Issued on May 11, 2021 I Download as a PDF

CMS Benefit and Payment Parameters for 2022

On May 5, 2021, the Centers for Medicare & Medicaid Services (CMS) published Final Benefit and Payment Parameters for 2022, together with a Fact Sheet. These uniform standards, as required under the Affordable Care Act (ACA), are intended for health insurers and the marketplace to ensure health coverage options for consumers, as well as provide planning guidance for insurers and employers. These regulations take effect on July 6, 2021.

Following are highlights of the final rules of interest to employers:

Cost-Sharing Limits
The ACA imposes certain cost-sharing restrictions, such as out-of-pocket limits on health plans. These annual out of pocket limits apply to insured plans offered through the marketplace, and insured and self-funded plans offered outside marketplace. Below are cost sharing limitations for 2021 and 2022:

For purposes of determining the ACA out-of-pocket limits, these rules use the methodology that was used for the 2015 through 2019 years which result in a lower out-of-pocket limit than the methodology that was used for 2020 and 2021.  Further, this methodology will also impact the calculation of the affordability standard which is 9.83% for 2021.  This metric is used for determining whether an employer subject to employer shared responsibility (employers employing 50 or more employees) offer affordable coverage.  Further, it will impact the calculation of the IRC section 4980H (a) and (b) penalties.  Thus far, neither the affordability standard nor the IRC section 4980H (a) or (b) penalties for 2022 have been announced.

As a reminder, the out-of-pocket (OOP) limits applicable to high deductible health plans (HDHP) used in conjunction with health savings accounts (HSA) differ from these ACA-imposed cost sharing limits. Below are the OOP limits for HDHP plans for 2021 and 2022:

Benefit Limit for Excepted Benefit HRA
Employers can choose to offer an HRA integrated with individual coverage (IC-HRA), or an excepted benefit HRA (EB-HRA).  An EB-HRA is a stand-alone HRA that can be used to reimburse certain Code Section 213(d) expenses such as co-pays and deductibles, as well as premium for certain excepted benefits policies such as dental and vision.

One of the criteria for this type of HRA is a cap or limit on the maximum reimbursement for medical expenses that can be made through the EB-HRA; this amount is subject to inflationary indexing.  The maximum contribution amount for plan years beginning in 2022 remains at $1,800.

Reduction in Cost-sharing through the Marketplace for 2022
The Guidance provides that for individuals who purchase health insurance through the marketplace, the maximum annual limitation on cost sharing is below what CMS proposed in November 2020, as noted in the table below.

Medical Loss Ratio (MLR) Calculation
The final rules address the calculation of the medical loss ratio (MLR).  As a reminder, the MLR rules require insurers issuing individual and group health plans to spend a certain amount of premium dollars on medical care and health care quality improvements. Generally, the MLR rules require insurers to spend at least 85% of premium dollars paid by the large group market (over 100 employees) on medical claims; 80% in the small group (100 or fewer employees) and individual markets.

This Guidance allows insurers to prepay the MLR estimate, such as by providing a premium credit, anytime over the course of the year as long as it does so in a nondiscriminatory manner.  This applies for the 2020 reporting year which is due in 2021. 

Further, the Guidance provides that beginning for the 2021 reporting year reported in 2022, temporary premium credits can be provided as a result of a public emergency, similar to the premium credits that many insurers provided in the summer of 2020 as a result of the coronavirus public emergency.  If insurers choose to provide this form of premium credit, it might save plan sponsors some headaches in determining how to use MLR refunds.

Special Enrollment Periods
The final rules establish two new special enrollment periods.  One for individuals who did not receive timely notice of a triggering event and another one for cessation of employer contributions or government subsidies, such as the American Rescue Plan Act COBRA subsidy.   See Special Edition At Issue: COBRA Premium Subsidy under the American Rescue Plan

Untimely Notice of Triggering Event
A qualified individual, enrollee, or dependent who did not receive timely notice of a triggering event or was otherwise reasonably unaware that a triggering event occurred, will qualify for an applicable special enrollment period and select a new plan within 60 days of the date that he or she knew, or reasonably should have known, of the occurrence of the triggering event.

The individual will be allowed to choose the earliest effective date that would have been available if he/she had received timely notice of the triggering event.

Cessation of Employer Contributions or Government Subsidies to COBRA
A special enrollment period is triggered when a qualified individual or his or her dependent is enrolled in COBRA continuation coverage and employer contributions or government subsidies to COBRA continuation coverage cease.

The triggering event for this special enrollment period would be based on loss of employer contributions or government subsidies to COBRA continuation coverage, rather than the loss of coverage itself.  The qualified individual or his/her dependent would have 60 days to select a qualified health plan.

Federal Exchange User Fees
On January 19, 2021, HHS finalized the user fee rates for insurers offering qualified health plans through the federally-facilitated exchanges at 2.25% of total monthly premiums and user fee rates through state-based exchanges on the federal platform at 1.75% of total monthly premiums. 

On January 28, President Biden issued an Executive Order directing all agencies to review regulations, orders, guidance, policies, etc. to determine whether such agency actions are inconsistent with this Administration’s policy to protect and strengthen the ACA and to make high-quality health care accessible and affordable for every American.

Due to this Executive Order, HHS intends to propose new qualified health plan user fees rates for the 2022 plan year.  A new federally-facilitated exchange user fee rate of 2.75% of total monthly premiums; and a new state-based exchange on the federal platform user fee rate of 2.25% of monthly premiums.

Federal Poverty Level Guidelines for 2021

The Department of Health and Human Services has released the federal poverty level (FPL) guidelines for 2021.  These poverty guidelines are important for a number of reasons, not the least of which is the Affordable Care Act.

• The FPL guidelines are used to determine eligibility for premium assistance and cost-sharing.  
• Further, for employer shared responsibility purposes, use of the FPL guidelines is one of three safe harbor methods that can be utilized to determine an individual’s household earnings for purposes of satisfying the ACA’s affordability standard.  Coverage under an employer-sponsored plan is deemed affordable to a particular employee if the employee's required contribution to the plan does not exceed 9.83% (indexed for 2021) of the employee's household income for the taxable year, based on the cost of single coverage in the employer’s least expensive plan.  If the FPL guidelines safe harbor is used, the maximum individual contribution is $105.51 (indexed for 2021).  The W-2 safe harbor determines affordability using Box 1 of the employee’s W-2.  The rate of pay safe harbor determines affordability based on the employee’s hourly rate.
• As background, employers subject to the ACA’s employer shared responsibility provisions who fail to offer minimum essential coverage to their full-time employees or fail to offer adequate and affordable coverage may be subject to an excise tax if at least one of its employees qualifies for premium assistance through a marketplace.  If an employer is using the FPL as its affordability standard, it is allowed to use the FPL guidelines in effect six months prior to beginning of the plan year. Note: a calendar year plan must use the 2020 FPL guidelines since the 2021 FPL guidelines were not issued when the offer of coverage was made.
• In addition, these FPL guidelines are used to determine eligibility for other federal entitlement programs such as the Children’s Health Insurance Program, certain parts of Medicaid, and subsidies for Medicare Part D prescription benefits. 

The 2021 FPL guidelines became applicable on January 13, 2021 (unless an office administering a program using the guidelines specifies a different effective date for that particular program).  Below is a chart reflecting the 2021 and 2020 levels. 

Additional poverty guidelines are available from the HHS Office of The Assistant Secretary for Planning and Evaluation.

Extended Transition Period for ACA Compliant Policies

Certain so-called ‘grand-mothered’ policies in the individual and small group markets have enjoyed exemption from certain market provisions by way of non-enforcement guidance issued by the CMS’ Center for Consumer Information and Insurance Oversight (CCIIO).  On January 19, 2021, CCIIO released another extension providing that individual and small group non-grandfathered health policies renewing prior to October 1, 2022 (but ending by January 1, 2023) could be renewed, free from many of the ACA’s market reforms, including:

• Fair health insurance premiums;
• Guaranteed availability of coverage;
• Guaranteed renewability of coverage;
• Prohibition of pre-existing condition exclusions or other discrimination based on health status with respect to adults, except with respect to group coverage;
• Prohibition of discrimination against individual participants and beneficiaries based on health status except with respect to group coverage;
• Non-discrimination in health care;
• Comprehensive health insurance coverage; and
• Approved clinical trials.

This means that unless extended again, or if changes are made by Congress or the Biden Administration in the interim, beginning January 1, 2023, these policies must be ACA-compliant.

Federal Marketplace Special Enrollment Period

Due to the coronavirus pandemic many state-based marketplaces offered a special enrollment period in the spring of 2020 when the coronavirus emergency started.  The federal marketplace, including states that use the federal marketplace platform, did not offer a special enrollment opportunity. 

On January 28, 2021, President Biden signed an Executive Order making a special enrollment period available in the federal marketplace.  CMS has affirmed that the special enrollment period will run from February 15, 2021 to August 15, 2021.  Below is a list of states that use the federal marketplace. 

*State run marketplace but use the federal platform

Note: the following state-based marketplaces have followed suit and are offering a special enrollment period to give people an opportunity to enroll:

Note: these marketplace special enrollment opportunities do not directly impact employer-sponsored group health coverage.  They may provide a health coverage opportunity to individuals who may have lost access to employer-sponsored coverage.

Further, the Executive Order directs government agencies to review any standards or positions that impede access to health coverage and to revise or make recommendations for modification.  As an example, the government is asking the U.S. District Court of Appeals for the D.C. circuit, which is considering a challenge to the association plan regulations promulgated by the Trump administration, to delay ruling until the Biden administration has a chance to assess its position on the matter.

Individual Coverage HRA (IC-HRA) Developments

An individual HRA is a special type of HRA that allows the purchase of individual health insurance policies.  In January of 2021, final regulations were issued but not published in the federal register.  The Biden Administration has withdrawn those regulations to give its administration the opportunity to review the regulations.  The regulations address IC-HRA compliance with employer shared responsibility as well as compliance with the Internal Revenue Code Section 105(h) salary based discrimination rules.  Final regulations are similar to the proposed regulations (see Health Reform Bulletin 145).  If and when these regulations are re-issued, a more detailed summary will be provided.

The Equal Employment Opportunity Commission (EEOC) has responded to a request about how an IC-HRA can comply with the Age Discrimination in Employment Act (ADEA).  In summary, this letter provides that a plan will be ADEA compliant if the employer makes a like contribution to all IC-HRA participants without regard to age.  Further, the letter provides that the employer can make a larger contribution for older aged individuals.  Compliant with previously issued regulations, the EEOC provides that providing a smaller contribution for older aged individuals would not be compliant.  Finally, the letter affirms that the individual insurance policy used in conjunction with the IC-HRA is not subject to the ADEA.  This letter is a good reminder that there are laws in addition to the Internal Revenue Code and ERISA that apply to IC-HRAs.

About the Author

Karen R. McLeese is Vice President of Employee Benefit Regulatory Affairs for CBIZ Benefits & Insurance Services, Inc., a division of CBIZ, Inc.  She serves as in-house counsel, with particular emphasis on monitoring and interpreting state and federal employee benefits law. 

Ms. McLeese is based in the CBIZ Kansas City office.

The information contained herein is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations. The information contained herein is provided as general guidance and may be affected by changes in law or regulation. The information contained herein is not intended to replace or substitute for accounting or other professional advice. Attorneys or tax advisors must be consulted for assistance in specific situations. This information is provided as-is, with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained