by Christoper E. Condeluci, Principal and sole shareholder of CC Law & Policy PLLC in Washington, D.C.
Coronavirus Testing and Treatment = An “Essential Health Benefit”
- As most of you know by now, every fully-insured health plan that is an “individual” or “small group” market plan MUST cover coronavirus testing and treatment. This was confirmed for everyone when HHS issued an FAQ stating that coronavirus testing and treatment is considered an “essential health benefit.”
- Analysis: However, the Administration did indicate that the “individual” or “small group” market plan could STILL apply cost-sharing to the coverage of coronavirus testing and treatment. HOWEVER, virtually every State has come out requiring insurance carriers selling an “individual” or “small group” market plan in the State to waive any cost-sharing for coronavirus testing. In truth, I have lost count of all of the States that have made this announcement, but in my opinion, it’s virtually every State. BUT, what about cost-sharing for any treatment relating to the coronavirus? Well, that’s a bit of a different story. After all, testing is relatively inexpensive. BUT, treatment related to the coronavirus can – and will be – costly. Soooo, unless I am missing something, insurance carriers selling an “individual” or “small group” market plan can STILL impose cost-sharing for treatment related to the coronavirus, which could reach all the way up to a policyholder’s out-of-pocket maximums. I do NOT foresee States requiring free coverage for coronavirus treatments. Nor, do I foresee the Federal government requiring free coverage for treatment. HOWEVER, the House recently passed legislation (which the Senate is about to approve as well) that requires ALL insurance carriers selling an “individual” or “small group” market plan in the State to NOT ONLY waive the cost-sharing for coronavirus testing – BUT ALSO – to waive any cost-sharing for any services that may be rendered during the medical visit in which the test is being taken. This is certainly NOT free coverage for coronavirus treatment. BUT, this legislation goes further than just free coverage for testing.
What About Coronavirus Testing and Treatment Under Fully-Insured “Large Group” and Self-Insured Plans?
- As you also know, fully-insured “large group” and self-insured plans are NOT required to cover the “essential health benefits.” So technically, these plans are NOT required to cover coronavirus testing and treatment. BUT, because coronavirus testing and treatment would fall into the category of a “doctor’s visit” or “hospitalization” or even “preventive,” these types of benefits and services are ALWAYs covered under a fully-insured “large group” and self-insured plan. Therefore, coronavirus testing and treatment is DEFINITELY covered under these plans.
- Analysis: As far as I know, most if not all employers sponsoring a fully-insured “large group” or self-insured plan are voluntarily providing free coverage for coronavirus testing, just like “individual” and “small group” market plans are required to provide. BUT, what about treatment relating to the coronavirus? Again, the coverage for treatment is REAL money. Soooo, insurance carriers are NOT about to waive cost-sharing for treatment. Nor are self-insured plans. HOWEVER, the same legislation that was passed by the House (which the Senate is about to approve as well) requires ALL fully-insured “large group,” as well as self-insured plans, to provide free coverage for testing – AND ALSO – free coverage for any services that may be rendered during the medical visit in which the test is being taken. Again, this legislation is NOT requiring free coverage for coronavirus treatment. BUT, this legislation goes further than just free coverage for testing.
What About High-Deductible Health Plans (HDHPs) Providing Free Coverage Coronavirus Testing and Treatment?
- Importantly, a number of employers that sponsor a fully-insured “large group” or self-insured plan WANT to provide free coverage for BOTH coronavirus testing and treatment. BUT, if the health plan is a high-deductible health plan (HDHP), there is a BIG problem when it comes to the HDHP-policyholder’s eligibility to contribute to an HSA. What do I mean?
- Analysis: In short, if an HSA-eligible HDHP pays for the costs associated with coronavirus testing and/or treatment BEFORE the deductible is met, the HDHP-policyholder would be rendered INeligible to contribute to their HSA for the 2020 tax year. This is because the HSA rules are clear that if an HDHP pays for medical services or treatments covered under the plan before the deductible is met, the HDHP-policyholder CANNOT make a tax-free contribution to their HSA for the year. The employer community snapped in to action immediately to try to remedy this problem, and they banged on the Treasury and the IRS to issue guidance to clarify that HDHPs can indeed pay for coronavirus testing and treatment BEFORE the HDHP’s deductible is met. In previous guidance, the IRS has explained what “types” of medical services or treatments covered under the HDHP can permissibly be paid BEFORE the deductible is met. For example, in Notice 2004-23, the IRS explained what constitutes “preventive care,” and thus, can be paid first-dollar in accordance with the “preventive care” exception under the HSA rules. The IRS followed up this Notice with Notice 2004-50, which clarified that “preventive care” includes certain drugs and medications. Most recently, the IRS issued Notice 2019-45, providing a list of certain medications and treatments for “chronic care management” that would be considered “preventive care” under the HSA rules, and thus, could be paid for on a first-dollar basis. HOWEVER, nowhere in these pieces of guidance is testing and/or treatment for the coronavirus. Recognizing this – and responding to requests for relief from the employer community – the IRS issued Notice 2020-15, explaining that HSA-eligible HDHPs can indeed pay for costs associated with coronavirus testing and treatment BEFORE the deductible is met, and HDHP-policyholders will NOT lose their eligibility to make tax-free contributions to their HSA.
It’s Not Just Health Care and the Coronavirus, Is It?
- NO!! As you all know, the coronavirus is having a devastating impact on the economy. And I am NOT just talking about the stock market. There are sooooooo many people ranging from workers in restaurants and hotels, to workers in the airline and cruise industries, and even workers in dental offices who are LOSING their jobs. Although Congress and the Administration have NOT gotten out in front of the “layoffs” of these workers, Congress and the Administration are trying to help. How?
- Analysis: The legislation passed by the House recently (which the Senate is about to approve as well) requires certain employers to provide “paid sick leave” for up to 2 weeks. And, these same employers must pay for a portion of “family medical leave” (or FMLA) for certain workers. When I say “certain employers,” here is what I mean: The legislation requires employers with 500 or fewer employees to pay for the “paid sick leave” for up to 2 weeks, as well as the paid “FMLA leave” for up to 10 weeks. These requirements ALSO apply to employers with fewer than 50 employees. This latter point is significant because paid FMLA leave is generally NOT applicable to employers with fewer than 50 employees. BUT, under this particular legislation, employers with fewer than 50 employees are required to make payments to employees eligible for the “FMLA leave” and also the “paid sick leave.” Importantly though, the legislation allows employers with fewer than 50 employees to submit a request to the Department of Labor (DOL) to be “exempted” from the requirement to pay the “paid sick leave” and “FMLA leave” if the employer can show that these required payments “would jeopardize the viability of the business as a going concern.” I say “importantly” because – at least in my opinion – small employers NEED some relief from these required payments because most small employers have – or will have – liquidity problems if they are indeed required to comply here. Unfortunately though, small employers are going to have to have to wait for the DOL to issue guidance detailing the “process” for submitting the exemption, and then the small employer has to wait for their exemption request to be “processed” by the DOL. That is going to take a LONG time. When I said “certain workers” above, here is what I mean: In the case of “paid sick leave,” the legislation says that employees (1) who have health issues related to the coronavirus, (2) who are caring for a family member experiencing health issues related to the coronavirus, or (3) who are caring for a kid whose school has been closed due the coronavirus emergency are eligible to receive the “paid sick leave.” If, for example, an employee is experiencing a health issue related to the coronavirus (like hospitalization or quarantine), the employee can get paid up to $511 a day or $5,110 over the 10 days (i.e., 2 weeks of business days). If the employee is caring for a family member experiencing health issues related to the coronavirus or caring for a kid whose school has been closed, the employee can get paid up to $200 a day or $2,000 over the 10 days (i.e., 2 weeks of business days). When it comes to “FMLA leave,” these “certain workers” include employees who are NOT working because (1) they are caring for a kid whose school has been closed or (2) their child care provider is unavailable due the coronavirus emergency. In this case, the employee can get paid up to $200 a day or up to $10,000 over a 10 week period (note, an employee may NOT take the full 10 weeks of “FMLA leave,” so the payment amount may be less than $10,000). Also note, employers can require this employee to take the first 2 weeks of the FMLA leave as “unpaid leave.” Lastly, when it comes to “certain workers” who may ALSO be eligible for the “paid sick leave” and “FMLA leave,” the legislation ALSO INCLUDES self-employed individuals. See below for a fuller explanation of self-employed individuals here. In my opinion, this is a BIG DEAL!!
How Will Employers Get the Money to Pay the Required Paid Sick Leave and FMLA Leave?
- The legislation gives employers (again, employers with 500 or fewer employees, including employers with fewer than 50 employers that are not “exempted” out) a tax credit up to the $5,110 and $2,000 for the “paid sick leave” for each employee getting the paid sick leave for the full 2 weeks, and/or a tax credit for up to the $10,000 for each employee who takes the full 10 weeks of “FMLA leave.”
- Analysis: This tax credit would be delivered through the payroll tax system. In other words, the legislation says that employers would NOT be required to pay the payroll taxes they would otherwise be required to pay to the Federal government. And, the amount of payroll taxes that the employer would NOT pay to the Federal government would equal up to the $5,110 and $2,000 for the “paid sick leave” for each employee getting the paid sick leave for the full 2 weeks, and also the $10,000 for each employee who takes the full 10 weeks of “FMLA leave” (again, employees may NOT take the full 10 weeks). On the one hand, it is GREAT that the Federal government is taking on ALL of the liability for the “paid sick leave” and “FMLA leave” paid to employees. HOWEVER, the manner in which this tax credit is being delivered to employers is NOT SO GREAT. What I mean is, employers are required to pay the “paid sick leave” and/or “FMLA leave” UP FRONT, only to get reimbursed on the back-end by NOT having to pay payroll taxes to the Federal government. As stated above, coming up with this money up-front is going to challenge employers – especially small employers – from a liquidity stand-point.
Self-Employed Individuals and Paid Sick Leave and FMLA Leave
- Interestingly – and importantly – self-employed individuals are ALSO able to receive “paid sick leave” and “FMLA leave,” as mentioned above. Now, you might be saying: Hey Chris, if you are a self-employed individual, how can you pay yourself?? After all, as a self-employed individual, you do NOT have an employer paying your salary – RATHER – as a self-employed individual, you generate your own income based on your own work??
- Analysis: According to the legislation, a self-employed individual will be eligible to get paid up to the same $5,110 or $2,000 for “paid sick leave” that employees can receive, depending on the self-employed individual’s circumstances. And the way the self-employed individual will get “paid” is through a tax credit from the Federal government. More specifically, the legislation says that a self-employed individual can claim a tax credit against their annual income in an amount up to the $5,110 or $2,000 for “paid sick leave.” In addition, a self-employed individual will be eligible to get paid up to the same $10,000 for 10 weeks for the “FMLA leave” that employees can receive if the self-employed individual is not working because (1) they are caring for a kid whose school has been closed or (2) their child care provider is unavailable due the coronavirus emergency. Again, the self-employed individual would get “paid” up to this $10,000 by claiming a tax credit against their annual income (although note, they may NOT take the entire 10 weeks of FMLA leave, so the $10,000 credit may be less than the maximum). I gotta say, I LOVE fact that self-employed individuals can take advantage of the “paid sick leave” and the “FMLA leave” to the same extent an employee can take advantage of these benefits. Why? Because – as you have heard me say in the past – we have a growing “gig economy” and we also have legacy industries that are by definition made up of self-employed individuals (e.g., realtors, farmers, electricians and plumbers, certain health care workers, just to name a few). In my opinion, these self-employed individuals NEED to be given access to “workplace benefits” to the same extent common law employees have access to workplace benefits. UNFORTUNATELY, self-employed individuals currently do NOT have access to most “workplace benefits” that are traditionally offered to employees. The Department of Labor (DOL) tried to extend “workplace health benefits” that employees of large employers currently enjoy to self-employed individuals through “association health plans” (AHPs). And, the DOL has successfully extended the ability to contribute to a 401(k) retirement plan by allowing self-employed individuals to participate in an “association retirement plan” (ARP). These efforts are ALL examples of extending “workplace benefits” to self-employed individuals. And now, ADD IN a self-employed individual’s ability to take “paid sick leave” and “FMLA leave.” These are NOT efforts to, for example, dismantle things like the Affordable Care Act, ERISA, or other State law requirements. They are a recognition that a self-employed individual is BOTH an EMPLOYER and an EMPLOYEE.
As you also know, Congress and the Administration are working on a 3rd coronavirus relief bill. We do NOT yet have legislative language for this 3rd relief bill, but the Administration has announced that it wants to send a check directly to Americans, likely a $1,000 check for each adult, plus $500 for each child up to a maximum number of children. Senate Democrats are also calling for direct spending for certain industries like the airline, cruise, hotel, and health care industries. Both the Administration and Congressional Democrats also want to provide low-interest or no-interest loans to small employers so they can address any liquidity shortfalls.