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IRS Releases ACA Pay-or-Play Penalties for 2026

Kristin Tracy on September 19, 2025

On July 22, 2025, the IRS released updated penalty amounts for 2026 related to the employer shared responsibility (“pay-or-play”) rules under the Affordable Care Act (ACA). For calendar year 2026, the adjusted$2,000 penalty amount is $3,340, and the adjusted $3,000 penalty amount is $5,010. This is an increase from the penalty amounts for the 2025 calendar year, which are $2,900 and $4,350, respectively.

Pay-or-Play Rules

The ACA requires applicable large employers (ALEs) to offer affordable, minimum-value (MV) health coverage to their full-time employees (and dependents) or potentially pay a penalty to the IRS. An ALE is an employer withat least 50 full-time employees, including full-time equivalent employees, during the preceding calendar year.

An ALE may be subject to a pay-or-play penalty if at least one full-time employee receives a premium tax creditfor purchasing individual health coverage through an Exchange and the ALE:

  • Did not offer health plan coverage to “substantially all” (generally, at least 95%) of full-time employees and their dependents;
  • Offered health plan coverage to substantially all full-time employees but not to the specific full-timeemployee receiving the credit; or
  • Offered health plan coverage to full-time employees that was unaffordable or did not provide MV.
Pay-or-Play Penalty Calculations

Depending on the circumstances, one of two penalties may apply under the pay-or-play rules, the 4980H(a) penalty or the 4980H(b) penalty, as follows:

  • Under Section 4980H(a), an ALE will be subject to a penalty if it does not offer coverage to substantially all of its full-time employees (and dependents) and any one of its full-time employees receives a subsidy toward their Exchange plan. This monthly penalty is equal to the ALE’s number of full-time employees (minus 30)multiplied by one-twelfth of $2,000 (as adjusted) for any applicable month. For 2026, the adjusted penalty amount is $3,340; and
  • Under Section 4980H(b), ALEs that offer coverage to substantially all full-time employees (and dependents)may still be subject to a penalty if at least one full-time employee obtains a subsidy through an Exchange because the ALE did not offer coverage to all full-time employees, or the ALE’s coverage is unaffordable or does not provide MV. The monthly penalty assessed on an ALE for each full-time employee who receives a subsidy is one-twelfth of $3,000 (as adjusted) for any applicable month. For 2026, the adjusted penalty amount is $5,010. However, the total penalty for an ALE is limited to the 4980H(a) penalty amount.

Provided by Ellingson Group
This Legal Update is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers shouldcontact legal counsel for legal advice. ©2025 Zywave, Inc. All rights reserved.

One Big Beautiful Bill Act – Changes for Employee Benefits

Kristin Tracy on August 13, 2025

On July 4, 2025, President Donald Trump signed a major tax and spending bill, commonly referred to as the “One Big Beautiful Bill Act” (OBBB Act), into law. The OBBB Act includes changes for employee benefit plans.

The OBBB Act will:
  • Expand the availability of health savings accounts (HSAs)
  • Permanently extend the telehealth exception for high deductible health plans (HDHPs)
  • Increase the maximum annual limit for dependent care flexible spending accounts (FSAs)
  • Allow employers to help pay employees’ student loans beyond 2025 and make cost-of-living adjustments to the tax exclusion for educational assistance programs
  • Allow employers to contribute up to $2,500 per year to a new type of tax-advantaged account for children, called a “Trump Account”

Contact us today for further resources on employee benefits-related provisions from the OBBB Act

Provided to you by Ellingson Group
This article is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. © 2025 Zywave, Inc. All rights reserved.

Pay-or-Play Affordability Percentage Will Increase for 2026

Kristin Tracy on August 13, 2025

On July 18, 2025, the IRS released Revenue Procedure 2025-25 to index the contribution percentage in 2026 for determining the affordability of an employer’s health plan under the Affordable Care Act (ACA). For plan years beginning in 2026, employer-sponsored coverage will be considered affordable under the ACA’s “pay-or-play” rules if the employee’s required contribution for self-only coverage does not exceed 9.96% of their household income for the year.

Affordability Test

The ACA’s pay-or-play rules require applicable large employers (ALEs) to offer affordable, minimum-value health coverage to their full-time employees (and dependents) or risk paying a penalty. The affordability of health coverage is a key point in determining whether an ALE may be subject to a penalty. An ALE’s health coverage is considered affordable if the employee’s required contribution to the plan does not exceed 9.5% (as adjusted annually) of the employee’s household income for the taxable year. This percentage is adjusted each year based on health plan premium growth rates in relation to income growth rates.

In recent years, the affordability percentage has been adjusted to:

  • 9.12% for plan years beginning in 2023;
  • 8.39% for plan years beginning in 2024;
  • 9.02% for plan years beginning in 2025; and
  • 9.96% for plan years beginning in 2026.

For purposes of the pay-or-play rules, the affordability test applies  only to the portion of the annual premiums for self-only coverage and does not include any additional cost for family coverage. Also, if an employer offers multiple health coverage options, the affordability test applies to the lowest-cost option that provides minimum value.

Because an employer generally will not know an employee’s household income, the IRS has provided three optional affordability safe harbors that ALEs may use to determine affordability based on information that is available to them: the Form W-2 safe harbor, the rate of pay safe harbor and the federal poverty level safe harbor.

Affordability Percentage for 2026

For 2026, the affordability percentage increases to 9.96%. This means that an ALE’s health coverage for the 2026
plan year will be considered affordable if a full-time employee’s required contribution for self-only coverage
under the lowest-cost option does not exceed 9.96% of their income. This is a significant increase from the
affordability contribution percentage for 2025 and the highest this percentage has ever been. As a result,
employers may be able to increase employees’ health coverage contributions for 2026 while still meeting the
adjusted affordability percentage.

Provided to you by Ellingson Group
This Compliance Overview is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. ©2025 Zywave, Inc. All rights reserved

Employee Handbook Best Practices

Kristin Tracy on August 13, 2025

An employee handbook functions as a vital compliance document and internal governance tool. When structured properly, it promotes consistency, supports risk management and provides employees with a clear understanding of company policies and expectations. In today’s ever-shifting legal environment, maintaining a thoughtfully written and regularly updated employee handbook is essential for employers.

Essential considerations for employers when preparing or updating an employee handbook include:

  • Understanding the importance of a compliant handbook;
  • Considering the legal implications of a handbook;
  • Including essential policies;
  • Tailoring the handbook to the organization;
  • Avoiding common errors and pitfalls;
  • Implementing and communicating handbook policies; and
  • Ongoing maintenance.

A well-drafted employee handbook ensures that all company policies and practices are communicated clearly and minimizes the risk of potential discrimination, disparate treatment and other employment-related claims or lawsuits. This Compliance Overview provides employers with best practices when drafting and maintaining an employee handbook.

ACTION STEPS

Employers should carefully consider their obligations and potential legal and business risks when creating and updating employee handbooks. This Compliance Overview provides best practices for employers when drafting an employee handbook.

Best Practices for Drafting and Maintaining an Employee Handbook

The Importance of a Legally Compliant Handbook

A well-crafted employee handbook is more than a collection of workplace policies; it’s a cornerstone of an organization’s legal compliance, a clear line of communication between an employer and its employees, and a powerful tool for reinforcing company culture. However, employers often underestimate the legal and cultural impact of employee handbooks. When properly developed, an employee handbook minimizes legal risk, promotes consistent policy enforcement and gives employees a transparent view of the organization’s expectations. A well-constructed handbook can serve as a frontline defense during disputes, audits and legal actions by helping employers establish good faith compliance with legal requirements.

Employee handbooks serve multiple functions, including:

  • Communicating company values and workplace rules;
  • Outlining an organization’s policies and procedures;
  • Fostering clear communication;
  • Clarifying employment practices;
  • Answering common employee questions;
  • Supporting legal compliance;
  • Establishing performance and behavior expectations; and
  • Protecting an employer in the event of a legal dispute.

Legal Considerations

Avoiding Contractually Binding Language

Most employee handbooks are meant to educate employees on an employer’s policies and expectations. They are not intended to create a contractual obligation between employees and the organization. However, employer missteps and careless language can establish unintended contractual relationships between an employer and its employees. Therefore, it’s important for employers to include disclaimers and avoid promises that could be interpreted as binding commitments. Disclaimers can help clarify the purpose of the handbook and define the terms of the employment relationship to help mitigate the risk of an employer being bound to the text of the employee handbook. For example, employers can include a disclaimer stating that the organization may revise its policies at any time. To be effective, disclaimers should be prominently featured in the handbook and understandable to the average employee and specific.

Additionally, employers should avoid language that suggests guarantees or entitlements. Clearly defining the terms of the employment relationship can also help mitigate the risk of an employer being contractually bound to the text of the employee handbook.

Employers should include a signed acknowledgment form to confirm an employee’s receipt and understanding of the handbook. Additionally, acknowledgment of specific policies, such as anti-discrimination, anti-harassment and confidentiality policies, can further support compliance by helping organizations demonstrate that they followed their workplace policies if personnel issues arise later.

Maintaining Employees’ At-will Employment Status

Most employment relationships are at-will, which means that an employment relationship may be terminated at any time (with or without cause) and for any reason (or no reason) as long as it is lawful. However, an at-will employment relationship may be eliminated by an employment contract or applicable laws. Unless a unique employment relationship exists, employers should clearly state that the employee handbook does not overrule existing at-will employment relationships. Employers should also ensure that other policies do not undermine the at-will employment relationship, such as probationary periods, which may make it appear that employment is guaranteed for a specific period, or progressive discipline policies, which may fail to state that an employee
can be terminated at any time.


While an employee handbook is not a contractual agreement, careless language can create legal ambiguity. Employers should consider the following when preparing an employee handbook:

  • Incorporating a clear at-will employment disclaimer;
  • Avoiding language suggesting guarantees or entitlements; and
  • Ensuring conformity with federal, state, and local employment laws.

Employers should also ask every employee to sign an acknowledgment clearly stating they recognize and agree
that nothing contained in the handbook is intended to create a contractual relationship or alter the at-will relationship of their employment.

Employers can include the following language in their employee handbook to further emphasize at-will employment relationships:

  • Written or oral statements made to the employee are not to be interpreted as altering the at-will
    relationship;
  • Disciplinary procedures in the handbook may be adjusted or modified at any time and at the employer’s
    discretion;
  • The employer reserves the right to change any terms or conditions of employment, whether these are
    stated in the handbook or established through employment practices; and
  • The terms and conditions contained in the employee handbook may only be altered in writing and signed
    by specified officers of the organization (e.g., owner, president or chief executive officer).

Ensuring Compliance with Legal Requirements

Lastly, employers should ensure that the policies and procedures in their employee handbook comply with federal, state and local laws to mitigate legal risk and ensure compliance with regulatory standards. An employee handbook may be presented as evidence in an employment law litigation. Therefore, employers should consider this when preparing and drafting employee handbooks and be prepared to defend the policies included therein.

A legally sound handbook reinforces consistent treatment of employees and provides clear guidance in workplace decision-making, supporting both accountability and transparency, while non-compliant policies can expose an organization to costly litigation, fines and reputational damage. Due to the rapidly evolving nature of employment laws, employers need to be vigilant about reviewing and updating their handbooks regularly. Areas of employment law that can change frequently include employee leave, wage and hour laws and anti- discrimination regulations.

Some policies may not be legally required under federal, state and local laws, but including them in an employee handbook can help establish employer expectations for its workforce and protect the organization from unlawful behavior and potential legal risk. Examples of these policies include performance reviews, social
media guidelines, internal complaint procedures and an employee code of conduct.

Essential Components of an Employee Handbook

While employee handbooks often vary by company size, industry and geographic location of an employer’s workforce, a well-constructed employee handbook includes many sections and specific policies that are clear and accessible for all employees to reference. Determining what topics should be included in an employee handbook can be a complex and challenging task. When deciding which policies to incorporate into a handbook, employers should consider the following commonly included policies:

  • A welcome and purpose statement;
  • A mission statement;
  • An at-will employment statement;
  • Employee code of ethics;
  • Employment authorization and verification requirements;
  • Equal employment opportunity and anti-harassment policies;
  • Expectations around behavior, appearance and workplace conduct;
  • Pay practices, hours of work and timekeeping practices;
  • Confidential information and company property policies;
  • Leave policies, including policies covering any required federal, state or local leave entitlements;
  • Safety procedures, including drug and alcohol testing and violence in the workplace policies, and
    emergency response plans;
  • Guidelines on the use of technology, the internet and social media;
  • Employment benefits, such as employer-offered insurance and COBRA benefits policies; and
  • Discipline, termination and grievance procedures

These policies should reflect not only the organization’s legal obligations but also its values and operational priorities.

Additionally, some laws and regulations require employers to have written policies on certain issues or topics. These requirements often vary by state or locality where employers operate. Employers should become familiar with these requirements and ensure their employee handbook contains any required policies.

Tailoring the Employee Handbook to the Organization

Organizations should align their employee handbook with their company culture, values and operational realities. A one-size-fits-all approach to an employee handbook rarely serves a business well. For example, an organization with remote or hybrid employees will likely need robust remote work and cybersecurity policies, while a manufacturer may prioritize OSHA compliance and safety training protocols in its handbook.

Since no single template applies universally to all organizations, employers must tailor their employee handbooks to reflect industry-specific obligations (e.g., HIPAA compliance for health care employers or OSHA standards for manufacturers), company structure and evolving workplace norms, such as remote and hybrid work arrangements. Additionally, employers should consider adapting the tone, format and organization of their employee handbook to the nature of the organization’s business and workforce. For most employers, using a standard format may be suitable. However, for others, choosing a different format, such as frequently asked questions, may be more appropriate.

Avoiding Common Errors and Pitfalls

Many common employee handbook issues or errors often stem from an employer’s oversight, including:

  • Copying policies for other organizations;
  • Relying on outdated templates;
  • Failing to define important terms or expectations;
  • Using inconsistent or vague language that confuses employees or contradicts legal regulations and
    requirements;
  • Neglecting to collect signed acknowledgment forms from employees; and
  • Allowing the handbook to become outdated.

Regular handbook audits can help avoid many of these common pitfalls.

Handbook language should be clear and unambiguous. However, sometimes employers draft policies in a way that is difficult for employees to understand by relying on legalese and other jargon. Organizations can avoid this by defaulting to clear and accessible everyday language that all employees can understand. If a significant number of employees do not understand English or if English is not their primary language, employers should consider translating their handbook into other languages so the entire workforce can understand it.

Another common issue is drafting policies in a way that can be construed to infringe on employee rights. For example, in recent years, there has been increased scrutiny of unlawful restrictions found in employment policies on employee rights under the National Labor Relations Act to engage in protected concerted activity or collective action to improve wages, hours and working conditions. Overlooking key differences between federal, state and local laws can frequently result in violations of employee rights. Therefore, employers should review their employee handbooks to ensure that policies do not infringe on employee rights or fail to distinguish between applicable laws.

Employees should be able to use and reference an employee handbook with ease. Employers can do this by using a user-friendly format when designing handbooks. This often includes grouping similar policies and making them easy to find, allowing employees to locate specific policies quickly. Including a table of contents or index can also make it easier for employees to navigate and locate workplace policies.

Retaining qualified legal counsel to review an employee handbook is often one of the most effective ways to identify errors and address potential risks. Legal professionals can catch subtle compliance issues and ensure an organization’s policies align with current laws and regulations

Implementing and Communicating Workplace Policies

Once the handbook is finalized, employers should focus on training and communicating workplace policies and any updates to employees. Organizations should train managers and employees on the policies included in their employee handbook and how the employer will use the handbook. This can help employees become familiar with the employee handbook and understand the employer’s workplace policies.

To ensure that workplace policies are communicated effectively to employees, organizations can determine the best way to distribute their employee handbook. For some workplaces, distributing an electronic version of the handbook may work best. This has the added benefit of saving time and expense in printing and distributing the handbook. Additionally, many organizations distribute the employee handbook during onboarding or new hire orientation. This allows employees to become familiar with workplace policies and expectations at the start of their employment, which can improve employee engagement and retention. When distributing handbooks, employers should also have employees acknowledge that they have received, reviewed and consented to the employee handbook by signing and dating an acknowledgment form. Importantly, organizations should consider having an employment attorney review their handbook or any updates before making it available to employees.

It’s vital that employers ensure that employment policies are readily accessible to all employees—whether in print, digital format or integrated into the organization’s onboarding platform—and document who has received them and when for recordkeeping and compliance purposes. Employees should know where to find and how to access their organization’s employee handbook.

Ongoing Mainenance

An employee handbook is a living document that evolves with an organization as the law or business changes. Therefore, it’s essential for employers to review their employee  handbook regularly to ensure that organizational standards comply with legal requirements. Regular review can also help employers eliminate any inaccuracies or inconsistencies in their policies. Employers should review and update their employee handbook annually, at a minimum. However, employers should monitor federal, state and local legal developments and update their handbooks accordingly. If major legal changes occur, employers should consider updating their handbooks more frequently. When making changes or updates, it can be wise to seek feedback from leadership and employees to fine-tune policies and respond to evolving workplace dynamics.

When an employer revises their employee handbook, employers should communicate any changes to all employees to avoid confusion and provide employees with the updates. For significant changes, employers can have all employees sign another acknowledgment form that verifies that each employee understands and accepts all changes to the handbook. A revised employee handbook should clearly indicate that it supersedes any prior versions. Employers should retain copies of old handbooks for the longest statute of limitations period under applicable federal, state and local laws.

Employer Takeaways

An up-to-date and clearly written employee handbook is an indispensable risk management and workforce communication tool for employers. However, if poorly drafted or left outdated, a handbook may expose an organization to liability. Therefore, organizations should invest the necessary time and legal expertise to ensure their employee handbook complies with all applicable legal requirements and serves its intended purpose.

Whether an employer is drafting an employee handbook from scratch or revamping an existing one, by following the best practices outlined in this article, employers can better ensure that their employee handbook promotes consistency throughout the employment relationships, protects the organization and stands up to the demands of today’s workplace. A comprehensive handbook, developed with proper legal oversight, can help mitigate risks and support an employer’s overall compliance efforts.

Provided to you by Ellingson Group
This Compliance Overview is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. ©2025 Zywave, Inc. All rights reserved

Top Health Plan Compliance Issues for 2025

Kristin Tracy on March 6, 2025

Employers should be aware of the top compliance issues that may impact their health plan coverage for 2025.Some of these compliance issues are established requirements for employers, such as the new simplified reporting under the Affordable Care Act (ACA). Other compliance issues are anticipated developments employers should monitor, such as additional health care transparency requirements. It is uncertain what impact Republican control of Congress and the White House may have on health plan compliance issues,although there will likely be a shift in priorities related to health care policies.

Other top health plan compliance issues employers should be aware of in 2025 include:

  • New mental health parity requirements, including a fiduciary certification requirement for comparative analyses of nonquantitative treatment limitations (NQTLs);
  • Expiration of the telemedicine exception for high deductible health plans (HDHPs); and
  • Possible new state and federal oversight of pharmacy benefit managers (PBMs) to help control health carecosts.

Simplified ACA Reporting

At the end of 2024, Congress passed two new laws, the Paperwork Burden Reduction Act and the Employer Reporting Improvement Act, which ease ACA reporting requirements for employers and set new limits on theIRS’ assessment of “pay-or-play” penalties.

As background, the ACA requires ALEs and non-ALEs with self-insured health plans to provide information to the IRS about the health plan coverage they offer (or do not offer) to their employees. They must also provide related statements to individuals regarding their health plan coverage. The new laws ease ACA reporting requirements for employers as follows:

  • Individual statements only required upon request—Before 2025, ALEs were required to provide each full-time employee with a statement regarding their health coverage (Form 1095-C) within 30 days of Jan. 31each year. The IRS has allowed non-ALEs with self-insured health plans to provide health coverage statements (Forms 1095-B) to covered individuals upon request only. Beginning in 2025, this flexibility is extended to ALEs for furnishing Forms 1095-C. Accordingly, employers are no longer required to send Forms 1095-C and 1095-B to individuals unless a form is requested. Employers must give individuals timely notice of this option in accordance with any requirements set by the IRS. Requests must be fulfilled by Jan. 31 of the year following the calendar year to which the return relates or 30 days after the date of the request, whichever is later;
  • Electronic consent for individual statements —The new legislation clarifies that statements can be provided electronically to individuals if they have affirmatively consented “at any prior time” (unless they have revoked such consent in writing); and
  • Substituting birth dates for taxpayer identification numbers (TINs)—The new legislation confirms that employers may substitute a covered individual’s birth date in lieu of their TIN without the requirement tofirst make reasonable efforts to obtain the TIN.


In addition, ALEs are subject to IRS penalties if they do not offer affordable minimum essential coverage under the ACA’s employer shared responsibility (“pay-or-play”) rules. The new legislation increases the time ALEs have to respond to IRS penalty assessment warning letters from 30 days to 90 days. The legislation also imposes a six-year time limit on when the IRS can try to collect assessments.

Expiration of Telemedicine Exception for HDHPs/HSAs

Telemedicine exploded in popularity during the COVID-19 pandemic as a safe, remote health care option. With its popularity staying strong, telemedicine is expected to remain an important health care delivery method going forward. Employers that offer HDHPs compatible with health savings accounts (HSAs) should consider how telemedicine benefits may impact employees’ HSA eligibility. To be eligible for HSA contributions,individuals cannot be covered by a health plan that provides benefits, except preventive care benefits, before the minimum HDHP deductible is satisfied for the year. For plan years beginning in 2025, the minimum HDHP deductible is $1,650 for self-only coverage and $3,300 for family coverage. Generally, individuals who are covered by telemedicine programs that provide benefits before the HDHP minimum deductible is met are not eligible for HSA contributions.

A pandemic-related relief measure temporarily allowed employers with HDHPs to provide benefits for telehealth and other remote care services before plan deductibles were met. This relief became effective in2020 and has been repeatedly extended. It currently applies to plan years beginning before Jan. 1, 2025. This means that, for calendar-year HDHPs, the telemedicine exception expired on Dec. 31, 2024. There has been bipartisan support for extending telemedicine relief for HDHPs either permanently or temporarily. Although Congress extended other telehealth relief for the Medicare program at the end of 2024, it did not extend the relief for HDHP/HSA plans. It remains to be seen if Congress will revive this relief in 2025.

Because the telemedicine relief has not been extended, HDHPs that have not imposed a deductible on telehealth services will need to start doing so for the plan year beginning on or after Jan. 1, 2025, top reserve eligibility for HSA contributions. This means that employees will be required to pay the cost of telemedicine services, other than preventive care, until the HDHP deductible is satisfied. Any changes to telemedicine coverage should be communicated to plan participants through an updated summary plan description or a summary of material modifications.

 

New Fiduciary Certification Requirement Under MHPAEA

In September 2024, federal agencies released a final rule to strengthen MHPAEA’s requirements. MHPAEA generally prevents health plans and issuers that provide mental health and substance use disorder (MH/SUD)benefits from imposing less favorable benefit limitations on those benefits than on medical/surgical (M/S)coverage. In recent years, the U.S. Department of Labor has made MHPAEA compliance a top enforcement priority, with a primary focus being MHPAEA’s parity requirements for NQTLs. NQTLs are generally health plan provisions that impose nonnumerical limits on the scope or duration of benefits, such as prior authorization requirements, step therapy and provider reimbursement rates.

MHPAEA requires health plans and health insurance issuers to conduct comparative analyses of the designand application of NQTLs used for MH/SUD benefits compared to M/S benefits. Health plans and issuers mustmake their comparative analyses available upon request to federal agencies, as well as applicable stateauthorities and covered individuals.

The new final rule focuses on NQTLs to prevent health plans and issuers from using NQTLs to limit access toMH/SUD benefits to a greater extent than M/S benefits. The final rule also establishes minimum standards for developing comparative analyses to assess whether each NQTL, as written and in operation, complies with MHPAEA’s parity requirements. For health plans subject to ERISA, the comparative analysis must include a plan fiduciary’s certification confirming they engaged in a prudent process to select one or more qualified service providers to perform and document the plan’s comparative analysis and have satisfied their duty to monitor those service providers.

Employer-sponsored health plans must comply with new requirements for comparative analyses, beginning with the 2025 plan year (although some key requirements are delayed until the 2026 plan year). Employers with fully insured health plans should reach out to their issuers to confirm comparative analyses will be completed for their plan’s NQTLs for the 2025 plan year in accordance with the final rule’s applicable requirements.Employers with self-insured health plans should reach out to their third-party administrators (TPAs) or other service providers for assistance with their comparative analyses. In addition, employers with ERISA-covered health plans must ensure their comparative analyses include the required fiduciary certification that they have prudently selected and monitored their service providers.

Reproductive Health Privacy

A new final rule strengthens the HIPAA privacy protections by prohibiting the disclosure of protected health information (PHI) related to lawful reproductive health care in certain situations. The HIPAA Privacy Rule sets strict limits on the use, disclosure and protection of PHI by health care providers, health plans, health care clearing houses and their business associates (regulated entities). The Privacy Rule also allows regulated entities to use or disclose PHI for certain non-health care purposes, including certain criminal, civil and administrative investigations and proceedings.

As of Dec. 23, 2024, regulated entities must comply with stricter HIPAA privacy protections for reproductive health care. These new protections prohibit regulated entities from using or disclosing PHI related to lawful reproductive health care:

  • For a criminal, civil or administrative investigation into (or proceeding against) a person in connection with reproductive health care; and
  • To identify an individual, health care provider or other person for purposes related to such an investigation or proceeding.


In addition, regulated entities must obtain a valid attestation when a request is made to use or disclose PHI potentially related to reproductive health care for certain purposes to ensure that the use or disclosure is permissible.

Employers with self-insured health plans and employers with fully insured health plans that have access to PHI(other than certain limited types) should update their HIPAA policies and train affected members of their workforce on the new restrictions for PHI related to reproductive health care. Although the new privacy protections do not specifically require updates to business associate agreements, employers should review the terms of their agreements to determine if updates should be made. In addition, the U.S. Department of Health and Human Services has provided a model attestation form that employer-sponsored health plans may use to ensure a requested use or disclosure of PHI complies with the new privacy protections. Health plans must also update their HIPAA privacy notices for the new privacy protections, although they have until Feb. 16, 2026, to make these updates.

Health Plan Transparency Reminders

Over the last few years, several new transparency requirements have gone into effect for employer-sponsored health plans and health insurance issuers. These new transparency requirements are designed to improve the quality of health care and lower costs by making more information accessible to plan participants and the public. Going into 2025, employers should review their compliance with applicable health plan transparency requirements, including the following:

  • Self-service price comparison tool — Health plans and issuers must make an internet-based self-service tool available to plan participants to disclose personalized pricing information for covered items and services, including prescription drugs. Cost estimates must be provided in real time based on cost-sharing information that is accurate at the time of the request. This requirement was originally effective in 2023 for500 items and services. As of 2024, price comparison information must be available for all covered items and services;
  • Machine-readable files (MRFs) — Health plans and issuers must disclose detailed pricing information in MRFs on a public website. Currently, health plans and issuers must post MRFs regarding in-network-provider negotiated rates and out-of-network allowed amounts. These files must be updated monthly to ensure the information remains accurate. The requirement to post an MRF on covered prescription drugs has been delayed; and
  • Surprise medical billing notices — Health plans and issuers must comply with federal protections against surprise medical billing by limiting out-of-network cost sharing and prohibiting “balance billing” for certain types of health care services. Plans and issuers must post a notice regarding these protections on a public website and include it on each explanation of benefits (EOB) for an item or service to which the protections apply.


In addition, health plans and issuers must report information about prescription drug and health care spending to the federal government by June 1 each year, a process commonly referred to as prescription drug reporting or RxDC reporting. Health plans and issuers must also submit an attestation each year by Dec. 31, stating that their agreements with health care providers, TPAs and other service providers do not contain prohibited gag clauses that prevent the sharing of certain health care data.

Because employers do not typically have the information needed for these new transparency disclosures, they often rely on their issuers, TPAs or other third-party vendors to meet the transparency requirements. Employers should confirm that written agreements with their issuers, TPAs and other service providers have been updated to address this compliance responsibility. Employers should also monitor their service providers to confirm their plans’ compliance with applicable legal requirements, including the new transparency requirements. Cautious employers may want to consider requesting vendors to provide reporting related to transparency compliance.

Other Potential Developments

Other compliance developments are possible in 2025. These would impact health plan coverage in the future.For example, these developments may include:

  • Finalization of a proposed rule from December 2024 that would substantially modify the HIPAA Security rule to strengthen cybersecurity protections for electronic PHI. These changes would impact employers with self-insured health plans and those with fully insured health plans that have access to PHI;
  • New state and federal oversight of PBMs to help control health care spending, such as requirements for disclosures to health plan fiduciaries, application of drug discounts and rebates and prohibitions on spread pricing (which occurs when PBMs keep the difference between actual pharmacy charges and the higher negotiated payments from health plans);
  • New state coverage mandates for fully insured health plans regarding fertility treatments;
  • Ongoing litigation impacting group health plans on a variety of issues, including the ACA’s preventive care mandate; ERISA fiduciary requirements; preemption of state laws regulating PBMs; and the application of ACA Section 1557, which prohibits discrimination in covered health programs and activities based on sex,race, color, national origin, age or disability; and
  • Guidance from federal agencies regarding the implementation of additional transparency requirements for health plans. For example, employers should watch for regulatory guidance on advanced EOBs, which is a key transparency requirement that has not taken effect yet, but federal agencies are working to implement it in stages. When this requirement takes effect, health plans and issuers will need to send an EOB to covered individuals explaining the estimated cost of an item or service, including the individual’s estimated cost sharing, before a scheduled service.
LINKS AND RESOURCES

 

This Compliance Overview is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readersshould contact legal counsel for legal advice. ©2025 Zywave, Inc. All rights reserved.

IRS Issues ACA Reporting Guidance on Providing Statements Upon Request

Kristin Tracy on March 6, 2025

The IRS has issued Notice 2025-15 providing guidance on the alternative manner of furnishing statements tocovered individuals and full-time employees, using Forms 1095-B and 1095-C, in accordance with the AffordableCare Act’s (ACA) reporting requirements.

Background

The Paperwork Burden Reduction Act, enacted at the end of 2024 and applicable to 2025 reporting deadlines,provides that reporting entities are no longer required to send Forms 1095-B and 1095-C to covered individuals and full-time employees unless a form is requested. The legislation codified an existingalternative manner of furnishing Forms 1095-B established by a 2022 final rule and extended it to Forms 1095-C.

Alternative Manner of Furnishing

The legislation provides that reporting entities must notify individuals of their right to request a copy of thestatement “at such time and in such manner as the [IRS] may provide” to take advantage of the alternativefurnishing method. These requirements are now set forth in IRS Notice 2025-15, which also applies to 2024calendar year reporting due in early 2025.

In addition, any request must be fulfilled by Jan. 31 of the year following the calendar year to which the returnrelates or 30 days after the date of the request, whichever is later.

Timely Notice to Individuals

For 2024 statements required to be furnished in 2025, reporting entities will be able to provide Forms 1095-Band 1095-C upon request if they:

Post a clear and conspicuous notice on its website by March 3, 2025, stating that covered individuals andfull-time employees may receive a copy of their statement upon request. The notice must include:

  • An email address;
  • A physical address to which a request may be sent; and
  • A telephone number to contact the reporting entity.

Retain the notice in the same location on its website through Oct. 15, 2025.

Action Steps

Reporting entities wishing to take advantage of the alternative manner of furnishing Forms 1095-B and 1095-C should take steps to post the appropriate notice on their websites by March 3, 2025, and ensure it is retained through Oct. 15, 2025. Otherwise, reporting entities must provide Forms 1095 to each covered individual and full-time employee (as applicable) by March 3, 2025.

In addition, reporting entities must continue to comply with applicable state reporting requirements. The alternative furnishing method set forth in IRS Notice 2025-15 applies to federal reporting requirements.

 

Provided by Ellingson Group

This Legal Update is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers shouldcontact legal counsel for legal advice. ©2025 Zywave, Inc. All rights reserved.

2025 Applicable Large Employer (ALE) Requirements

Kristin Tracy on February 19, 2025

The Affordable Care Act (ACA) is the comprehensive health care reform law enacted in 2010. The ACA has many complex requirements for employers and their health plans. The attachments provide more information on ACA requirements for ALEs.

Disclaimer: This article and attachments are not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. The contents of this document may be affected by future regulations and sub-regulatory guidance.