Plan Design Changes to Know Ahead of Open Enrollment | CBIZ

Employers — Be Aware of These Plan Design Changes Ahead of Open Enrollment

To ensure proper preparation for open enrollment, employers sponsoring group health plans should be aware of compliance changes that may impact the design and administration of their plans. However, this is easier said than done. To help you stay ahead of the curve and maintain compliance in 2025, we compiled the following crucial plan design changes employers should know ahead of open enrollment.

Affordable Care Act (ACA) Affordability Standard

The ACA requires applicable large employers (ALEs) to offer affordable, minimum-value health coverage to their full-time employees and dependents or risk paying a penalty to the IRS. This employer mandate is also known as the “pay-or-play” rules.

An ALE is an employer with at least 50 full-time employees, including full-time equivalent employees, during the preceding calendar year. An ALE’s health coverage is considered affordable if the employee’s required contribution for the lowest cost self-only coverage that provides minimum value does not exceed 9.5% (as adjusted) of the employee’s household income for the taxable year.

The affordability percentage for plan years beginning on or after Jan. 1, 2025 is 9.02% — up from 8.39% in 2024.

Out-of-Pocket Maximum Limits

Non-grandfathered health plans and health insurance issuers are subject to limits on cost sharing for essential health benefits (EHBs). EHBs reflect the scope of benefits covered by a typical employer plan and must include items and services in 10 general categories, including emergency services, hospitalization, ambulatory patient services, prescription drugs, pregnancy, maternity and newborn care, mental health and substance use disorder services, rehabilitative and habilitative services, laboratory services, preventive and wellness services and chronic disease management, and pediatric services.

The annual limits on total enrollee cost sharing for EHB for plan years beginning on or after Jan. 1, 2025, are $9,200 for self-only coverage and $18,400 for family coverage. With this in mind, employers should review the out-of-pocket maximum limits for the health plan to ensure they comply with the ACA’s limits for the 2025 plan year.

Preventive Care Benefits

The ACA requires non-grandfathered health plans and issuers to cover a set of recommended preventive services without imposing cost-sharing requirements, such as deductibles, copayments or coinsurance, when the services are provided by in-network providers.

Health plans and issuers are required to adjust their first-dollar coverage of preventive care services based on the latest preventive care recommendations. In general, coverage must be provided for a newly recommended preventive health service or item for plan years beginning on or after the one-year anniversary of when the recommendation was issued. Information on the recommended preventive care services is available at HealthCare.gov.

Before the beginning of the 2025 plan year, employers should confirm the health plan covers the latest recommended preventive care services without imposing any cost sharing when the care is provided by in-network providers.

Health Flexible Spending Account (FSA) Contributions

The ACA imposes a dollar limit on employees’ pre-tax contributions to a health FSA. This limit is indexed each year for cost-of-living adjustments. An employer may set their own dollar limit on employees’ 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 IRS has not yet released the health FSA limit for plan years beginning in 2025. Moving forward, employers with health FSAs should take these steps:

  • Monitor future developments for the release of the health FSA limit for 2025; 
  • Once the IRS releases the health FSA limit, confirm that employees will not be allowed to make pre-tax contributions in excess of the limit for the 2025 plan year; and 
  • Communicate the health FSA limit to employees as part of the open enrollment process. 

High Deductible Health Plan (HDHP) and Health Savings Account (HSA) Limits

The IRS limits for HSA contributions, HDHP minimum deductibles and HDHP maximum out-of-pocket expenses all increase for 2025. The HSA contribution limits will increase effective January 1, 2025, while the HDHP cost-sharing limits will increase effective for plan years beginning on or after Jan. 1, 2025.

Keep in mind that the out-of-pocket maximum limits for HDHPs compatible with HSAs must be lower than the ACA’s limits. For the 2025 plan year, the out-of-pocket maximum limits for HDHPs are $8,300 for self-only coverage and $16,600 for family coverage.

Looking ahead, employers should check whether HDHP cost-sharing limits need to be adjusted for the 2025 limits and communicate HSA contribution limits for 2025 to employees as part of the enrollment process.

HDHPs: Expiration of Design Options

To be eligible for HSA contributions for a month, an individual must be covered under an HDHP as of the first day of the month and have no other impermissible coverage. In general, except for preventive care benefits, no benefits can be paid by an HDHP until the minimum annual deductible has been satisfied. However, there are a few narrow exceptions to the minimum deductible requirement, including the following exceptions that are expiring:

  • For plan years ending after Dec. 31, 2024, an HDHP is no longer permitted to provide benefits for COVID-19 testing and treatment without a deductible (or with a deductible below the minimum deductible for an HDHP) 
  • For plan years beginning on or after Jan. 1, 2025, an HDHP is no longer permitted to provide benefits for telehealth or other remote care services before plan deductibles have been met 

Due to these changes, employers with HDHPs should take these steps for plan years beginning in 2025:

  • Confirm that HDHPs will not pay benefits for COVID-19 testing and treatment before the annual minimum deductible has been met; 
  • Confirm that HDHPs will not pay benefits for telehealth or other remote care services (except for preventive care benefits) before the annual minimum deductible has been met; and 
  • Notify plan participants of any changes for the 2025 plan year regarding COVID-19 testing and treatment and telehealth services through an updated SPD or SMM. 

Excepted Benefit Health Reimbursement Arrangement (EBHRA) Limit

An excepted benefit health reimbursement arrangement (EBHRA) is an employer-funded health care account that reimburses employees for their eligible medical expenses on a tax-free basis. Employers can use EBHRAs to supplement their traditional group health plan coverage and help employees with their out-of-pocket medical expenses, including deductible, copayment and coinsurance amounts. Employers of all sizes may offer EBHRAs.

Although an employer must offer a traditional group health plan, employees are not required to enroll in the employer’s group coverage (or any other type of coverage) to be eligible for the EBHRA. Only employers can contribute to HRAs, including EBHRAs. EBHRAs are subject to a maximum amount that may be made newly available for the plan year. This maximum amount is adjusted annually for inflation. For 2024 plan years, the contribution limit is $2,100, and this limit increases to $2,150 for plan years beginning in 2025.

Employers that sponsor EBHRAs should:

  • Decide how much will be contributed to the EBHRA for eligible employees for the 2025 plan year, up to a maximum of $2,150; and 
  • Communicate the EHBRA’s annual benefit amount to employees as part of the open enrollment process. 

Mental Health Parity — Required Comparative Analysis for Nonquantitative Treatment Limitations (NQTLs)

The Mental Health Parity and Addiction Equity Act (MHPAEA) requires parity between a group health plan’s medical/surgical benefits and its mental health or substance use disorder (MH/SUD) benefits. These parity requirements apply to financial requirements and treatment limits for MH/SUD benefits. In addition, any nonquantitative treatment limitations (NQTLs) placed on MH/SUD benefits must comply with MHPAEA’s parity requirements.

MHPAEA requires health plans and issuers to conduct comparative analyses of the NQTLs used for medical/surgical benefits compared to MH/SUD benefits. This analysis must contain a detailed, written and reasoned explanation of the specific plan terms and practices at issue and include the basis for the plan’s or issuer’s conclusion that the NQTLs comply with MHPAEA.

Plans and issuers must make their comparative analyses available to specific federal agencies or applicable state authorities upon request. In recent years, the U.S. Department of Labor (DOL) has made MHPAEA compliance a top enforcement priority, with a primary focus being MHPAEA’s parity requirements for NQTLs. Considering this information, employers should reach out to health plan issuers (or third-party administrators) to confirm that comparative analyses of NQTLs will be updated. Regulations were recently issued requiring actions for plan years beginning in 2025 and 2026.

Prescription Drug Benefits — Creditable Coverage Determination

The Inflation Reduction Act of 2022 (IRA) includes several cost-reduction provisions affecting Medicare Part D plans, which may impact the creditable coverage status of employer-sponsored prescription drug coverage beginning in 2025.

Employers that provide prescription drug coverage to individuals who are eligible for Medicare Part D must inform these individuals and the Centers for Medicare and Medicaid Services (CMS) whether their prescription drug coverage is creditable, meaning that the employer’s prescription drug coverage is at least as good as Medicare Part D coverage. These disclosures must be provided on an annual basis and at certain other designated times, including when there is a change to a prescription drug benefit’s creditable coverage status.

Previously, CMS stated that one of the methods for determining whether coverage is creditable (the “simplified determination” method) would no longer be valid as of calendar year 2025, given the significant changes made to Medicare Part D by the IRA. However, CMS subsequently decided that it will continue to permit the use of the simplified determination methodology, without modification, for calendar year 2025 for group health plan sponsors who are not applying for the retiree drug subsidy.

Due to these developments, employers should take the following steps:

  • Confirm whether their health plans’ prescription drug coverage for 2025 is creditable or non-creditable as soon as possible to prepare to send the appropriate Medicare Part D disclosure notices; and  
  • Continue to utilize the simplified determination method for determining whether prescription drug coverage is creditable for 2025, if applicable. 

Connect with CBIZ’s Regulatory & Compliance Specialists for Tailored Guidance

Our team of regulatory and compliance experts at CBIZ is focused on reviewing and interpreting state and federal mandates that may impact your employee benefit plans. Using our knowledge and awareness of laws, court decisions, administrative rulings and pronouncements, we work hand-in-hand with employee benefits consultants to help identify and resolve complex compliance issues. Click here to learn more.


© Copyright CBIZ, Inc. and CBIZ CPAs P.C. (together, “CBIZ”). All rights reserved. Use of the material contained herein without the express written consent of the firms is prohibited by law. This publication is distributed with the understanding that CBIZ is not rendering legal, accounting or other professional advice. The reader is advised to contact a tax professional prior to taking any action based upon this information. CBIZ assumes no liability whatsoever in connection with the use of this information and assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

CBIZ is the brand name for CBIZ CPAs P.C. and CBIZ Advisors, LLC (together), a national professional services company providing tax, financial advisory and consulting services to individuals, tax-exempt organizations and a wide range of growth-oriented companies. CBIZ Advisors, LLC is a fully owned subsidiary of CBIZ, Inc. (NYSE: CBZ). CBIZ CPAs P.C. is an independent CPA firm that provides audit, review and attest services, and works closely with CBIZ, a business consulting, tax and financial services provider. CBIZ and CBIZ CPAs P.C. are members of Kreston Global, a global network of independent accounting firms. This publication is protected by U.S. and international copyright laws and treaties. Material contained in this publication is informational and promotional in nature and not intended to be specific financial, tax or consulting advice. Readers are advised to seek professional consultation regarding circumstances affecting their organization.

Employers — Be Aware of These Plan Design Changes Ahead of Open Enrollment https://www.cbiz.com/Portals/0/Images/PlanDesignChanges_articlegraphic (2) (1)-2.png?ver=Pbfy2enFYabFNd3zQzvTOg%3d%3dhttps://www.cbiz.com/Portals/0/Images/PlanDesignChanges_articlegraphic (2) (1)-1.png?ver=Jn088GdvA138NQZT7gb8yA%3d%3dTo help you maintain compliance this year, we compiled the following crucial plan design changes employers should know ahead of open enrollment. 2024-10-04T17:00:00-05:00To help you maintain compliance this year, we compiled the following crucial plan design changes employers should know ahead of open enrollment.Employee ManagementEmployee BenefitsYes