Coronavirus Update

by Christoper E. Condeluci, Principal and sole shareholder of CC Law & Policy PLLC in Washington, D.C.

The Final “3^rd Stimulus Package” Is FINALLY Released

Below I provide my own summary of the provisions of the final “3^rd Stimulus Package” that I have focused on in past updates.
- Analysis: Again, I am NOT summarizing the ENTIRE package. There are a number of sections of the Package that focus on things like Medicare and Medicaid spending, Telehealth, and Education-related matters that I do NOT talk specifically about, although I do touch on some provisions in each of these areas. I am also NOT including a summary of the Unemployment Insurance provisions, although I do want to dig into those provisions in a future update. I will note, the Senate STILL has yet to vote on the final Package due to a fight over some of the Unemployment Insurance provisions. Ho-hum.

The “3^rd Stimulus Package” and Private Health Plans

As stated previously, a lot of folks in the health plan world have been asking whether Congress is going to require “individual” and “group health plans” (BOTH fully-insured and self-insured) to provide free coverage for treatment for the coronavirus. Well, the final “3^rd Stimulus Package” has answered this question in the NEGATIVE. In other words, I do NOT see anything in the Package that requires insurance carriers and self-insured plans to EAT any of the costs of treatment.
- Analysis: As you know, House and Senate Leadership has raised the prospect of a possible “4^th Stimulus Package.” Sooooo, there is still a chance that Congress requires insurance carriers and self-insured plans to EAT some of all of the costs of treatment. For example, in the House Democrats so-called “alternative” to the “3^rd Stimulus Package,” there was a provision in there requiring private health plans to the waive any cost-sharing for treatment related to the coronavirus. Under the proposal, the Federal government would have been required to reimburse insurance carriers (and presumably self-insured plans) for the forgone cost-sharing. The House Democrats’ “alternative” would have also established a 2-year “risk corridor” program for “individual” and “small group” market plans to pay for the high cost of treatment related to the coronavirus (some estimates floating out there indicate that the average cost of treatment is around $30,000, and that is just the average). Note, waiving the cost-sharing for treatment is MUCH different than free coverage for the full cost of treatment. BUT, this idea of waiving the cost-sharing for treatment is gaining some steam, evidenced by a recent letter 16 Democratic Senators sent to the major insurance carriers asking that these carriers waive the cost-sharing for treatment related to the coronavirus. Stay tuned… Having said all of that, what is actually in the final “3^rd Stimulus Package” that insurance carriers and self-insured plans should care about?

Free Coverage for Testing for the Coronavirus: The legislation clarifies that it does NOT matter if the testing for the coronavirus that “individual” and “group health plans” (BOTH fully-insured and self-insured) MUST cover is FDA-authorized or not. Concerns were raised when the “2^nd Stimulus Package” said that only FDA-authorized tests for the coronavirus must be covered. It was argued that there are tests that are NOT FDA-authorized, which meant individuals would be charged for the cost of these tests. The “3^rd Stimulus Package” eliminates any confusion.

The Payment Amount for Coronavirus Testing: Insurance carriers and self-insured health plans must pay the provider performing the testing (along with costs incurred during the testing visit) an amount equal to their in-network negotiated rate for the testing and related services. If the carrier or self-insured plan does NOT have a negotiated payment rate for the testing and related services, the payment amount would equal (1) “the cash price” for the services “as listed by the provider on a public internet website” or (2) an amount that may be subsequently negotiated by the carrier or plan that is less than the cash price. The provider must publicize “the cash price” on the provider’s public website.

Free Coverage for Coronavirus Vaccine: As you know, the Affordable Care Act (ACA) requires “individual” and “group health plans” (BOTH fully-insured and self-insured) to provide free coverage for certain preventive services. The legislation provides that once a coronavirus vaccine is developed and “recommended” as a preventive service, insurance carriers and self-insured plans must cover the cost of the vaccine with NO cost-sharing.

HSA-Eligible HDHPs and Telehealth Plans: As I told you on Friday, the Republican draft of the “3^rd Stimulus Package” called for allowing an HSA-eligible high-deductible health plan (HDHP) to pay for the costs associated with a telehealth plan before the deductible is met, and the HDHP-policyholder WOULD continue to be eligible to make tax-free contributions to their HSA. I also suggested that this provision would likely stay in any final Package (after negotiations with Democrats). Well, this provision did indeed stay in the final “3^rd Stimulus Package.” HOWEVER, the provision is limited to the 2020 and 2021 plan year. This means that the employer community and HSA proponents are going to have to push for a permanent (or longer, temporary) extension in the “4^th Stimulus Package” or in “lame duck” (after the Nov. election) or in the next Congress. In last Friday’s update, I also explained that – according to the Republican draft – an employer could enter into a contract with a “direct primary care” provider, and this contract would NOT cause an HDHP-policyholder to lose their eligibility to contribute to their HSA. I noted that this provision – along with the telehealth exemption – enjoyed bi-partisan support back in 2018. But alas, NOT this time around. This provision was DROPPED.

Tax-Free Purchase of Over-the-Counter Medical Products Without a Prescription: Under the ACA, individuals purchasing over-the-counter medicines or products with their HSA, FSA, or HRA could NOT pay for these items on a tax-free basis UNLESS they had a prescription from a doctor. The employer community has fought for a LOONNGGG time to repeal this requirement. Well, it appears that this requirement is FINALLY repealed. Cadillac Tax, and now this!?! The employer community is on a good run…

The “3^rd Stimulus Package” Helping Individual Americans

The following provisions in the “3^rd Stimulus Package” are intended to help individual Americans:

Direct Deposits for Americans: The Treasury Department would make a “direct deposit” to Americans (i.e., not nonresident aliens) in an amount equal to $1,200 for individuals and $2,400 for families, plus $500 for each child. These amounts would be reduced for individuals making more than $75,000 and families making more than $150,000. Individuals making $99,000 and families making $198,000 would get nothing. On the other side of the income scale, Americans with no income, or income from “means-tested” programs, WOULD be eligible to receive the FULL amounts noted above. This was an important change from the Republican’s first draft that only offered $600 to these Americans. A change I figured we would see. The Treasury Department would make the “direct deposit” based on the bank account information taxpayers have given to the IRS to receive a “tax refund” in 2019 (or 2018). For those Americans who do NOT have a bank account – and for those Americans who have NOT provided their bank information to the IRS – the Treasury Department would presumably send them a paper check. Or, there may be ways to get these Americans a pre-paid card with the payment amount they are otherwise eligible to receive. Treasury is directed to figure all of this out through guidance, which will sadly slow down this financial relief for some Americans. Note, this direct payment to Americans will be treated like an “advance-refundable tax credit,” similar to how the premium subsidy for an ACA Exchange plan is treated. Also note, there is NO specific time-frame for making the direct deposits. Instead, the legislation directs Treasury to make the direct deposits “as rapidly as possible.”

Retirement Account Changes: Participants in retirement plans like a 401(k) or people with an IRA can take up to a $100,000 distribution from their retirement account without a 10% penalty. Participants that take such an “early” distribution can choose to re-pay these amounts over 3 years on a tax-free basis. If the participant does NOT re-pay these amounts, the amounts would be taxable to the participant ratably over a 3 year period. Participants can also take out up to a $100,000 “loan” from their retirement account, and they are given more time to re-pay the loan back to the plan. And, retirement accountholders who are age 70-1/2 or older who still have money in their retirement account, and who are otherwise required by current law to take out specified distribution amounts each year, would be permitted to suspend the receipt of this required distribution for 2020.

Student Loans: Employers can contribute up to $5,250 toward an employee’s student loans. This payment would NOT be taxable to the employee. This provision, however, is limited to 2020. BTW, for a good number of years now, employers and education-related organizations have wanted Congress to allow employers to make tax-free contributions to pay for student loans (just like how employers make tax-free contributions to pay for health coverage). Well, Congress finally did it, albeit for 1 year. Employers and education-related organizations will be sure to push for a permanent (or longer, temporary) extension in the “4^th Stimulus Package” or in “lame duck” or in the next Congress, etc.

Charitable Contributions: Taxpayers can take a full above-the-line deduct up to $300 in cash contributions made to a church or a charity. Also, certain limits placed on deducting charitable contributions would be suspended for 2020.

The “3^rd Stimulus Package” Helping Businesses and Self-Employed Individuals

The following provisions in the “3^rd Stimulus Package” are intended to help businesses and self-employed individuals:

Loans for Businesses and Self-Employed Individuals: Employers with 500 or fewer employees are eligible to receive a loan to cover costs incurred by the employer between February 15^th and June 30^th. For purposes of counting the number of employees that are employed, the term “employee” includes full-time employees, part-time employees, and individuals employed on “other basis,” like seasonal or temporary. The “costs” that can be paid with the loan include, among other things, wages, cash tip equivalents, the cost of health benefits, the cost of retirement benefits, the cost of leave (e.g., vacation, family, and sick leave), or the payment of State or local taxes assessed on employee compensation. The loan can also be used to pay mortgage interest, rent, utility bills, and premiums for COBRA. If an employee makes more than $100,000 annually, the loan can only cover wages up to $100,000 (which would be a prorated over the February 15^th to June 30^th time period). Businesses CANNOT use the loan to pay the “paid sick leave” and “FMLA leave” in the “2^nd Stimulus Package” if the business already received an advance-refundable credit for the “paid sick leave” and/or “FMLA leave.” And, the loan CANNOT cover compensation paid to foreign employees. Non-profit organizations exempt under Code section 501(c)(3) are eligible for the loan. So are veteran organizations and Tribal businesses. Self-employed individuals can also receive a loan. The maximum amount of the loan for businesses will typically be the amount the business paid for wages (up to $100,000 for each employee prorated over the February 15^th to June 30^th time period), cash tip equivalents, the cost of health benefits, the cost of retirement benefits, the cost of leave (e.g., vacation, family, and sick leave), or the payment of State or local taxes assessed on employee compensation during the same February 15^th to June 30^th time period in 2019, multiplied by 2.5. If the business was NOT in operation in 2019, the business would use the total payments of the above stated amounts incurred between January 1, 2020 and ending on February 29, 2020, multiplied by 2.5. The maximum amount of the loan for a self-employed individual will essentially be the amount of their own compensation that they generated for themselves up $100,000 (which would be a prorated over the February 15^th to June 30^th time period), multiplied by 2.5. If I am interpreting the language correctly, there is a special rule that would allow a business in the “Accommodation and Food Services” industry that employs more than 500 employees – BUT does NOT employ more than 500 employees in each physical location of the business’s work-sites – to receive a loan for EACH worksite, provided the business as a whole did NOT make $500 million or more in 2019. To me, this would mean that Buffalo Wild Wings (where we should all be right now watching March Madness :[) can get a loan for each of their restaurants around the country. If I am also interpreting things correctly, a franchisee of a franchise system like McDonalds or Ace Hardware would NOT be required aggregate all of the stores/restaurants that are under “common control” of this franchisee, which would mean that EACH store/restaurant owned by the franchisee that employs 500 or fewer employees can get a loan. To be eligible for the loan, the business, non-profit, or self-employed individual must certify that “the uncertainty of current economic conditions makes necessary the loan request to support the ongoing operations,” and they must acknowledge that “funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments.” A bank making the loan is required to allow the business, non-profit, or self-employed individual to defer the loan repayments for up to 6 months, but not more than 1 year. Interest on the loan cannot exceed 4%.

Loan Forgiveness for Businesses and Self-Employed Individuals: A portion of the loan described above may be 100% forgiven. In other words, the business or the self-employed individual would NOT be required to repay the loan, instead, the Federal government would repay the bank the amount of the loan that is forgiven. If the loan is used to pay for things like wages (up to $100,000 for each employee prorated over the February 15^th to June 30^th time period), cash tip equivalents, the cost of health benefits, the cost of retirement benefits, the cost of leave (e.g., vacation, family, and sick leave), or the payment of State or local taxes assessed on employee compensation, this portion of the loan amount is eligible to be forgiven. In addition, if the loan is used to pay mortgage interest, rent, and/or utility payments, this portion of the loan is also eligible to be forgiven. The amount of the loan that may be forgiven for a business would be reduced by the number of employees the business laid off prior to – or during – the period between February 15^th and June 30^th. In addition, if the business reduces the wages of an employee who make less than $100,000 during the period between February 15^th and June 30^th, the loan amount that may be forgiven will also be reduced. If, however, the business re-hires the employees that were laid off and/or the business restores the salary for those employees that may have seen a wage reduction, the loan amount that is eligible to be forgiven would correspondingly be increased. To be eligible for the loan forgiveness, the business must, among other things, verify the number employees on payroll and the amount of wages paid to these employees, verify the mortgage interest, rent, and/or utility payments, and certify that the documentation used to “verify” things is true and accurate. Without this “verification,” the business would NOT be eligible for the loan forgiveness. Presumably, a self-employed individual must make similar “verifications” about their compensation and the expenses like mortgage interest, rent, and/or utility payments to be eligible for the loan forgiveness, but it does NOT appear that the legislation speaks to self-employed individuals in this way.

Payroll Tax Holiday for the “Employer Share” of Payroll Taxes: An employer or self-employed individual may defer the “employer share” of the payroll taxes they would otherwise pay to the Federal government until December 31, 2020. In addition, an employer or self-employed individual that takes advantage of this deferral is only required to pay 50% of their payroll taxes by December 31, 2021 (12 months later), and the remaining 50% by December 31, 2022 (24 months later). If an employer or a self-employed individual took a loan (as described above) and they had their loan forgiven (as described above), this employer or self-employed individual would NOT be eligible to defer their “employer share” of payroll taxes.

Payroll Tax Credit for Keeping Employees Paid: An employer that fully or partially shut down their operations or saw their revenue be reduced by 50% can receive an advance-refundable credit on their payroll taxes up to 50% of the first $10,000 of wages (which also includes the employer contribution for health coverage) paid to employees during the period between March 13, 2020 and December 31, 2020. Non-profit organizations are also eligible to receive this tax credit. If an employer employs 100 or more employees, the employer will only get a tax credit for the wages (and contributions for health coverage) the employer pays to employees who are NOT providing services for them (i.e., these employees are at home doing no work, but still getting paid). If the employer employs less than 100 employees, the employer can get a tax credit on ALL wages (and contributions for health coverage) paid to employees whether they are on the job or at home. Note, if an employer takes a loan (as described above), regardless of whether the loan is forgiven or not, the employer CANNOT receive this payroll tax credit.

Any Other Provisions to Highlight?

“Paid Sick Leave” and “FMLA Leave” Limits: The final “3^rd Stimulus Package” clarifies that an employer is NOT required to pay more than $200 per day or $10,000 for the full 10 weeks of “FMLA leave” as required under the “2^nd Stimulus Package.” Also, employers are NOT required to pay more than $511 or $5,110 for the full 2 weeks of “paid sick leave” if the employee cannot work (or telework) because of health issues related to the coronavirus or $200 per day or $2,000 for the full 2 weeks of “paid sick leave” if the employee cannot work (or telework) because their kid is home from school or their health care provider is not available. As I mentioned last Friday, I am not sure why these limitations need to be clarified in this “3^rd Stimulus Package” because I was never confused about these points. BUT, others must have raised some concerns.
Advance-Refundable Tax Credit for “Paid Sick Leave” and “FMLA Leave”: As I described last Friday, the tax credit for the “paid sick leave” and the “FMLA leave” is now “advance-refundable.” In other words, an employer and a self-employed individual can ask the Federal government to send them a direct payment in an amount equal to the tax credit the employer or self-employed individual would otherwise take when they file their quarterly payroll taxes.
ERISA-Related Deadlines: The Package also allows the Department of Labor to postpone various “filing” deadlines for ERISA-covered health and retirement plans.
Defined Benefit Pension Funding: Employers with defined benefit pension plans can delay their required contribution to fund the plan for until December 31, 2020. Certain “benefit restrictions” will apply to plans sponsored by an employer that delays their required contribution.