Changes in Employer Sponsored Health Insurance for 2020

A number of rule changes implemented for 2020 have an impact on employer-sponsored health insurance. Despite the prevalence of the COVID-19 pandemic right now, employers still need to be aware of these changes. How the changes affect employer-sponsored plans could impact future health insurance decisions.

As a payroll and benefits administration provider, we routinely assist our clients as they work to provide sound benefits packages to employees. We stand ready to speak with our clients about the changes described below.

HDHPs and Preventative Care Changes

High deductible health plans (HDHPs) are an option for some employers looking to provide quality health insurance at a reduced cost. Last summer, the IRS altered the rules for these plans by adding to the list of chronic conditions eligible for preventative care benefits.

All of the items on the preventative care list can be offered separate from deductibles. Some 14 conditions were added to the list including heart disease, diabetes, and asthma. Employers should understand that the rule change does not constitute a mandate. Applying the updated list is voluntary.

Reduced Affordability Percentage

Employers are restricted in how much they can charge for their sponsored health insurance based on affordability calculations. The calculation for any given year is represented as a percentage of an employee's household income. While the percentage normally goes up year on year, it actually fell for 2020.

Through 2019, the rate stood at 9.86%. The IRS reduced it to 9.78% for 2020. The impact of the reduction should be minimized by new inflation calculations likely to offset the difference.

State Health Insurance Mandates

As you know, tax reform legislation passed in 2017 has effectively eliminated the individual mandate for health insurance by reducing the penalty to zero. However, five states and the District of Columbia have enacted their own health insurance mandates that closely reflect the original federal mandate.

Two of those states, California and Rhode Island, implemented their mandates as of January 1, 2020. The other three states with mandates in place are Massachusetts, New Jersey, and Vermont.

If your company does business in one of the five states or the District of Columbia, you now have additional reporting requirements related to health insurance. This can make ACA compliance a bit more difficult. As always, we stand ready to help our clients maintain compliance despite the complicated nature of the ACA and state mandates.

Midyear Elections

Separate from the changes implemented as of January 1, the COVID-19 pandemic has opened the door for additional changes. For example, theIRS has announced that increased flexibility under section 125 cafeteria plans will be allowed for the time being.

As a general rule, cafeteria plan elections must be made no later than the first day of the plan year and are irrevocable for that year. For the time being, cafeteria plans can allow employees to revoke certain elections and make new elections during the current year. However, certain conditions must be met.

Although such changes are generally perceived as a good thing given the state of the economy, it does create more paperwork for employers and benefits administrators. Once again, it is incumbent on employers to educate themselves so that they are not caught off guard.

Even prior to the COVID-19 pandemic, constantly changing rules and regulations made keeping up with health insurance mandates somewhat challenging. Things are not any easier in the midst of COVID-19. If you are finding it difficult to keep up with your employer-sponsored health plan, we are here to help. Reach out to us for more information about our health insurance solutions and other services.