Congress passed a much anticipated COVID-19 relief bill this week. The compromise is the first major COVID19 relief bill since the Coronavirus Aid, Relief, and Economic Security Act (CARES) in late March. The new legislation, which the president has indicated he will sign, extends many popular programs from CARES, including another round of Paycheck Protection Program loans, enhanced unemployment and tax credits for paid leave and employee retention.
The agreement also delivers long-debated consumer protections against surprise medical billing and funds the federal government through September. While the compromise legislation addresses many important concerns, Congress was not able to agree on more contentious provisions like liability protections for businesses, assistance to state and local governments, and retirement plan funding relief.
COVID-19 relief measures
The legislation extends many programs from CARES while introducing additional new opportunities for businesses. We continue to evaluate details of the nearly 6,000 page package, but key provisions include:
Paycheck Protection Program: The compromise makes an additional $284 billion available through the CARES Act’s Paycheck Protection Program (PPP). The PPP allows small businesses to obtain forgivable loans through the Small Business Administration (SBA). Businesses that received a PPP loan in 2020 are eligible to receive a second loan. The details of the program remain substantially the same with some important modifications. Generally, loans are available to employers with no more than 500 employees, including sole proprietors, independent contractors and self-employed persons. Eligibility is expanded to 501(c)(6) organizations other than unions. Second PPP loans are available only for businesses with no more than 300 employees. Lockton comment: CARES also included funds to support larger businesses, most notably under the Main Street Lending Program. Ultimately only a small amount of the funds were used. Congress, in the latest deal, eliminates these funds for larger businesses. The new tranche of loans, like prior amounts, remain forgivable if employee retention criteria are met and the funds are used for eligible expenses. The new legislation clarifies that eligible expenses include employee benefit plan insurance other than medical coverage (e.g., dental and life insurance), but does not specifically address business insurance. The new legislation also clarifies that business owners can claim deductions for expenses covered by PPP loan proceeds. An additional $20 billion is allocated for other SBA loans, including Economic Injury Disaster Loans (EIDL). These loans are not forgivable but have favorable terms. Businesses interested in the new round of PPP funding will want to work with their financial institutions, which continue to manage the loan process on behalf of the SBA.
Enhanced unemployment: Under CARES, the federal government funded additional weeks of unemployment beyond what states provided and offered unemployment benefits for self-employed individuals, including independent contractors and part-time workers not normally eligible for state-based unemployment benefits. The new bill will extend eligibility for supplemental federal unemployment benefits to Apr. 5. The bill also includes an additional $300 per week supplemental unemployment insurance benefit available through Mar. 14 and a benefit of $100 per week for certain workers who have both wage and selfemployment income but whose base unemployment benefit calculation doesn’t take their self-employment income into account.
Direct cash payments: The relief bill includes a second round of direct cash stimulus payments, this time in the amount of $600 for both adults and children. This is a departure from CARES, which provided $1,200 direct payments for adults and $500 for children. Like CARES, the direct payments phase out based on income.
Paid sick leave: The Families First Coronavirus Response Act (FFCRA) included paid sick and family medical leave requirements through Dec. 31, 2020 which generally applied for employers with fewer than 500 employees. A tax credit helped offset the employer’s cost of providing paid leave. While the mandate to provide leave still terminates at the end of the year, the new legislation extends the tax credit for paid leave through March 31, 2021 provided the employer makes the payments as otherwise required by the FFCRA. It also extends the paid family medical leave tax credit from the 2017 Tax Cuts and Jobs Act through 2025.
Live venues: The legislation dedicates $15 billion in relief funding for live venues, independent movie theaters, and cultural institutions.
Provider relief funds: Healthcare providers have relied on CARES Act funding in light of lost revenues and increased expenses. The Department of Health and Human Services (HHS) recently issued guidance on the third phase of distributions totaling $24 billion. The new legislation provides $3 billion in additional support for providers.
Childcare and education: The legislation provides $10 billion in grants for childcare centers and commits $82 billion for schools and universities to assist with reopening for in-person learning. The latter amount includes $2.75 billion in designated funds for private K through 12 education.
Employee Retention Tax Credit: The agreement extends and improves the Employee Retention Tax Credit (ERTC) to help keep workers in the jobs during coronavirus closures or reduced revenue. This credit was first included in CARES and allows businesses that have seen significant revenue declines due to the pandemic to receive a 50% tax credit against payroll taxes on the first $10,000 of annual wages and benefits provided to retained employees. The new legislation expands the credit to 70%, increases the wage base to the first $10,000 each quarter, and allows employers that received PPP loans to take the ERTC on compensation not paid for with PPP funds.
Rental assistance: The new relief bill extends the federal moratorium on renters’ eviction, but only briefly, through Jan. 31, 2021, and allocates an additional $25 billion for rental assistance.
Transportation funding: The transportation industry will receive a $45 billion allocation. This includes funding for airlines, public transit, airports as well as highway infrastructure projects.
Broadband access: Broadband has been critical for remote learners, workers and telehealth providers. The deal includes $7 billion dedicated to expanding broadband access for telehealth. It creates a new emergency broadband benefit, which will help students, families and unemployed workers afford broadband during the pandemic.
COVID-19 testing and vaccine: The package provides $20 billion for the purchase of vaccines, nearly $9 billion for vaccine distribution, and about $22 billion to help states with testing, tracing and Covid-19 mitigation programs.
Business meals: In a late addition, the legislation makes business meals fully deductible for two years. This modifies a provision in the 2017 Tax Cuts and Jobs Act that generally limited the deduction to 50%.
Employer-paid student loans: The CARES Act provision allowing employees to exclude from income employer payments for student loans is extended for five more years.
Flexible spending arrangements: Health and dependent care flexible spending arrangements are permitted to rollover of unused amounts from 2020 to 2021 and from 2021 to 2022. Relaxed rules for midyear prospective contribution changes are also extended to 2021.
Minimum required distributions: Certain construction and building trade workers age 55 or older who are receiving retirement benefits are permitted to continue to work and receive such benefits.
Retirement plan partial termination: Because of the high workforce turnover since March 2020, many employers who provide defined contribution retirement plans are in danger of a partial plan termination that would cause the employers to incur significant costs and administrative expenses. Usually, an IRS assessment of plan termination is triggered whenever turnover exceeds 20 percent. This provision would defer assessments until March 2021 to give companies time to restore at least 80 percent of their workforce and avoid termination.
Prohibitions on surprise medical billing and increased transparency
The relief bill includes long-awaited rules designed to protect healthcare consumers from surprise medical bills. The rules will apply to healthcare plans starting with the first plan year beginning on or after Jan. 1, 2022.
In general, patients are subject to surprise medical bills when they received care from an out-of-network provider or at an out-of-network facility, but they did not have a meaningful opportunity to choose a provider or facility that was in-network. A common example is in an emergency or when a patient receives nonemergency care at an in-network facility, but an ancillary provider, like an anesthesiologist or lab technician, is out-of-network and the patient doesn’t know it or knows it but cannot do anything about it.
Currently, the out-of-network provider or facility accepts payment from the group health plan according to the plan’s terms, but then bills the patient for the difference between their charge and what the plan paid.
Lockton comment: It is not uncommon for health plan sponsors to adopt policies or practices that designed to protect patients from balance billing at the expense of the plan in truly unexpected situations. But these practices can be problematic where the plan is self-insured, and the plan’s payment of all or a large portion of the balance bill triggers a stop loss claim. The stop loss carrier might reject coverage because the settlement with the provider was not in compliance with the plan’s terms.
The legislation says patients are responsible only for the cost-sharing they would have owed to an in-network provider when they are treated by an out-of-network provider or at an out-of-network facility, subject to limited exceptions. With the patient’s responsibility for additional charges out of the equation, the provider or facility and group health plan will have 30 days to agree to appropriate reimbursement. If an agreement is not reached, the provider, facility or plan has four days to demand binding arbitration.
During arbitration, each party presents their best offer, and the arbiter chooses between the offers with no ability to choose a different amount. The arbiter must consider a list of factors, including what the plan would typically pay in-network providers under similar circumstances. The losing party must pay for the arbitration, but the cost is split if an amicable settlement is reached before the arbiter announces its decision.
Lockton comment: It is unclear what happens if an agreement isn’t reached and arbitration isn’t triggered. Presumably, the provider or facility will be required to accept the plan’s final offer; however, we expect regulations to clarify this.
Several states have laws prohibiting surprise bills; however, these state laws are limited in scope and do not apply to self-funded plans subject to ERISA or federally regulated providers like air ambulance operators. The announced agreement adopts a new framework for addressing surprise medical bills when state laws do not already apply. The legislation does not prohibit states from adopting different rules in the future, but such rules would still not apply to self-funded ERISA plans or federally regulated providers.
The law applies to balance billing for both emergency and non-emergency services. For emergency services, patients are protected until they can consent to be transferred to an in-network facility. Patients are protected from balance billing from out-of-network providers, facilities (including facility fees) and air ambulances. Protections do not extend to balance billing from ground ambulance services.
Lockton comment: The legislation calls for reports from both air and ground ambulance providers. These reports could spur future regulation.
Similar protections apply for non-emergency services, with the notable difference being that a patient can voluntarily waive their right to protection. For a waiver to be valid, it must be made at least 72-hours prior to the scheduled time of services or at the time of scheduling if the appointment is made within 72-hours of the services. The provider must inform the patient in writing of the provider’s network status, identify in-network options and include an estimate of charges, among other information.
The law makes waivers unavailable in certain circumstances:
There is no in-network provider available in the facility
The care is for unforeseen or is urgent
The provider is a type of provider that a patient typically does not select (e.g., a lab technician, anesthesiologist or radiologist)
Federal regulators will establish a process for patients to dispute out-of-network charges when the provider or facility claims a waiver was in place.
Numerous other provisions are included in the rule that are meant to increase transparency and protect patients. These protections are intended to provide patients and plan sponsors with more information about health care costs with the hope of reducing those costs.
Look for a forthcoming detailed analysis of the surprise medical billing and transparency provisions from Lockton Compliance Services.
More work remains on liability reforms, state and local funding, and retirement
This legislation, while expansive and welcomed, may not be the last COVID-19 stimulus bill. Congressional negotiators continue to grapple with their disagreements on liability protections for businesses, relief funding for state and local governments, and retirement reforms.
Liability reforms: Many Senate Republicans have called for federal liability protections for businesses that make good faith efforts to mitigate COVID-19 related risks. The called for protections would make it more difficult for businesses to be sued by employees, customers and third parties who claim the business caused them to suffer a COVID-19 related injury. Some states have instituted liability protections, but not all, and those that have cannot protect businesses from suits involving federal laws. Republicans have argued these protections are necessary to encourage businesses to continue operating. Still, some Democrats have argued the proposal is weighted too heavily in favor of businesses over workers, consumers and others. That liability reforms are not included in this compromise makes it increasingly unlikely that federal reforms will come.
State and local funding: Another policy not addressed was funding for state and local governments. To be sure, CARES and the current legislation do allocate significant dollars to states and localities, but those provisions have more restrictions than what many Democrats requested. Democrats have long sought funds to help offset losses in state and local tax revenue and to support services that have suffered from the pandemic, including for first responders. Many Republicans have called this ask a “blue state bailout,” meaning any state and local funding would disproportionately prop up more liberal states and cities. They charge that these cities are using the coronavirus as an excuse, when their funding shortfall is actually due to mismanagement.
Retirement: Finally, long-sought retirement relief did not make the final compromise. Solutions to help with the stabilization of single-employer pension plans and to help struggling multi-employer plans were on the table but neither made the cut. While the single-employer pension plan funding issue is distinct from multi-employer pension relief, the two have been viewed by many lawmakers as needing to be resolved simultaneously. Multi-employer pension relief remains politically delicate and proved too controversial to include in the final compromise bill, thus keeping out provisions to help single-employer plan sponsors. On a hopeful note, conversations with lawmakers indicate a deal was close, so there is cause for optimism that we could see bipartisan pension legislation next year.
Lockton comment: Whether lawmakers can reach another agreement in 2021 remains to be seen. We suspect the outcome of two Senate runoff elections in Georgia on Jan. 5 will play a significant role in determining what is possible in 2021.
Not legal advice: Nothing in this alert should be construed as legal advice. Lockton may not be considered your legal counsel, and communications with Lockton’s Government Relations group are not privileged under the attorney-client privilege.