. Plans can do so by putting in place a co-pay accumulator program, which doesn’t count the value of co-pay assistance coupons or cards toward plan participants’ cost-sharing amounts. The 2021 benefit parameters differ from the rule for 2020, which permitted plans to exclude the value of co-pay coupons from a participant’s cost-sharing limits only when the prescription drug had a medically appropriate generic equivalent available. Enforcement of the 2020 final rule was placed on hold pending publication of the 2021 rule because of implementation concerns over whether co-pay assistance would make a participant ineligible to contribute to an HSA. Under the final rule for 2021, “a self-funded group health plan has the flexibility to determine whether to include or exclude the amount of drug manufacturer co-pay coupons, regardless of whether a medically appropriate generic equivalent is available,” according to an analysis by attorneys at Vorys, a national law firm. “An insured group health plan may also have to comply with any applicable state laws regarding co-pay coupons,” the attorneys noted. “Some states—including Arizona, Illinois, Virginia, and West Virginia—have banned co-pay accumulator programs,” Katie Keith, a former research professor at Georgetown University’s Center on Health Insurance Reforms, wrote on the Health Affairs blog. “In those states, insurers are required to count coupons and co-pay assistance towards a plan’s deductible or out-of-pocket limit.” HSA Eligibility Concerns Last year, the oversight agencies—the HHS, the IRS and the Department of Labor—determined that plan sponsors who complied with the 2020 benefit parameters final rule, before the co-pay coupon provision was suspended, could cause participants enrolled in HSA-compatible HDHPs to become ineligible to make or receive HSA contributions. HSA eligibility requires that account holders have no other health insurance other than an HDHP, except for vision and dental coverage. This requirement excludes any product or service that helps pay medical expenses before the plan deductible is met, such as a drug manufacturer’s discount coupon or rebate. “Unless new guidance is issued by the IRS changing its current position that discounts must be disregarded in determining whether a HDHP deductible has been met, it appears that sponsors of HSA-compatible HDHPs must adopt a co-pay accumulator program in order to preserve participants’ eligibility to make or receive [HSA] contributions,” according to the Vorys attorneys.

On May 12, 2020, the IRS released Notice 2020-29, which provides temporary flexibility for mid-year election changes under a Section 125 cafeteria plan during calendar year 2020. The changes are designed to allow employers to respond to changes in employee needs as a result of the COVID-19 pandemic. This guidance relates to mid-year elections for self-insured and fully insured employer-sponsored health coverage, health flexible spending arrangements (health FSAs) and dependent care assistance programs (DCAPs). Permitted Election Changes For employer-sponsored health coverage, a Section 125 cafeteria plan may permit an employee to prospectively: Make a new election if the employee previously declined coverage; Revoke an existing election and enroll in different health coverage sponsored by the employer; or Revoke an existing election, if the employee is or will be enrolled in other health coverage. Employees may also prospectively revoke an election, make a new election or decrease or increase an existing election for a health FSA or DCAP. A plan may permit any of the election changes described in the notice, regardless of whether they satisfy existing mid-year election change rules. Employer Requirements An employer using this relief may determine the extent to which such changes are permitted and applied. If these changes are permitted, the employer must adopt a plan amendment by Dec. 31, 2021, and inform employees of the change. The amendment may be retroactive to Jan. 1, 2020. Changes to the plan may also implicate other applicable laws, such as participant notification requirements under ERISA.