In This Issue
- 3rd Quarter Benefit News Highlights
- FEATURE: One Big Beautiful Bill Act (OBBBA)
- FEATURE: Renewal Season Checklist
- FEATURE: Medicare Part D Creditable Coverage
- Appendix: Q3 2025 Resource Recap for Partners
3rd Quarter Benefit News Highlights
1 – TIP: Creditable Coverage Notices
Employers are confused about which plan year needs to be addressed in the Medicare Part D creditable coverage notice, especially those employers who are trying to distribute a notice to eligible individuals by October 15 to align with Medicare’s open enrollment period.
First of all, it’s helpful to clarify that the creditable coverage notice isn’t technically required to be distributed in the fall if the employer distributes it upon initial eligibility and during open enrollment each year. CMS does require that the notice be distributed prior to October 15, but that requirement is met so long as it has been distributed within the 12 months prior to October 15. If the notice is distributed during open enrollment each year, it makes it easier to address the creditable status for the upcoming plan year. However, if the notice is distributed in the early fall, or creditable status isn’t yet known during open enrollment, the best the employer can do is communicate the creditable status of the current plan. Then if creditable status changes upon the 2026 renewal, the employer would be obligated to send out an additional notice letting eligible individuals know that the creditable status of the plan has changed.
2 – Draft ACA Reporting Instructions
The IRS has released the draft 2025 instructions for Forms 1094-C and 1095-C. There are no significant changes from the prior year’s instructions other than updated due dates and penalty amounts. For 2025 reporting (covering the 2024 calendar year), statements must be furnished to employees or a notice of availability posted by March 2, 2025, and electronic filing with the IRS is due by March 31, 2025. The maximum penalty for reporting failures has increased to $340 per form. While we will need to wait until the final instructions are issued, it is unlikely there will be substantial changes from the draft version. The draft instructions can be found here – 2025 Instructions for Forms 1094-C and 1095-C. In addition, an updated version of Pub. 5165, which provides a guide for electronically filing the ACA information returns, can be found here – Publication 5165 (Rev. 7-2025).
3 – DOL Spring Agenda
The Department of Labor’s Spring 2025 regulatory agenda includes several health and welfare benefit plan initiatives focused on transparency, nondiscrimination, and disclosure requirements. Overall, the agenda shows a continued regulatory push toward participant protections and plan transparency. Items of interest for health and welfare benefits include:
- Default electronic disclosure/notice rules;
- Further transparency into pharmacy benefit manager fee disclosures;
- Guidance for the advanced explanation of benefits;
- Provider nondiscrimination requirements;
- Requirements for air ambulance services; and
- Clarification for broker disclosures.
The DOL’s full spring agenda can be found here – Agency Rule List – Spring 2025
4 – Certain Marketplace Changes Paused
On August 22, 2025, a U.S. District Court Judge issued a preliminary injunction blocking several provisions of the new “Marketplace Integrity and Affordability Rule,” which had been set to take effect shortly and would likely have affected coverage for individuals beginning in 2026. The rule would have imposed stricter income verification, premium penalties for auto-re-enrollees, exclusions for individuals with unpaid premiums, and tighter eligibility checks for special enrollment periods. The judge found that plaintiffs were likely to succeed on their Administrative Procedure Act claims and that the changes risked irreparable harm by pushing millions off coverage. Some provisions of the rule will proceed (e.g., changes to cost-sharing calculations and the elimination of the 60-day reconciliation window for income discrepancies), but the ruling temporarily preserves broader access to Marketplace individual coverage while litigation continues over whether the rule unlawfully undermines the ACA’s protections. The text of the opinion can be found here – USCOURTS-mdd-1_25-cv-02114-0.pdf
5 – Provider Directories – Ghost Networks
A growing wave of lawsuits target inaccurate provider directories, primarily focused on mental health providers, resulting in some significant settlement payments and corrective action. Research revealed that many mental health providers listed in plan directories were unreachable, not accepting patients, or not actually in-network—commonly referred to as “ghost providers.” For employers sponsoring group health plans, this poses both a compliance and a reputational concern. Employers are encouraged to push their carriers and TPAs to perform regular provider verification (at least quarterly) and to provide transparency regarding how inaccuracy is detected and addressed.
6 – Short-Term Limited Duration Insurance – Possible Resurgence?
Individual short-term limited duration insurance (STLDI) plans are not subject to the same requirements as comprehensive individual health insurance and may exclude coverage for pre-existing conditions. Historically, STLDI plans were limited to a maximum of three months of coverage. In 2018, the Trump administration expanded these plans, allowing for initial coverage of up to 12 months with renewals permitted for up to 36 months total. In contrast, the Biden administration issued final rules—effective in late 2024—restricting STLDI coverage to a maximum of three months, with a one-month extension permitted in certain cases, and requiring enhanced consumer notices.
Recent guidance from the Trump administration indicates an intent to roll back the Biden-era restrictions and restore the longer duration limits, potentially allowing policies to extend up to one year with renewals for a total of three years. While formal rulemaking is pending, the administration has announced that it will not enforce the 2024 rules in the interim. Note: Despite this federal non-enforcement stance, many states continue to impose their own restrictions on, or may even prohibit, STLDI plans. The statement can be found here – STATEMENT OF U.S. DEPARTMENTS OF LABOR, HEALTH AND HUMAN SERVICES, AND THE TREASURY REGARDING SHORT-TERM, LIMITED-DURATION INSURANCE
7 – Court Decision – MHPAEA Enforcement
A recent federal district court’s ruling in Perrone v. Blue Cross Blue Shield of Michigan reinforces that health plan participants can pursue Mental Health Parity & Addiction Equity Act (MHPAEA) claims under ERISA, making clear that mental health parity violations are judicially enforceable. This decision contributes to a growing body of case law showing that courts are willing to entertain MHPAEA lawsuits claiming a lack of parity in how a plan treats mental health or substance use disorder (MH/SUD) benefits compared to medical/surgical ones. The case highlights the growing importance of proactively auditing any financial requirements or treatment limitations imposed on MH/SUD benefits—particularly non-quantitative treatment limitations (NQTLs) like network restrictions and utilization management—and thoroughly documenting these reviews as part of the required NQTL written comparative analysis. The full text of the court opinion can be found here – USCOURTS-miwd-1_24-cv-01313-0.pdf
8 – Prescription Drug Management
The Trump administration continues to advance its commitment to lowering prescription drug prices, centered on a revived “Most-Favored-Nation” model. A recent executive order directs federal agencies to benchmark U.S. drug prices against the lowest prices paid in comparable countries, while also expanding direct purchasing and drug re-importation programs. To further pressure manufacturers, the administration has threatened steep tariffs on imported pharmaceuticals.
At the state level, legislatures have introduced over 800 bills in 2025 to improve prescription access and reduce consumer costs. These proposals include capping out-of-pocket expenses, regulating pharmacy benefit managers (PBMs), supporting state affordability boards, and addressing high-cost therapies and pricing trends. An overview of state efforts is available in the National Conference of State Legislatures’ (NCSL) summary: This Year’s Prescription Drug Bills Aim to Reduce Consumer Costs
While state initiatives focus on consumer protections and targeted regulatory reforms, the federal strategy under the Trump administration leans heavily on international price comparisons, trade leverage, and structural market changes. We can only hope these combined efforts will eventually lead to more affordable prescription drugs.
9 – Updated CHIP Model Notice
The DOL provided an updated CHIP model notice with information that is current as of July 31, 2025. The State Premium Assistance Notice for Medicaid and CHIP informs employees of potential opportunities for premium assistance available in the state in which they reside. Employers are required to distribute the CHIP notice annually to all eligible employees who live in a state offering premium assistance, so most employers distribute the notice to all employees who are eligible for the employer’s group health plan during each open enrollment, likely as part of their benefits summary or in an annual notices packet. Employers should always grab the most current model notice when distributing the notice. The recently updated version of the CHIP notice can be found here – model-notice.doc
10 – PCORI Fee Reminder
The PCORI fee for group health plans that ended sometime during 2024 must be reported and paid by July 31, 2025. Health insurance carriers pay the fee on behalf of fully-insured plans, but employers are responsible for reporting and paying the fee for any self-funded group health plans, including HRAs. The fees due in July 2025 are as follows:
- $3.22 per covered life for plan years ending in January – September 2024.
- $3.47 per covered life for plan years ending in October – December 2025.
Average covered lives used for reporting and paying the PCORI fee may be determined using one of three methods: (i) the actual count method; (ii) the snapshot method; or (iii) the Form 5500 method. The fee is reported and paid by employers sponsoring self-funded group health plans using quarterly excise tax Form 720, Line 133(c) and (d), and should be filed for the 2nd quarter ending June 30th, 2025.
11 – Form 5500 Extensions – Calendar Year Plans
The Form 5500 for an ERISA plan is due the last day of the seventh month after the end of the ERISA plan year, including short plan years. So, for a calendar year plan, the Form 5500 is generally due on July 31st. An extension of up to 2 1/2 months is available for employers that request an extension using Form 5558 (Application for Extension of Time to File Certain Employee Plan Returns). Form 5558 must be filed with the IRS, not with the DOL. If Form 5558 is filed on or before the normal due date of the Form 5500, the extension request will be automatically granted; no approval is necessary. For a calendar-year plan, the 2 1/2-month extension will result in a Form 5500 due date of October 15th.
More information about Form 5558 can be found here – https://www.irs.gov/forms-pubs/about-form-5558
FEATURE: One Big Beautiful Bill Act (OBBBA)
The massive budget reconciliation bill known as the One Big Beautiful Bill Act (OBBBA) was signed into law by President Trump on July 4, 2025. As with many such budget bills, there were various employee benefits provisions tucked into its depths, including changes for health savings accounts (HSAs), dependent care assistance programs (DCAPs), student loan payments under educational assistance programs, and qualified transportation plans. The benefit-related changes are summarized below.
Health Savings Accounts (HSAs) – IRC §223
OBBBA Changes
- Telehealth – For plan years beginning in 2025, telehealth may be offered with no cost-sharing without impacting HSA eligibility.
- Direct Primary Care – Beginning in 2026, certain direct primary care (DPC) arrangements may be offered with no cost-sharing without impacting HSA eligibility. Additionally, HSA funds can now be used to reimburse any fees paid for such arrangements.
- Marketplace Plans – Beginning in 2026, bronze-level and catastrophic individual plans purchased through the Marketplace will be treated as high-deductible health plans (HDHPs) and allow for HSA eligibility, regardless of plan design. Because this change only affects individual policies, it will have little impact on most employer plans other than those employers offering an ICHRA or QSEHRA.
Only eligible individuals can make contributions to their HSA account. To be eligible to contribute to an HSA, an individual:
- Must be enrolled in a qualifying HDHP;
- May not have any other “disqualifying coverage”; and
- Cannot be claimed as a tax dependent by another individual.
Medical plans that cover non-preventive care before the individual meets the minimum statutory HDHP deductible generally cause a loss of HSA eligibility, but there are now specific exceptions for telehealth and certain DPC arrangements.
Telehealth – Beginning in 2025
To encourage individuals to avoid hospitals when appropriate during the COVID-19 health crisis, Congress passed relief permitting plans to cover telehealth and other remote care services before a participant satisfied the HDHP’s deductible without impacting HSA eligibility. Since that time, such relief has been extended on multiple occasions, but the most recent relief expired at the end of 2024 plan years. The OBBBA has now made this relief permanent. Retroactive back to the beginning of 2025, which is when the relief expired for calendar year plans, coverage for telehealth and other remote care services that is available with reduced or no cost-sharing will not affect individuals’ eligibility to contribute to an HSA.
Direct Primary Care (DPC) – Beginning in 2026
Historically, it has been unclear how access to DPC impacted eligibility to contribute to an HSA. Most assumed that access to DPC prior to the minimum HDHP deductible interfered with HSA eligibility. Beginning in 2026, participation in DPC arrangements that meet the following requirements will not cause a loss of HSA eligibility:
- The DPC must be subject solely to a fixed monthly fee of no more than $150 for an individual or $300 for more than one individual (subject to annual indexing); and
- The DPC must involve medical care provided by a primary care practitioner. Procedures that require the use of general anesthesia, prescription drugs (other than vaccines), and laboratory services not typically administered in an ambulatory primary care setting do not qualify as primary care.
In addition, fees paid for such DPC arrangements are treated as eligible medical expenses for purposes of HSA reimbursement.
Dependent Care Assistance Programs (DCAPs) – IRC §129
OBBBA Changes
- Beginning in 2026, the maximum annual reimbursement limit is increased from $5,000 to $7,500 (or $3,750 for married individuals filing separately). This amount is still not indexed for inflation, meaning it will remain at $7,500 until Congress changes the limit again.
Student Loan Payments – IRC §127
OBBBA Changes
- Beyond 2025, employer student loan payments or reimbursements of up to $5,250 (indexed annually) will continue to qualify for tax-favored treatment as a type of §127 educational assistance program.
Under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, employer payments of student loans were made excludable from employees’ taxable income under §127 up through the end of 2025. The OBBBA makes this ability to treat student loan payments as an eligible expense under §127 permanent. In addition, the annual limit of $5,250 for all §127 eligible expenses is now set to be indexed annually (previously fixed at $5,250).
Qualified Transportation Plans – IRC §132
OBBBA Changes
- Beginning in 2026, the ability to reimburse employees for bicycle commuting expenses on a tax-favored basis under §132 is permanently removed.
- Beginning in 2026, the method for determining the annual inflation amount for qualified transportation benefits under §132 is adjusted.
FEATURE: Renewal Season Checklist
As renewal season approaches, employers should take a proactive approach to reviewing their health and welfare benefit offerings. This is the ideal time to align plan design, documentation, and administration with federal and state requirements, while also confirming that carriers and vendors are prepared to support the upcoming plan year. Careful planning reduces compliance risk, ensures employee communications are accurate, and helps avoid costly corrections later. The following checklist highlights key compliance priorities for employers.
Renewal Checklist
FEATURE: Medicare Part D Creditable Coverage
| Plan Design & Documentation |
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| Eligibility Tracking |
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| Contributions & Affordability |
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| Enrollment Materials & Notices |
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| Compliance Assessment |
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Employers are not required to offer creditable prescription drug coverage, but they are required to determine and communicate creditable (or non-creditable) status to eligible individuals. This information assists Medicare Part D eligible individuals in making informed decisions about enrolling in Medicare Part D and helps avoid late enrollment penalties.
Determining Creditable Coverage Status
Prescription drug coverage is creditable if the actuarial value of the coverage equals or exceeds the actuarial value of Medicare Part D prescription drug coverage. Employers often rely on insurance carriers or third-party administrators (TPAs) to provide the creditable determination. If such information is not provided, the employer must make the determination themselves.
Employers who do not apply for the retiree drug subsidy generally use the “simplified method” for determining whether prescription drug coverage is creditable. If a plan does not meet the criteria under the simplified determination method, the employer could assume the plan is non-creditable, or the employer could obtain an actuarial determination to confirm.
Simplified Method for Determining Creditable Status
For 2026 plan years, employers may choose to use either the existing simplified method or a revised simplified method for determining creditable status. See 2026 Final Part D Redesign Program Instructions here – https://www.cms.gov/files/document/final-cy-2026-part-d-redesign-program-instruction.pdf
Revised Simplified Method (available beginning in 2026) – To be deemed creditable, the plan must meet the following criteria:
- Provide reasonable coverage for brand name and generic prescription drugs and biological products;
- Provide reasonable access to retail pharmacies; and
- Pay on average at least 72% of participants’ prescription drug expenses.
Existing Simplified Method – To be deemed creditable, the plan must meet the following criteria:
- Provide reasonable coverage for brand-name and generic prescription drugs;
- Provide reasonable access to retail pharmacies;
- Pay on average at least 60% of participants’ prescription drug expenses; and
- Depending upon whether the plan is integrated (most plans are non-integrated):
- A non-integrated drug plan must have either no annual benefit maximum or a minimum annual benefit of $25,000; OR have an actuarial expectation that the amount payable by the plan will be at least $2,000 annually per Medicare-eligible individual.
- An integrated plan must: have a maximum annual deductible of $250; have either no annual benefit maximum or a minimum annual benefit of $25,000; AND have a lifetime combined benefit maximum of at least $1 million.
Disclosure of Creditable Status to Eligible Participants
The creditable status of the plan must be disclosed to Medicare Part D eligible individuals who are eligible to enroll in the plan sponsor’s prescription drug plan. This includes employees, COBRA participants, retirees, as well as their spouses and dependents. Individuals are eligible for Medicare Part D if they are enrolled in either Medicare Part A or Part B and live in the service area of a Medicare Part D plan. Due to difficulties in identifying eligible individuals, many employers choose to provide the disclosure notice to everyone eligible for their prescription drug plan.
Timing
Employers can satisfy the annual disclosure requirement by providing the notice each year during the employer’s open enrollment period or in the fall to coincide with the Medicare Part D open enrollment period. The notice must also be provided when individuals are first eligible for prescription drug coverage (e.g., new hires). Additionally, employers must provide notice whenever the employer no longer offers prescription drug coverage, when the creditable status changes, and upon request.
Delivery Method
CMS recommends employers mail paper copies. However, notices may be provided electronically if the DOL’s electronic delivery safe harbor is satisfied. Employers may provide a single notice to eligible individuals and their dependents residing at the same address. If the notice is incorporated with other information or notices (e.g., benefits booklet or enrollment packet), the disclosure should be on its own page and a prominent reference (in 14-point font) should be included on the first page of the materials listing the notice’s specific page number.
Reporting to CMS
In addition to individual disclosures, employers must report the creditable status of their coverage to CMS annually, within 60 days of the start of the plan year. This reporting is most often completed by the employer and not the insurance carrier or TPA. Information necessary to complete the reporting includes employer identification number, type of coverage, number of plan options, estimated number of Medicare-eligible individuals covered, and the date the notice was distributed to participants.
CMS has provided detailed reporting instructions available here: https://www.cms.gov/Medicare/Prescription-Drug-Coverage/CreditableCoverage/Downloads/CreditableCoverageDisclosureUserManual05292012.pdf
Appendix: Q3 2025 Resource Recap for Partners
This appendix provides a complete account of all resources released in Q3 of 2025. Lumelight’s direct partners and clients can use the links to download, rebrand, and redistribute the relevant material to their clients as necessary.