CMS and HHS

Medicare Part D Reforms

The Inflation Reduction Act [1] contained Medicare Part D reforms slated to take effect in 2025. These changes will impact employer sponsored health plans that offer prescription drug coverage in an important way. Employers must inform employees annually, prior to the start of the Medicare open enrollment period beginning October 15, if their drug plans are ‘creditable’. {2] This determination depends on many factors and is the responsibility of the plan sponsor to confirm. Most relevant to creditable status determinations, the Part D annual out-of-pocket costs will be capped at $2,000 for people with Medicare Part D starting in 2025 (in 2024, the limit was $8,000). Employees that postpone Medicare enrollment until they retire at an age older than 65 will face a life long penalty [3] if they do not maintain creditable coverage prior to Medicare Part D enrollment. This means that new Medicare cost limits will render many employer plans non-creditable, exposing employees to Part D penalties when they eventually enroll in Medicare. 

Section 1557 Final Rule

The ACA’s Section 1557 is a very brief statement, prohibiting discrimination “under, any health program or activity, any part of which is receiving Federal financial assistance,” on the basis of “race, national origin, sex, religion, or color”. [4] The final rule [5] implementing this section of the law was published on May 6, and has implications for certain employers as health plan sponsors. Many employers will either not be impacted at all, while others will be able to rely on their fully insured carriers to comply with this law. However self insured employer plans that receive federal funding will need to take notice. For example, if an employer is a health care entity itself (such as a hospital), and receives federal financial assistance such as Medicare payments, then the result is that all the employer’s operations are subject to ACA Section 1557. Even employers that are not themselves health care entities, but whose health plan receives federal funding through Medicare or Medicaid payments, would be subject to 1557.

No Surprise Act- Billing Disputes

Now that we are about two years into the No Surprise Act (NSA) implementation, it should come as no surprise that the courts are split on billing dispute challenges. Providers are at odds with insurance carriers when it comes to enforcement of independent dispute resolution (IDR) awards, as well as the amount of the awards. For example, the US District Court for the District of New Jersey [6] ruled in favor of arbitration award enforcement against the challenge brought by a physician practice, while the US District Court for the Northern District of Texas dismissed [7] a similar suit, finding there is no private right to sue under the NSA. Where does this leave us? We are squarely in the gray area where NSA billing disputes arise under employer sponsored health plans. The good news is that employees are not left to deal with surprise bills, as they are directed to be settled between carriers and providers, outside of individuals’ hands.

IRS

Sections 6055 and 6056 

The 4980H(a) and (b) penalty figures for 2025 have been announced, and for the first time since the law’s enactment, these amounts will decrease from 2024:

 

4980H(a): If Employer does not offer coverage to 95% of its full time employees, and one employee receives a subsidy to purchase insurance on the Health Exchange, the Employer is subject to a penalty equal to $2,900 x every full time employee (minus 30). 

4980H(b): If employer offers coverage that is unaffordable (affordability measure for 2025 is still TBD at the time of this writing) or doesn’t offer minimum value, and any employees qualify for a subsidy to purchase insurance on the Health Exchange, the employer is subject to a penalty equal to $4,350 x the number of full time employees that receive a subsidy to purchase insurance on the Health Exchange.

At the time of this writing, the affordability threshold is still to be determined. The IRS Rev. Proc. 2024-14 can be reviewed in its entirety here.

SCOTUS

Food and Drug Administration et al v. Alliance for Hippocratic Medicine et al

A group of doctors and medical providers challenged the FDA’s expansion in access to an abortion medication called Mifepristone. In 2016 and again in 2021, the FDA changed the conditions under which this drug could be used, thereby making it more accessible to individuals. The doctors challenging this change objected to abortions generally, but the Court noted in a unanimous opinion, that the plaintiffs did not have ‘Article III standing’ (a legal right) to sue. Justice Kavanaugh wrote for the court, noting “some issues may be left to the political and democratic processes.” [8]

Loper Bright Enterprises et al v Raimondo Secretary of Commerce, et al

On June 28th, in a much anticipated opinion, the Court held by a 6-2 vote to overturn the long standing precedent known as ‘Chevron deference’. Since Chevron v Natural Resources was decided in 1984, Federal Agencies (such as the IRS and the EEOC) have been giving ‘deference’ in their interpretation, implementation and oversight of laws. This means the Courts have given “respect” to the way an agency decides laws under their purview are followed (and what the laws mean). Any conflicting interpretation is decided in favor of the agency’s argument. In short, this practice has been deemed improper. Justice Gorsuch states in his opinion that from here on out, the Court will “resolve cases and controversies without any systemic bias in the government’s favor.” (p. 33) The biggest question will be how current federal regulatory guidance will be impacted. The EEOC, DOL and IRS have numerous FAQs and interpretations that ‘fill gaps’ in existing law, many of which employers rely on in their administration of health and welfare plans. If these foundational interpretations are challenged in the court system, justices will no longer be required to defer to the government. 

DOL

Pregnant Workers Fairness Act (PWFA)

Following the first anniversary of the law’s effective date, the EEOC has passed implementing regulations to guide employers in their compliance efforts under the PWFA. Employers [9] are required to provide ‘reasonable accommodations’ to employees with limitations caused by childbirth, pregnancy, or related medical conditions. Examples of these accommodations include The ability to access drinking water as needed, ability to sit, longer or more frequent breaks to eat or use the bathroom, closer parking spots, more flexible hours or schedules, and reassignment from overly strenuous duties or exposure to chemicals that are unsafe for pregnancy.

Weight Loss Medication

After the FDA recently approved Wegovy for use in overweight individuals to reduce the risk of major cardiovascular events associated with obesity, employers have been faced with growing pressure to cover the cost of this and related medications. The CDC reports that obesity accounts for $173 billion of medical expenses, and that the prevalence of obesity among U.S. adults was 41.9% during 2017–March 2020. [10] Employers must weigh the long term goal of curbing the ever increasing health care costs they already face, against the steep price tag associated with covering GLP1 medications for weight loss. At the time of this writing, there is no state or federal law requiring that private employers cover the cost of GLP-1 drugs for conditions other than Diabetes.

New York

Paid Prenatal Leave

Though the New York Budget Bill passed without inclusion of anticipated disability reform, we did see an additional grant of paid leave for 2025. Beginning January 1, pregnant employees will be entitled to 20 hours of paid leave for all prenatal care (defined very broadly). This is in addition to existing paid time off, paid sick leave, and PFL entitlements. Time off can be taken in one hour increments, and must be available on January 1 without accrual requirements. The leave will be paid by employers, and is not an insured benefit related to existing PFL policies.

California

AB 1048 (Dental Plan Changes)

In October, 2023, Governor Newsom signed AB 1048 which made several changes to dental plans in the state., As of January, 2025, fully insured dental plans written in California will not be permitted to apply any waiting period, or any preexisting condition exclusions. The law also requires state regulatory agencies to review  premiums charged by dental plans, to ensure fairness in rates.

 [1]  https://www.cms.gov/inflation-reduction-act-and-medicare/part-d-improvements

 [2] Creditable coverage refers to an employer plan’s drug coverage relative to the coverage provided by Medicare part D. Plans that pay at least the same as Medicare Part D, with out of pocket costs to individuals that are the same are less than those enrolled in Medicare, are considered ‘creditable’.

 [3] Individual Part D penalties depends on several factors including how many month an individual was enrolled in non-creditable coverage prior to enrolling in Medicare Part D

 [4]  Section 1557 refers to Title VI of the 1964 Civil Rights Act

 [5] The final rule is codified as 42 U.S.C. §18116 https://www.govinfo.gov/content/pkg/FR-2024-05-06/pdf/2024-08711.pdf

[6] GPS OF NEW JERSEY M.D., P.C. A/S/O T.U. v. HORIZON BLUE CROSS & BLUE SHIELD et. al., Docket No. 2:22-cv-06614 (D.N.J. Nov 15, 2022),

[7] Guardian Flight, LLC v. Aetna Health Inc. et al

[8] FDA v. ALLIANCE FOR HIPPOCRATIC MEDICINE, p.24, 602 U.S.___(2024)

[9] The PWFA applies to all employers with 15 or more employees across all locations

[10] May, 2024 CDC Report ‘Adult Obesity Facts’