Thanks to new regulations that took effect Jan. 1, it will be easier for dependents of an employee with employer-sponsored family health coverage to seek out coverage and subsidies on the Marketplace if they are in a plan that is deemed unaffordable under the Affordable Care Act.

The new rules, issued by the Department of Treasury and the IRS, are aimed at fixing what’s become known as the “family glitch,” which is tied to the affordability test of employer-sponsored coverage.

The ACA affordability threshold for employer-sponsored coverage is 9.12% of income for 2023, meaning that if an employee is spending more than that for their portion of the premium, the coverage would be deemed unaffordable and they would be eligible to seek out coverage on an exchange and qualify for subsidies.

Under the family glitch, affordability of employer-sponsored coverage for a family member of an employee was determined by the affordability test for self-only coverage. And because of ACA rules, even if the family coverage was more than 9.12% of household income for the worker’s family members, they would be ineligible for premium credits (or subsidized coverage) on the government-run exchange.

Some 5.1 million individuals are affected by the family glitch, according to the Kaiser Family Foundation. It estimates that 85% of them in 2022 were enrolled in employer-sponsored plans and paying more than they would if they qualified for subsidies on the exchange.

Another study estimated that these individuals could be spending on average 15.8% of their income on their employer-sponsored coverage.

Example of the family glitch:

An employer pays 100% of the $7,500 premium for an employee’s self-only coverage, but doesn’t pay anything towards the individual’s family members’ coverage, which is an additional $8,500 per year.

As a result, the worker’s dependents would be considered to be enrolled in affordable employer-sponsored coverage, which would prevent them from qualifying for tax credits on the exchange.

The new rules

Under the new rules, the worker’s required premium contributions for self-only and family coverage would be compared to the affordability threshold of 9.12% of their household income.

If the employer offers multiple plans, the affordability test is applied to the lowest-cost plan, regardless of if the employee chooses a plan that costs them more than 9.12% of household income.

If the cost of self-only coverage is considered affordable, but the family coverage not, the employee would not be eligible to apply for subsidized coverage on an exchange, but their dependents would be.

In your communications with your staff, it may be a good idea to let them know of this new rule as it could allow some of them with family coverage to secure subsidies for their dependents on the Marketplace and pay less in premium for the coverage.

As health insurance and treatment costs rise and recognizing the potential for tax savings and other benefits, more employers have started offering flexible savings accounts to their employees.

FSAs are also an important way to enable employees who are not enrolled in high-deductible health plans with attached health savings accounts to save money over the year for medical and related expenses.

A study by the National Business Group on Health predicts that 66% of employers will be offering FSAs to their employees in 2023, up from about 60% in 2018 and 52% in 2015 and making for an increase of 27% in less than a decade.

The study predicts that uptake will continue growing as employers look for ways to help their employees put aside funds for medical services, pharmaceuticals, copays, coinsurance and other medical items.

Also, the total amount saved in these vehicles was $30.7 billion in 2020, up 8.7% from the year prior, according to medical equipment supplier AvaCare Medical. The average amount of money placed into FSAs has increased every year since 2015, reaching an average of $2,400 in 2022, according to the IRS and the Bureau of Labor Statistics.

While they have always offered tax savings and other benefits for individuals and businesses, the increasing popularity of FSAs is likely due to the rising cost of health care.

Contributions

Participating employees can contribute up to $3,050 in 2023, up $200 from 2022. Amounts contributed are not subject to federal income tax, Social Security tax or Medicare tax. The limit only applies to how much an employee can contribute to their account.

If the plan allows, the employer may also contribute to an employee’s FSA.

Employer contributions (including non-cashable flex credits) generally cannot exceed $500 per plan year for the health FSA to maintain excepted benefit status. That means that the maximum health FSA available in 2023 will be limited to $3,550 ($3,050 maximum employee contribution + $500 maximum employer contribution).

Another important note: Health FSA eligibility cannot be broader than the major medical plan eligibility to maintain excepted benefit status, under the Affordable Care Act. That means that a health FSA should never be available to an employee who is not also eligible for a major medical plan.

Carryover

Under the law, enrollees must use up the funds they set aside during the year or forfeit the remainder, unless their employer allows part of the funds to be carried over.

Also, if a cafeteria plan permits health FSA carryovers, the maximum amount that a participant can carry over from the 2023 to the 2024 plan year is $610, up $40 from the maximum carryover amount from 2022 to 2023.

Some employers may provide a two-and-a-half-month grace period during which employees can use their remaining funds.

Regardless of what you decide in terms of allowing carryovers, you should clearly inform your workforce of your current carryover limit and any changes in 2023. That way, you give your staff the ability to avoid forfeiting as much as possible at the end of the year.

What FSA funds can be spent on

Some of the qualified medical expenses that are not covered by health insurance, and for which employees can pay using FSA funds, are:

• Copays
• Deductibles
• Dental and vision care services
• Eyeglasses and hearing aids
• Chiropractic and acupuncture
• Physical therapy
• Other medical devices
• Prescription drugs
• Over-the-counter medications.

Despite group health insurance costs expected to rise 5.4% this year, the tight labor market is forcing employers to prioritize enhancing benefits over cost-cutting measures, according to a new report by Mercer.

With Americans increasingly struggling to pay their health care bills, more employers are shying away from only offering their workers high-deductible health plans (HDHPs) that reduce premiums up front for higher out-of-pocket costs for workers.

Also, with mental health a top concern for workers, employers are seeking out benefits and plans that include virtual mental health services to make it easier to access care.

The expected health insurance cost growth of 5.4% is still less than general inflation, which was averaging just a tad below 8% in 2022. Because of high inflation, employers should be prepared for continued accelerated cost growth in 2024 and beyond, according to Mercer.

What employers are doing

With the tight labor market and health insurance benefits high on employees’ demands, employers are focusing on:

• Enhancing benefits to improve attraction and retention (84% of large employers cited this as “important” or “very important”).
• Adding programs/services to expand access to behavioral health care and mental health services (73% said this was important or very important).
• Improving health care affordability (68%).
• Enhancing benefits/resources to support women’s reproductive health (55%).

That’s not to say that employers are not concerned about costs. Instead, they are tackling it in different ways than in the past.

“Given the focus on affordability, it is not surprising that, despite expectations of higher healthcare costs, most leaders are avoiding ‘healthcare cost shifting,’ or giving plan members more responsibility for the cost of health services through higher deductibles or copays,” Mercer wrote.

It added that there was little change in the median amount of these cost-sharing features in 2022.

Prior to the COVID-19 pandemic, employers were shifting workers to HDHPs to reduce their costs, but while employees enjoy lower premiums with these plans, if they need care they will pay more out of pocket.

Mercer found that fewer large employers are offering only HDHPs than in past years. Very large organizations (20,000 or more employees) had been adopting these plans with gusto until 2018, when 22% of them offered an HDHP as the only option for their employees. That fell to 13% in 2021 and was only 9% in 2022.

Instead, more employers were using salary-based premiums in 2022 (34%, up from 29% in 2021). Under these arrangements, lower-wage workers have smaller paycheck deductions for health coverage than those with higher salaries.

Cost-cutting

Employers are instead looking at other ways to cut costs for themselves and their employees. The Mercer study found that:

• 35% of large employers are steering employees to high-performing provider networks and other sources of high-value care.
• 36% of large employers offer telephonic navigation and advocacy service to help members find the right provider based on quality and cost.
• 17 % offer digital navigation.
• 24% are focusing on managing costs of specialty drugs.
• 23% are working with their carriers and pharmacy benefits managers on cost and clinical management strategies. 

As many as 9 million surprise medical bills have been prevented since January 2022 due to the impact of the No Surprises Act, according to a new report.

This is the first data that indicates the law, aimed at eliminating surprise medical billing for insured patients getting emergency treatment, is working. The number of claims subject to protections of the law have far exceeded the federal government’s initial prediction, the report by AHIP Health Policy & Markets Forum and the Blue Cross Blue Shield Association found.

If you have not made your employees aware of this groundbreaking law, you should, as Americans are tagged with billions of dollars a year in surprise bills when they go out of network, even if they don’t know it.

Often these bills come after going to an in-network hospital but either the doctor, the lab or the anesthesiologist were out of network.

Surprise billing is also common in medical emergencies, when an ambulance takes a patient to the closest ER – and frequently at a hospital that’s not in the patient’s network. The patient is normally in no condition to check his or her plan for in-network providers.

The No Surprises Act

Beginning on Jan. 1, 2022, the No Surprises Act banned surprise medical billing in most instances. The purpose of the law was to reduce surprise medical billing for insured patients receiving emergency treatment.

However, the law provides patients additional rights in some non-emergency situations, as well.

To help control your employees’ medical costs, it’s a good idea for plan sponsors to make sure workers and their families understand how the law works, so they can assert their rights under the act.

Emergency services

The act prohibits in-network hospitals and other providers from billing patients for any out-of-network charges for emergency services. The most the in-network provider can bill the patient for is their plan’s maximum in­-network cost-sharing amounts.

So, if a patient is admitted to the ER and they must have an emergency surgery, and the surgeon or anesthesiologist is out of network, the hospital cannot bill the patient any more than they would have billed them had the surgeon or anesthesiologist been in the plan’s network.

Patients must still pay their deductible, copays and co-insurance amounts.

Providers cannot bill patients with insurance for anything beyond that.

Uninsured patients

Patients who are uninsured, or who are self-paying for care scheduled in advance (i.e., non-emergency care), are entitled to a “good faith estimate” from their providers.

If the patient gets a bill for anything more than that estimate, plus $400, they have 120 days from receipt to contest the bill.

Waiving rights

Some providers may ask your employees to sign a document that waives their rights under the law. However, the No Surprises Act prohibits waivers for any of these services:

• Emergency care
• Unforeseen urgent medical needs during non-emergency care
• Ancillary services
• Hospitalist charges
• Assistant surgeon charges
• Out-of-network provider services when no in-network alternative is available
• Diagnostic services.

Key points for covered employees

• You are not required to waive your rights under the No Surprises Act.
• You are not required to use out-of-network providers. You can seek non-emergency care in-network.
• Your plan must cover emergency services without requiring preauthorization.
• Your plan must cover emergency services by out-of-network providers.
• Your plan must apply any amounts you pay for emergency or out-of-network services towards your deductible and out-of-pocket limits.

If you’ve been wrongly sent a surprise medical bill, visit https://www.cms.gov/nosurprises.