On Nov. 24, 2014, the Office of Personnel Management (OPM) issued a proposed rule regarding establishment of the multi-state plan program for the state health insurance exchanges. In so doing, OPM republished the entire multi-state plan rule issued in 2013 with proposed changes embedded. We originally reported on final regulations regarding the multi-state plan program in the Mar. 12, 2013 edition of Compliance Corner. The proposed rule sets forth changes to the program based on experiences during the first year of the program.
As background, a multi-state plan (MSP) is a type of private health insurance administered by OPM and offered across state lines through the exchanges. In the 2014 plan year, the program was available in 31 states and the District of Columbia. For plan year 2015 OPM added a second group of issuers expanded the MSP into five additional States for a total of 36 States.
The proposed rule may provide greater flexibility and encourage more participation in the program. To that end, OPM is requesting comments regarding a relaxed definition of “group of insurers,” groups with which OPM can contract to provide a multi-state plan through the exchanges. Alternative structures (i.e. a group of cooperative plans) are being considered as possible MSP applicants. One of the goals of the MSP program was to provide an option for small employers with employees located in different states. Currently, very few insurers are offering MSP through the SHOP for employers. To resolve this issue, the OPM is considering relaxing original requirements regarding expansion and SHOP coverage. Also proposed is additional flexibility regarding benchmark plans. Other minor issues addressed include a refined definition of habilitative services, collection of user fees by OPM, and numerous technical corrections.
On Nov. 21, 2014, CMS issued proposed regulations related to benefit and payment parameters for the 2016 benefit year. The regulations address several topics, outlined below.
Transitional Reinsurance Contributions. The proposed contribution amount for 2016 is $27 per covered life. This is a decrease from the 2015 contribution amount of $44. The contribution is currently not payable on fully insured expatriate plans. The proposed regulations would also exempt self-insured expatriate plans in 2016.
Marketplace Open Enrollment. The open enrollment period for the individual marketplace would be from Oct. 1, 2015 through Dec. 15, 2015 with a coverage effective date of Jan. 1, 2016.
Special Enrollment Periods (SEP). An individual who is eligible for a non-calendar year employer sponsored plan would experience a SEP at the end of the plan year, permitting the individual to enroll in the marketplace outside of open enrollment. The regulations also propose a SEP for an individual who is making less than 100 percent of the federal poverty level (FPL) and resides in a state that has not expanded Medicaid. The SEP would apply if the individual has a subsequent change in household income to between 100 and 400 percent of FPL, resulting in premium tax credit eligibility.
Individual Mandate Exemptions. An individual who is required to pay more than 8.1 percent of household income for minimum essential coverage would be exempt from the individual mandate. This is an increase from the current 8.0 percent.
SHOP. SHOPS would be permitted to assist employers with COBRA premium processing. The SHOP would, at the employer’s request, collect COBRA premium payments directly from participants and forward the payments to the insurer. The employer would still be responsible for all other COBRA administrative functions including notice requirements.
Out-of-pocket (OOP) maximum. For 2016, the proposed OOP maximum is $6,850 for self-only coverage and $13,700 for family coverage. This is an increase from the 2015 OOP maximums of $6,600 for self-only and $13,200 for family.
Pediatric services. Pediatric dental and vision services, which are essential health benefits (EHB), would be offered to children through the end of the calendar year in which they turn 19 years of age. This is a change from the current requirement to provide coverage until age 19.
Habilitative services. The proposed regulations define habilitative services, which is a category of EHB, as services and devices provided for an individual to attain, maintain or prevent deterioration of a skill or function never learned or acquired due to a disabling condition. This is different from rehabilitative services which are provided to an individual who had acquired such skills but lost them or became impaired because of illness, injury or a disabling condition. An example of an habilitative service is therapy for a child who is not walking or talking at the expected age.
Prescription drugs. Plans required to provide coverage for EHB could not limit prescription drug coverage to mail-order delivery. There would be an exception for certain drugs that have limited access and are not generally available through retail pharmacies. The plan would be permitted to charge different cost-sharing amounts for pharmacy versus mail-order delivery. Also, plans would be required to publish a complete list of all covered drugs on its formulary drug list including any tiering structure.
Discrimination in EHB. The regulations identify several practices which the agency would generally consider to be discriminatory and in violation of the EHB regulations. Examples include placing all drugs for a specific condition on a high-cost sharing tier and limiting coverage for hearing aids to participants who are 6 years of age or younger.
Minimum Value. The regulations propose rules in line with IRS Notice 2014-69, which state a group health plan would not be considered to provide minimum value unless the plan includes coverage for inpatient hospitalization and physician services. The notice provided an exception for employers who entered into a binding written commitment or began enrolling employees prior to Nov. 4, 2014 and the plan year begins by Mar. 1, 2015. The proposed regulations clarify that a binding written commitment exists when an employer is contractually required to pay for an arrangement, and a plan begins enrolling employees when it begins accepting employee elections to participate in the plan.
MLR. Currently, a group health plan that is subject to ERISA and receives a MLR rebate (which represents plan assets) must use the rebate within three months or place the rebate amount in trust. Non-federal government plans and church plans are not subject to ERISA and do not have a similar timeframe imposed to use the rebate. The regulations propose that employer plan sponsors not subject to ERISA must use the rebate within three months. They could use the rebate to reduce the employees’ portion of premium for the subsequent policy year (including spreading the reduction over all 12 months of the policy year), but the policy year must begin within three months of receiving the rebate. Otherwise the employer must distribute the rebate in the form of a cash refund or apply a mid-year premium credit to the employees.
CMS is accepting comments on the proposed regulations through Dec. 26, 2014.
On Nov. 26, 2014, the IRS finalized proposed regulations relating to minimum essential coverage under PPACA’s individual mandate. The proposed regulations were issued Jan. 23, 2014 (covered in the Jan. 28, 2014, edition of Compliance Corner) and describe an exemption from the individual mandate for individuals that cannot afford minimum essential coverage. This is separate from the affordability requirements under the employer mandate. However, whether an individual qualifies for the exemption depends on whether employer coverage is affordable via a separate standard: Coverage is unaffordable if the cost of that coverage (whether through an employer’s plan or the lowest cost bronze plan on an exchange) exceeds a percentage (8 percent for 2014 and 8.1 percent for 2015) of the individual’s household income for the most recent tax year. The proposed regulations addressed how employer contributions made via an HRA or wellness program affect the affordability exemption for an individual. The final regulations mostly adopt those regulations.
On HRAs, an employer’s contributions are taken into account when determining (in other words, they reduce) an employee’s required premium contribution towards the employer coverage if the HRA is integrated with the employer’s plan and the employee may use the s contributions to pay premiums. HRAs that may be used only for cost-sharing will not reduce an employee’s required contributions towards coverage.
On wellness incentives, the incentive (i.e., premium reduction) is taken into account when determining an employee’s required contributions only if the incentive is related to tobacco use.
Lastly, the proposed regulations requested comments on how to treat cafeteria plan contributions with respect to the unaffordable coverage exemption. The final regulations state that an employee’s required contribution is reduced by any employer contributions made available for the current plan year under a cafeteria plan that:
Although the final regulations relate to requirements for individuals under the individual mandate, employers should be aware of the regulations, since an employer-sponsored HRA, tobacco-related wellness program or cafeteria plan contribution may affect an individual’s ability to qualify for the unaffordability exemption.
On Nov. 21, 2014, the IRS published Notice 2014-76, which provides a list of individual mandate hardship exemptions that taxpayers may claim on their individual federal income tax return without obtaining a hardship exemption certification from a state health insurance exchange (also called a 'marketplace'). Generally, the individual mandate rules require individuals to obtain certificates from health exchanges to prove they are exempt from the requirement to obtain health coverage because they qualify for a hardship exemption. However, the rules permit the IRS to issue guidance exempting individuals from the exchange certification requirement. Notice 2014-76 appears to be that guidance.
According to the notice, exchange certification is not required for hardship exemptions for individuals:
While the notice relates to individuals and the individual mandate, employers should be aware of the notice in case employees have questions relating to hardship exemptions.
On Nov. 21, 2014, the IRS released Revenue Procedure 2014-62 announcing the indexed applicable percentage table in IRC Sec. 36B(b)(3)(A). That table is used to calculate an individual’s premium tax credit for tax years beginning after calendar year 2015 (i.e. plan years starting in 2016). The applicable percentage table is as follows:
|Household income percentage of Federal poverty line:||Initial percentage||Final percentage|
|Less than 133%||2.03%||2.03%|
|At least 133% but less than 150%||3.05%||4.07%|
|At least 150% but less than 200%||4.07%||6.41%|
|At least 200% but less than 250%||6.41%||8.18%|
|At least 250% but less than 300%||8.18%||9.66%|
|At least 300% but not more than 400%||9.66%||9.66%|
Also announced in the Revenue Procedure is the 2016 update to the required contribution percentage, which is used to determine whether an individual is eligible for affordable employer-sponsored minimum essential coverage. The percentage increases from 9.56 percent to 9.66 percent for plan years beginning in 2016.
Revenue Procedure 2014-62 will appear in Internal Revenue Bulletin 2014-50 dated Dec. 8, 2014.
On Nov. 7, 2014, the U.S. Supreme Court agreed to address the provision of premium tax credits through federally facilitated exchanges. Challengers claim PPACA’s express language authorized premium tax credits only through exchanges established “by the state.” Such an interpretation would disallow the provision of premium tax credits in any states that have refused to establish their own exchanges and instead defaulted to a federally-facilitated exchange. The IRS has interpreted that same section of PPACA to authorize premium tax credits in both state and federally facilitated exchanges because the federally facilitated exchanges are standing in the shoes of state exchanges. In King v. Burwell, 2014 WL 3582800 (4th Cir. 2014), the Fourth Circuit Court of Appeals ruled that ambiguity about premium tax credits in the law makes the regulation allowing premium tax credits in federally-facilitated exchanges a permissible exercise of agency discretion.
It is anticipated that the case will be argued in the spring with a decision expected toward the end of the Court’s current term in June 2015. This case is significant because premium tax credits are an essential part of PPACA. A finding that premium tax credits are not available through federally facilitated exchanges could cripple the law. Without premium tax credits, employer mandate penalties would have no trigger in those states.
On Nov. 12, 2014, the Court of Appeals for the District of Columbia Circuit decided to suspend their rehearing of Halbig, et al. v. Burwell, because the U.S. Supreme Court has decided to hear another challenge that addresses the same issue. The case will, therefore, be held in abeyance pending the Supreme Court’s decision in King v. Burwell.
On Nov. 6, 2014, the DOL published FAQs About Affordable Care Act Implementation (Part XXII). The three new FAQs relate to compliance of premium reimbursement arrangements.
The first and third FAQs address employer premium reimbursement for employees who purchase insurance on the individual market (both inside and outside the insurance exchanges). As background, last year the IRS published Notice 2013-54, which stated that employer premium reimbursement arrangements are considered group health plans and are subject to PPACA. The notice explained that such arrangements violate two of PPACA’s provisions—the prohibition on annual dollar limits for essential health benefits and the requirement to provide preventive services at zero cost-sharing. The notice applied to all employer reimbursement arrangements, including pre-tax salary deductions applied to individual coverage, stand-alone HRAs used to reimburse employees for purchasing outside coverage and any other employer-provided reimbursement for individual policies. A few months later the IRS issued a set of FAQs re-emphasizing the same position.
In light of the notice and subsequent FAQs, it appeared the only option for employers to assist employees with individual premium reimbursement was to do it on a post-tax basis (i.e., include the reimbursement in the employee’s gross income). However, the Nov. 6 FAQs appear to prohibit even a post-tax reimbursement arrangement for individual premiums. FAQ 1 states that any individual insurance premium reimbursement arrangement—regardless of whether the employer treats the money as pre-tax or post-tax to the employee—is a group health plan that will violate the two above PPACA provisions.
Emphasizing this position, FAQ 3 takes aim at vendors marketing individual premium reimbursement arrangements, including so called “section 105 reimbursement” plans. The FAQ makes clear that these arrangements are group health plans that would be in violation with the two above PPACA provisions. Further, employees/individuals who participate in these types of plans are ineligible for premium tax credits.
As a result of these two FAQs, it appears the only option for employers would be to offer additional salary (i.e., additional taxable wages) without regard to whether an employee actually uses that salary to purchase individual coverage.
Lastly, FAQ 2 addresses a plan design where an employer offers employees with high claims risk a choice of group plan enrollment or cash. The FAQ clarifies that such a design is prohibited as it violates HIPAA’s nondiscrimination rules. Although the HIPAA nondiscrimination rules contain an exception for discriminatory plan designs that favor high claims risk employees (called ’benign’ discrimination), the FAQ states that a plan design that offers cash only to high claims risk employees does not fall into that exception. Thus, employers that had hoped to reduce costs by incenting high-claims employees to purchase exchange coverage instead of enrolling in the employer’s plan may no longer use the strategy of offering a cash incentive only to high claims risk employees.
An IRS website featuring two FAQs clarifies the deductibility of the reinsurance program contributions. The first FAQ clarifies that insurers are able to treat contributions made under the reinsurance program as ordinary and necessary expenses paid or incurred in carrying on a trade or business. Similarly, the second FAQ clarifies that sponsors of self-insured group health plans may also treat the contributions as ordinary and necessary business expenses. However, plan sponsors who pay reinsurance contributions through a third-party administrator or directly from plan assets may be able to deduct the contributions as contributions to the plan.
Employers should work with their tax counsel or CPA in light of this IRS guidance to ensure proper deductibility of the contributions in future tax filings.
On Nov. 7, 2014, the IRS issued Notice 2014-71 in regards to premium tax credit eligibility and pregnant women. As background, an individual is eligible for a premium tax credit if he/she has household income between 100 and 400 percent of the federal poverty level and is enrolled in a qualified health plan through an exchange. An individual is not eligible for a premium tax credit if he/she is eligible for affordable employer-sponsored coverage providing minimum value, Medicaid, CHIP or Medicare. The new notice states that women who are eligible for pregnancy based Medicaid or CHIP will remain eligible for a premium tax credit as long as they do not actually enroll in the Medicaid or CHIP coverage. The notice is effective Nov. 7, 2014.
On Nov. 4, 2014, the IRS published Notice 2014-69, which addresses group health plans that fail to cover in-patient hospitalization services or exclude substantial coverage of physician services. These types of plans have often been referred to as “skinny” or “limited benefit” plans, and are referred to in the notice as “non-hospital/non-physician services plans”. These plans have been a subject of substantial debate over the past two years. The debate centers on whether such plans are considered as meeting the minimum value (MV) requirements under PPACA’s employer mandate. The federal government previously provided three methods for determining whether a plan meets MV: An HHS MV calculator, a design-based MV checklist and via actuarial certification. Arguably (and the reason for the debate), a non-hospital/non-physician services plan could meet MV based on the calculator.
However, according to Notice 2014-69, non-hospital/non-physician services plans do not provide the intended MV and therefore will not be considered as meeting the MV requirement. The notice states that in the immediate future the federal government will issue proposed regulations to formalize that position, and that those regulations will be finalized and fully applicable in 2015. Accordingly, going forward, employers may not rely solely on the MV calculator or actuarial certification to demonstrate that a non-hospital/non-physician services plan provides MV value.
That said, the notice does contain a limited exception. If an employer has entered into a binding written commitment to adopt, or has begun enrolling employees in, a non-hospital/non-physician services plan prior to Nov. 4, 2014, and the employer did so based on the reliance of the MV calculator, the employer will not be subject to an employer mandate penalty with respect to the plan before the end of the plan year (as in effect under the terms of the plan on Nov. 3, 2014)—so long as that plan year begins no later than Mar. 1, 2015. In other words, if an employer prior to Nov. 4, 2014, had entered into an agreement with a non-hospital/non-physician services plan (or had begun enrolling employees into that plan), the plan will be considered as meeting MV for purposes of the employer mandate through the end of the plan year (so long as the plan year begins by Mar. 1, 2015).
Importantly, though, an employee that is covered under a non-hospital/non-physician services plan may still qualify for a premium tax credit through the exchange. This is meant to allow an employee to still qualify for assistance in obtaining a richer plan through the exchange.
An employer that offers a non-hospital/non-physician services plan (including one adopted prior to Nov. 4, 2014) to an employee is also subject to two other obligations. First, the employer must not state or imply in any disclosure that the plan precludes an employee from obtaining a premium tax credit (if otherwise eligible). Second, the employer must timely correct any prior disclosures that state or implied that the plan would preclude an otherwise eligible employee from obtaining a premium tax credit.
Employers should review their plan strategies in light of the IRS notice and consider whether the non-hospital/non-physician services plan is still a viable option in complying with the employer mandate. NFP Benefits Compliance will continue to monitor developments on this issue, including the forthcoming release of proposed regulations.
On Oct. 31, 2014, CMS announced that enforcement of HIPAA's health plan identifier (HPID) requirement has been delayed indefinitely. As background, HIPAA requires health plans to obtain an HPID, which is to be used by the plan in certain HIPAA-related transactions. The HPID is a unique identifier for the plan, similar to a taxpayer identification number—a standard number that applies in all transactions so that the parties involved know the true identity of the plan. Large health plans (those with annual receipts of more than $5 million) were supposed to obtain an HPID by Nov. 5, 2014 while small health plans had an additional year to comply. The HPID regulations also introduced two new (and somewhat confusing) terms—“controlling health plan” (CHP) and “sub-health plan” (SHP). A CHP is a plan that controls its own business operations, and which is required to obtain its own HPID. A SHP, on the other hand, is a plan that takes direction from a controlling health plan, and which is not required to obtain its own HPID (although a CHP can direct an SHP to obtain an HPID or obtain one on their behalf).
Generally speaking, in the fully insured context, the insurer is responsible for obtaining an HPID. In the self-insured context, though, the employer assumes that responsibility. CMS had recently published several items of guidance to assist insurers and employers in determining which health plans must obtain an HPID and in walking through the process of obtaining the HPID. Those items were covered in the Oct. 7, 2014, edition of Compliance Corner.
The announced delay pushes off HPID penalty enforcement indefinitely for all health insurers and health plans. Importantly, the announcement also references a letter from the National Committee on Vital and Health Statistics (NCVHS) to HHS recommending that covered entities not use the HPID in connection with HIPAA transactions. NCVHS's recommendation is based on several conclusions, including a lack of clear business need and purpose for using HPID in health care administrative transactions, confusion about how the HPID would be used in conjunction with the current payer identification numbers that have already been widely adopted in the industry, and costs to health plans if software has to be modified to account for the HPID. NCVHS also cited the challenges faced by health plans with respect to the definitions of 'controlling health plans' and 'sub-health plans', something employers have been struggling with over the past year as they attempted to understand and comply with the HPID rules.
With an indefinite delay in enforcement and a recommendation that lacks support for the HPID's purpose, the HPID requirement's future is unknown. For now, though, it is clear that insurers and employers will not be penalized for failing to obtain an HPID by the above dates. NFP Benefits Compliance will continue to monitor developments on this issue.
On Oct. 8, 2014, CMS issued a bulletin reminding employers that enrollment in the SHOP marketplace would begin Nov. 15, 2014. As a reminder, employers wishing to obtain a small business tax credit must purchase coverage through the SHOP marketplace in 2015. The bulletin includes a link to the SHOP full-time equivalent calculator to determine eligibility based on employee count, a tax credit estimator tool and information about SHOP coverage including the plans and premium estimates. Remember that the determination of the full-time employee count for the small business tax credit is not the same calculation as determining whether an employer is an applicable large employer (subject to the employer mandate). NFP has a small business tax credit calculator. Ask your advisor for details.
As a reminder, PPACA created a temporary reinsurance program for insurers. The program is funded by transitional reinsurance contributions from insurers and group health plans. The employer plan sponsor of a self-insured plan is responsible for this requirement, but may contract with a third party administrator or administrative services only contractor to file on behalf of the plan. For fully insured plans, responsibility for this requirement lies with the carrier.
The employer must report its annual enrollment count through www.pay.gov. The original deadline was Nov. 15, 2014. Because that date falls on a Saturday, CMS will accept submissions through Monday, Nov. 17, 2014. (FAQ 5415) CMS has clarified that neither the calculation method nor employee level information is required to be reported. The employer must only report plan level information and the average enrollment count. (FAQ 6447) For recordkeeping purposes, documentation supporting the calculation method and the enrollment count should be maintained for 10 years.
When calculating the number of covered lives, those who have Medicare Part A or B as primary coverage may be excluded. This is an important clarification for retiree plans which are subject to the fee and may have participants who have primary Medicare coverage. (FAQs 6437 and 6449)
CMS has published a detailed manual with step-by-step instructions and screen shots to assist plans with the submission process.
The DOL, IRS and HHS have jointly issued guidance related to reference-based pricing. As background, a plan that uses reference-based pricing pays a fixed dollar amount for a specific procedure. Certain health care providers accept this fixed amount as payment in full for the service rendered. The plan may treat these providers as the plan’s only in-network providers. If a participant uses a non-network provider, the plan may exclude the amount billed over the reference price from the maximum out-of-pocket calculation.
The new guidance, issued in the form of a frequently asked question, states that a plan may only use reference-based pricing for services for which the participant has sufficient time to make an informed choice of provider. For example, a plan could not use this form of payment for emergency services.
Plans should implement procedures to ensure reasonable access to quality providers, and are encouraged to consider the state network adequacy provisions. If a network provider is not available or if the quality of services could be compromised for a specific participant and service, the plan should allow services rendered by a non-network provider to be paid as if they were provided by a network provider.
Finally, plans must provide participants with information regarding pricing structure, a listing of services for which the reference based pricing applies and a listing of network providers.
The departments will continue to monitor this issue and may issue additional guidance in the future. The guidance above may be relied upon in the interim.
On Oct. 1, 2014, the IRS, EBSA and HHS released final regulations related to excepted benefits. As background, plans or programs that qualify as excepted benefits are generally exempt from PPACA’s mandates such as preventive care services and the prohibition on annual dollar limits. There are four types of excepted benefits:
In December 2013 the agencies released proposed regulations which specifically addressed limited excepted benefits. The agencies finalized those regulations with a few amendments. According to the final regulations, in order to be an excepted benefit, a long-term care plan and limited scope dental or vision plans must be provided under a separate policy, certificate or contract of insurance, or not be an integral part of a group health plan. To be considered a non-integral part of a group health plan, participants must have the right to waive coverage for the benefits, or claims for the benefits must be administered under a separate contract from claims administration for any other benefits under the plan. Previously a limited benefit plan qualified as an excepted benefit only if participants had the right to waive coverage and, if coverage was elected, the participant was charged a premium or contribution amount for coverage. Both the proposed and final regulations removed the requirement that participants be charged a premium for coverage. This means an employer’s self-insured stand-alone dental plan qualifies as an excepted benefit even if premiums are paid solely by the employer. Stand-alone dental or vision HRAs are also permissible.
In relation to an EAP, the program must meet four criteria in order to qualify as an excepted benefit. First, the program must not provide significant medical care. While many hoped the regulations would provide specific parameters for determining whether a plan provided significant care (such as a certain number of outpatient visits), the regulations only provide that the amount, scope and duration of covered services are taken into account in determining whether significant medical care or treatment is provided. As an example, the agencies state that a plan that provides only limited short-term outpatient counseling (without covering inpatient, residential or intensive outpatient care) without requiring prior authorization does not provide significant medical care.
Secondly, participation in an EAP cannot be contingent upon participation in a group health plan. Further, participants cannot be required to exhaust EAP benefits before being eligible for benefits under a group health plan. Finally, the EAP must have no cost sharing for participants. The final regulations removed a requirement which was included in the proposed regulations that EAP benefits could not be financed by another group health plan.
The 2013 proposed regulations also addressed wraparound coverage for individual policies. The agencies indicated that they will issue future guidance on this issue.
The final regulations apply to plan years starting on or after Jan. 1, 2015. Until then, plans may comply with the requirements of either the proposed or final regulations.
On Sept. 22, 2014, the IRS released two sets of FAQs discussing the informational reporting requirements under Internal Revenue Code Sections 6055 and 6056. Section 6055 requires employers that sponsor self-insured plans to report specific information to the IRS and to plan participants which will assist the IRS in administering and enforcing the individual mandate. Section 6056 requires applicable large employers who are subject to the employer mandate to report certain information to the IRS and to plan participants to help administer and enforce the employer mandate and eligibility for premium tax credits. Reporting under both sections is required in early 2016 for calendar year 2015.
The Section 6055 FAQs address the basics of employer reporting, including which entities are required to report, what information must be reported and how and when reporting entities must report required information. The Section 6056 FAQs cover the same topics and also address questions related to the methods of reporting.
Importantly, the FAQs clarify that due to the leap year in 2016, for the first year (reporting on 2015 calendar-year compliance), reports are due Feb. 29, 2016, rather than March 1, 2016 as previously reported. The reports are due March 31, 2016, if filing electronically. Electronic filing is required of employers filing 250 or more Section 6056 returns (employee statements). These dates apply regardless of the plan year of the employer-sponsored coverage. For example, reporting is due on those dates for 2015 compliance, even if the plan year runs from May 1 through April 30. In addition, like the Form W-2, employers must distribute employee statements by Jan. 31 of the following year (i.e., Feb. 1, 2016, for 2015 compliance because Jan. 31, 2016 is a Sunday) although employers may apply for a 30-day limited extension.
On Sept. 25, 2014, CMS published “A Quick Reference Guide to Obtaining a Controlling Health Plan HPID.” The quick reference guide is a step-by-by-step outline of how a controlling health plan (CHP) can obtain a health plan identifier (HPID). As background, CHPs (defined as group health plans that control their own business activities, actions and policies) are required to obtain an HPID by Nov. 5, 2014. Smaller CHPs have an additional year to obtain an HPID (by Nov. 5, 2015). HPIDs are obtained via a multi-step process using the CMS website and systems. The reference guide describes those steps and includes screenshots to assist.
In conjunction with the quick reference guide, CMS also published several FAQs relating to the HPID requirement. The FAQs clarify that the carrier is the entity responsible for obtaining an HPID in the fully insured context. For self-insured plans, the employer as plan sponsor is generally responsible for obtaining an HPID. TPAs, even those that administer self-insured plans, are not required to obtain an HPID on behalf of a self-insured plan. Such plans may contract with a TPA to obtain an HPID on their behalf, but the HPID would belong to the plan, not the TPA.
Importantly, the FAQs also clarify how the HPID requirement applies to health FSAs, HRAs and HSAs. The FAQs state that FSAs and HSAs are individual accounts directed by the consumer to pay health care costs, and therefore are not required to obtain an HPID. Note that the underlying HDHP, though, would likely be considered a CHP, and would be required to obtain an HPID. HRAs may require an HPID if they meet the definition of CHP. However, most HRAs will be structured to pay deductibles and other costs associated with the underlying major group medical plan, and therefore would not be a CHP. Such an HRA would instead rely on the group plan’s HPID.
According to the FAQs, where an employer sponsors several benefit package options, but the options are bundled together via a wrap document, the employer may obtain one HPID for the bundled plan rather than multiple HPIDs for each benefit package option. For example, with a wrap plan that includes a fully insured medical plan, self-insured dental plan, and an HRA that covers deductibles, the employer would obtain an HPID only for the self-insured dental plan. Since the HRA covers only deductibles, the HRA would not be required to obtain an HPID—the HRA would rely on the HPID of the fully insured medical plan (obtained by the carrier).
CMS also published a user manual and web page relating to the HPID requirement. The user manual is a detailed description of the Health Insurance Oversight System—the system used by CMS for assigning HPIDs and related identification numbers. The web page includes general information on the HPID requirement, as well as links to other helpful resources that CMS previously made available.
On Sept. 18, 2014, the IRS published Notice 2014-49, which relates to proposed methods for applying the look-back measurement period method if the measurement period applicable to a particular employee changes. This change may occur in two different situations addressed in the notice. In the first situation, the change may occur because the employee transfers within the same applicable large employer (ALE) member from a position to which one measurement period applies to a position to which a different measurement period applies. For this purpose, two measurement periods are different if they are of different durations or if they start on different dates (or both).
In the second situation, the change may occur because an ALE member modifies the measurement method applicable to a position. A change in method may include a change from the look-back measurement method to the monthly measurement method (or vice versa), or a change in the duration or start date of any applicable measurement period under the look-back measurement method.
In general, the notice describes proposed methods to address these situations, both in cases where the employee is in a stability period at the time of the transfer and in cases where the employee is not yet in a stability period. Generally speaking, for an employee who is in a stability period at the time of transfer (i.e., has been employed for a full measurement period at the time of transfer and has a set status as either a full-time employee or a non-full-time employee), the employee retains his or her status through the end of the associated stability period. For an employee who is not in a stability period (or administrative period) at the time of transfer, the employee’s status is determined using the measurement period applicable to the second position, but hours of service in the first position are included in applying that measurement period.
The notice includes six specific examples describing how the proposed methods apply in the above situations. Notice 2014-49 requests comments on the proposed methods. However, the notice also states that employers may rely on the proposed methods until further guidance is issued, and in any case through the end of the 2016 calendar year. Employers should work closely with advisors and outside counsel in designing and implementing look-back measurement periods that best fit their needs and employee base.
On Sept. 18, 2014, the IRS published Notice 2014-55, which creates two new Section 125 midyear qualifying events. The two new events apply in very specific situations and – like all Section 125 events – are optional. Employers who wish to include these new Section 125 qualifying events as options in their plan design need to amend the plan document accordingly. These events will be especially relevant for employers sponsoring non-calendar-year plans and those utilizing look-back measurement periods for variable and seasonal workforces.
The first new event is known as “Revocation Due to Reduction in Hours of Service,” and it applies when an employee is expected to average less than 30 hours of service per week due to a reduction in hours, yet eligibility for coverage under the employer’s group health plan is not affected. In this case, the employee may revoke their election even if they continue to be eligible for group health coverage (such as when a look-back measurement period is being utilized), and enroll in another plan that provides minimum essential coverage (MEC). For this event, employers may rely on a representation from the employee that they have enrolled or intend to enroll in new coverage. The employee does not actually have to provide proof of enrollment to drop coverage.
Previously there was no qualifying event unless eligibility for coverage under the plan was affected, and there was no specific hour requirement for triggering this qualifying event — it all depended on whether the plan document included an hours requirement for eligibility. This new qualifying event allows the employee to revoke coverage for themselves and their covered beneficiaries and enroll in another plan – even a plan offered by the same employer – as long as the plan they are enrolling in provides MEC and the new coverage is effective no later than the first day of the second month following the date coverage was revoked. This new qualifying event may be especially useful for employers who offer MEC coverage to part-time employees (those working fewer than 30 hours of service a week), even if that coverage is not affordable and does not meet minimum value. In this case, an employee whose hours drop below 30 hours of service per week may choose to revoke coverage in the minimum value affordable coverage and voluntarily move to the MEC coverage offered by that employer (or available elsewhere).
The second new qualifying event is known as “Revocation Due to Enrollment in a Qualified Health Plan,” and it applies when an employee has experienced a midyear special enrollment event such as marriage, birth or adoption, making them eligible to enroll in a qualified health plan (QHP) available in a state health insurance exchange. It also applies during the exchange’s annual open enrollment period, which may be especially useful to employers sponsoring non-calendar-year plans. Under this qualifying event, the employee may revoke their election under the group health coverage as long as they enroll, or intend to enroll, in a QHP. Again, employers may rely on a representation from the employee. The employee does not actually have to provide proof of enrollment to drop coverage.
Previously there was no qualifying event allowing a Section 125 plan to recognize special enrollment periods in a QHP offered through the exchange, nor could an employee enroll in a QHP during the exchange open enrollment and drop coverage through an employer-sponsored plan if that employer sponsored a non-calendar-year plan. This resulted in periods of duplicate coverage or a period of no coverage when 1) employees experienced special enrollment periods and enrolled in exchange coverage midyear, as they were unable to drop employer-sponsored coverage being paid for on a pretax basis, or 2) employees participating in non-calendar-year plans were perpetually “locked” into their employer-sponsored coverage, since the exchange does not recognize an employer’s non-calendar-year open enrollment as a special enrollment period, allowing midyear enrollment in the exchange. This new qualifying event resolves this issue by allowing employees to revoke coverage for themselves and their covered beneficiaries in order to obtain coverage through the exchange following a special enrollment opportunity or during the exchange’s annual open enrollment period. Coverage provided under the QHP must be effective no later than the day immediately following the day original coverage was revoked.
Each of these events allows employees to revoke coverage midyear under an employer’s group health plan, but does not allow employees to revoke their health flexible spending account (health FSA) elections. Further, these events only apply when an employee is paying for coverage on a pretax basis. While the notice may be relied upon immediately, employers wishing to allow these two permitted election changes must amend their cafeteria plans to include them. The IRS is allowing employers to retroactively amend their plans to the first day of the plan year, as long as the amendment is adopted on or before the last day of the plan year in which the elections are allowed. Further, plan years beginning in 2014 may be amended any time on or before the last day of the plan year that begins in 2015. However, in no event should an employee’s request to revoke coverage retroactively be allowed.
The Registration for Technical Assistance Portal (REGTAP), operated by CMS, continues to issue FAQs and guidance related to PPACA. The FAQ and information below address an issue that may be of interest to employers.
On Aug. 14, 2014, REGTAP posted FAQ 3794, which addresses how a member’s standing as a result of death or retroactive termination will be reflected to employers on their monthly invoice and if the employer will be credited for such previously paid amounts. The FF-SHOP will give a credit on the next monthly invoice for any amount due back to the employer due to either circumstance. The credit will be placed in the adjustment section of the invoice, along with the employee’s name and credit amount.
The information provided above is not intended to be a comprehensive resource. It only highlights one particular FAQ that may be relevant to employers. To ensure receipt of the most current information, employers should register for REGTAP updates.
On Sept. 18, 2014, the IRS published Notice 2014-56, setting the applicable dollar amount for plan years that end on or after Oct. 1, 2014, and before Oct. 1, 2015. As a reminder, the PCOR fee is calculated using the average number of lives covered under the plan and the applicable dollar amount for that plan year. The applicable dollar amount is $2 for plan years ending after Oct. 1, 2013, and before Oct. 1, 2014. Notice 2014-56 announces that the applicable dollar amount for plan years that end on or after Oct. 1, 2014, and before Oct. 1, 2015, is $2.08. For plan years ending on or after Oct. 1, 2015, the adjusted applicable dollar amount will be published in future Internal Revenue Bulletin guidance.
With respect to payment responsibility, if a plan is fully insured, then the insurance carrier is responsible for paying the fee. If a plan is self-insured, the plan sponsor is responsible for the fee. For this purpose, “plan sponsor” is defined as the employer for a single employer plan.
On Aug. 28, 2014, the IRS released draft instructions for completing the reporting forms required under IRC Sections 6055 and 6056 as added by PPACA, including Forms 1094-B, 1094-C, 1095-B and 1095-C. As reported in the July 29 edition of Compliance Corner, the IRS released drafts of these reporting forms in late July.
Beginning in 2016, Section 6055 requires that health plans report certain information to the IRS and to plan participants to help administer and enforce the individual mandate. This information will be reported using Forms 1094-B and 1095-B. Also beginning in 2016, Section 6056 requires employers who are subject to the employer mandate to report certain information to the IRS and to plan participants to help administer and enforce the employer mandate and eligibility for premium tax credits. This information will be reported using Forms 1094-C and 1095-C. These forms will be used by applicable large employers (those who are subject to the employer mandate), employers with self-funded plans and insurers. Although reporting is not required until 2016 (for 2015), it is important for employers to become familiar with these instructions and forms so the proper information can be gathered beginning in January 2015.
Forms 1094-B and 1095-B
Forms 1094-B and 1095-B are required of every entity that provides minimum essential coverage to an individual and is to be filed by insurers (if the plan is fully insured) or by the employer (if the plan is self-insured and the employer is not subject to the employer mandate). These forms are for reporting information to the IRS and to taxpayers about individuals covered by minimum essential coverage. Large employers who sponsor a self-insured plan and are subject to the employer mandate will instead report information about coverage on Form 1095-C. Form 1094-B is the submittal form and is to be submitted to the IRS with the total number of Forms 1095-B, the return form. The return and transmittal form must be filed with the IRS on or before Feb. 28 (March 31 if filed electronically) of the year following the calendar year of coverage. Filers must furnish a copy of Form 1095-B to the person identified as the responsible individual on the form. This must be done by Jan. 31 by mail unless the individual consents to receive the statement electronically.
Forms 1094-C and 1095-C
Forms 1094-C and 1095-C are to be filed by applicable large employers who are subject to the employer mandate. The purpose of the forms is to report offers of health coverage to employees. The forms will also be used to help determine whether an employer owes an employer mandate penalty and whether an employee qualifies for a premium tax credit. Eligibility for 2015 employer mandate transition relief will also be reported on Form 1094-C. These forms must be filed with the IRS the year following the calendar year to which the return relates (by Feb. 28 if filing on paper or March 31 if filing electronically). Form 1095-C must also be furnished to the employee by Jan. 31. This must be done via mail unless the recipient of the form consents to receive the statement electronically.
The draft instructions are quite technical. Employers should review the instructions to familiarize themselves with the reporting obligations. The IRS intends to finalize the forms and instructions later this year.
Along with the draft instructions, on Sept. 2, 2014, the IRS issued notices asking for comments about the draft forms and instructions as required by the Paperwork Reduction Act of 1995.
Draft Instructions for Forms 1094-B and 1095-B »
Draft Instructions for Forms 1094-C and 1095-C »
IRS Request for Comment on Forms 1094-B and 1095-B »
IRS Request for Comment on Forms 1094-C and 1095-C »
On Sept. 2, 2014, CMS issued final regulations related to renewals of health insurance and individual eligibility determinations in the exchange. With regard to eligibility redeterminations, the final regulations follow the proposed regulations issued July 2014, as reported in the July 15 edition of Compliance Corner. Exchanges must redetermine the eligibility of consumers receiving coverage on an annual basis. Exchanges can choose one of three sets of procedures for making annual eligibility redeterminations:
The regulations clarify that eligibility for advance payments of the premium tax credit and cost-sharing subsidies is based on projected annual household income, and individuals may voluntarily report changes at any time during the year.
The proposed regulations regarding renewals of coverage were finalized with only one substantial change: In the event that a consumer is enrolled in a plan that will no longer be offered on the exchange and the consumer does not proactively select a new insurance plan during open enrollment, that consumer will be automatically enrolled in a different plan of the same carrier and metal level. If the carrier does not offer a different plan of the metal level the consumer was previously enrolled in, the consumer will be enrolled in a plan one metal level higher or one metal level lower than the plan in which they were previously enrolled. If none of the above options are available, the consumer will be enrolled in "any other plan offered under the product in which the enrollee's current QHP is offered in which the enrollee is eligible to enroll." The final regulations change the procedure related to a consumer whose cancelled plan is not available on the exchange the next year and the above scenarios are not possible. In that scenario, the carrier will follow guaranteed renewability requirements and applicable state law to complete reenrollment outside the exchange. If the consumer has been renewed into a different plan, the carrier is responsible for providing the consumer with an SBC for the plan at least 30 days prior to the coverage effective date.
The exchanges are encouraged to complete the processes early enough to ensure that consumers have coverage (and financial assistance, if applicable) effective Jan. 1, 2015. The final regulations were effective Sept. 5, 2014.
On Aug. 1, 2014, the IRS provided a statement confirming that premium tax credits remain available for the federally run and state-run health insurance exchanges. This statement was issued after two federal appeals court rulings regarding premium tax credits were issued July 22, 2014. Please see the July 29, 2014, Compliance Corner article entitled “Appellate Courts Disagree on IRS Ability to Administer Premium Tax Credits and Cost-sharing Subsidies in Federally Facilitated Exchanges” for more information concerning the two rulings.
NFP Benefits Compliance will continue to monitor the development of this important issue, and will provide additional information on future guidance.
On Aug. 22, 2014, HHS, the DOL and EBSA jointly released much-anticipated key guidance incorporating the U.S. Supreme Court’s decision in Burwell v. Hobby Lobby Stores, Inc., 134 S. Ct. 2751 (2014), into existing regulations. The guidance includes an interim final rule, a new proposed rule applicable to closely held for-profit entities and a new model notice.
The current regulations already provided for an accommodation process (using a self-certification form, EBSA Form 700) with respect to the requirement to offer contraceptive coverage for non-grandfathered employer-sponsored group health plans at zero cost sharing for those plans established and maintained by certain nonprofit religious employers, as well as those who are religious-based institutions of higher education. However, due to the Hobby Lobby Stores decision, the newly issued interim final regulations expand this accommodation by outlining a second process that nonprofit religious organizations may use to provide notice of their religious objections with respect to providing some, or all, contraceptive coverage. The interim final rule essentially allows for an alternative pathway so that participants may still access coverage for the full range of FDA-approved contraceptives, as prescribed by a health care provider, without cost sharing. The nonprofit religious employer will provide notice to HHS of their religious objection, and then HHS and the DOL will notify insurers and TPAs so that enrollees may receive separate coverage for contraceptive services with no additional cost to the enrollee or employer. The interim final rule solicits comments, but goes into effect immediately upon publication in the Federal Register tomorrow (Aug. 27, 2014).
In conjunction with the interim final rule, HHS provided a model notice to be used by “eligible organizations” to notify the Secretary of HHS of a religious objection to cover: 1) all contraceptive services, or 2) a subset of contraceptive services. The notice may also, but is not required to, be used by an eligible organization to provide updated information to HHS. If the eligible organization establishes or maintains more than one plan, it may submit a separate notice for each plan, or it may modify the model notice accordingly. At their option, an eligible organization may provide alternative notice or may continue to elect to self-certify using the existing EBSA Form 700 and send a copy to each health insurance issuer and TPA.
Finally, the agencies also issued a proposed rule soliciting comments on how they might extend the same accommodations outlined above to closely held, for-profit entities (like Hobby Lobby). Under the proposed rule, the definition of “eligible organization” would be expanded to include closely held for-profit entities that have a religious objection to providing coverage for some or all of the contraceptive services otherwise required to be covered. Such organizations would not have to contract, arrange, pay or refer to contraceptive coverage to which they object on religious grounds.
The proposal outlines and asks for comments on two approaches for how to define a “closely held for-profit” entity:
The proposal also seeks comments on whether other steps might be appropriate to implement this proposed rule. In the meantime, such employers can use either EBSA Form 700 or the model notice described above to notify their insurers and TPAs of their intent to decline offering all, or some, contraceptive coverage.
Enrollment in the marketplace is currently closed unless an individual is eligible for a special enrollment period (SEP). On Aug. 4, 2014, CMS announced two SEPs related to Medicaid:
Individuals qualifying under either condition should contact the marketplace if they are interested in purchasing coverage. Individuals who wish to purchase coverage but who are not eligible for a SEP have to wait until the marketplace open enrollment period scheduled for Nov. 15, 2014, through Feb. 15, 2015.
On Aug. 18, 2014, CMS continued its educational efforts related to the reinsurance contribution submission process. During the webinar, representatives reminded contributing entities that the enrollment counts are based on January through September of the calendar year, not a group’s specific plan year. The only exception to this rule is a self-insured group health plan that chooses to use the Form 5500 counting method to calculate its enrollment. The group must have filed a Form 5500 in the prior plan year. The group would be reporting the enrollment based on the prior plan year rather than the calendar year.
CMS representatives also addressed the question of how contributions would be calculated for a plan that switched funding methods midyear (for example, from fully to self-insured). In the example provided, both the insurer and employer plan sponsor would submit an enrollment count report, use the actual count method and be responsible for a partial payment.
Contributions are not required for covered lives under a plan that is supplemental or secondary to the group health plan coverage when contributions for the same covered life have been made under the group health plan. This is an important clarification for employers who may sponsor multiple arrangements covering the same lives.
As a reminder, an insurance carrier will generally be responsible for the filing and payment of the reinsurance contributions for a fully insured plan while an employer plan sponsor will generally be responsible for a self-insured plan. NFP Benefits Compliance has many resources related to reinsurance contributions. Please ask your advisor for additional information.
The Registration for Technical Assistance Portal (REGTAP), operated by CMS, has issued additional FAQs and guidance clarifying information for both reinsurance contributions and federally facilitated SHOP (FF-SHOP) information. The selected FAQs and information below are a brief summary of highlights that may be of interest to employers.
On Aug. 13, 2014, REGTAP posted a number of FAQs addressing reinsurance contributions. A few notable questions are below:
FAQ 2644 clarifies that the counting methods for reinsurance contributions and the PCOR Fee are similar, but not the same. The major difference is that the reinsurance contribution is counted using the first nine months of a calendar year, while the PCOR fee uses a full 12 months.
FAQ 2692 clarifies that the reinsurance contribution is based on the calendar year regardless of the plan year.
FAQ 2726 clarifies who the covered lives are for purposes of reinsurance contributions. They include employees, retirees, spouses and dependents.
FAQ 2753 clarifies how the count for reinsurance contributions should be performed when a plan changes from self-insured to fully insured mid-calendar-year (and vice versa). The FAQ clarifies that each entity is responsible for paying the portion of the fee beginning on the date the reinsurance contribution applies to that entity, through the date during the year when the change was made using one of the allowable counting methods. Further guidance on this point was issued in a webinar and slides on Aug. 18, 2014 (described in more detail in the previous article). For example, using the actual count method, an employer would add the number of covered lives for each day (using zeros for the days that the party was not the contributing entity), then divide by the total number of days from January through September.
CMS Presentation »
FAQ 2657 clarifies that the health plan identifier (HPID) number is a separate requirement (still required by CMS) and is not used in the reinsurance contribution submission process.
FAQ 2524 clarifies that the second remittance for the reinsurance fee will be due by Nov. 15, 2015 (for the 2014 benefit year). However, the entire 2014 contribution may be paid by Jan. 15, 2015, if a contributing entity would prefer not to make two payments (reflecting $63 per covered life). In the alternative, a contributing entity may choose to break this up into two payments (with the $52.50 portion due Jan. 15 and the $10.50 portion due Nov. 15, 2015).
FAQ 2659 is a related question and emphasizes this point as well.
On Aug. 15, 2014, an update provided guidance on how to lay out upload files for submitting reinsurance contributions. The document outlines information that is relevant for both insurers and self-insured employers responsible for submitting their own reinsurance contributions by the Nov. 15, 2014, deadline.
Additional guidance relating to the FF-SHOP provided on Aug. 15, 2014, includes the following FAQs:
FAQ 3780 clarifies that employers in the FF-SHOP will not be able to have a 90-day waiting period. Instead, the FF-SHOP will only accommodate either immediate entry or first of the month following 15-, 30-, 45- and 60-day waiting periods.
A related question, FAQ 3769, clarifies that the FF-SHOP will enforce new hire waiting periods and send the applicable effective dates for new hire coverage directly to issuers.
FAQ 3765 clarifies that the FF-SHOP will provide both group-level and member-level termination notices.
FAQ 3766 clarifies that employers with locations in more than one state may enroll in one SHOP by using either a multi-state or national plan network. Or, they may enroll separately in each state SHOP.
FAQ 3778 clarifies that employees will be able to directly change and update certain fields, including dependent name, mailing address and phone numbers. However, other fields, such as date of birth and Social Security numbers, may only be updated by an employer.
FAQ 3781 clarifies that employees will have the ability to change plan selections multiple times up until the employer submits the final enrollment application. Once that has been submitted, an employee will be required to have a special enrollment period in order to change plans before renewal.
The summarized information provided above is not intended to be a comprehensive resource. It only highlights a few FAQs that may be relevant to employers. To ensure the most up-to-date and exhaustive information available, please register for REGTAP updates.
On Aug. 7, 2014, CMS provided additional guidance – in the form of FAQs – on PPACA's reinsurance contribution requirements. As background, group health plans are required to report enrollment calculations to CMS annually from 2014 through 2016. The first report is due by Nov. 15, 2014, and will be completed through www.pay.gov. Plans will be assessed a fee per covered life. For 2014, that fee is $63. Payment is broken into two installments, with the first payment due by Jan. 15, 2015. For fully insured plans, the insurer is generally responsible for the filing and payment of the contribution. For self‑insured plans, that responsibility lies with the employer as plan sponsor.
The fee is generally calculated by counting the number of covered lives throughout the plan year, although the permitted counting methods allow calculation of covered lives based on enrollment only in the first nine months of a calendar year. According to FAQ #3542, if a covered life terminates coverage in the fourth quarter of a benefit year, the contributing entity cannot omit this covered life from its annual enrollment count for that plan.
According to FAQ #3539, there are no exemptions from the reinsurance contribution requirement specifically available to religious organizations. Thus, unless a religious organization is otherwise exempt from the requirement, the organization must file and pay the reinsurance contribution for any self‑insured plans that it sponsors.
According to FAQ #3540, a TPA or carrier that provides self‑insured, self‑administered coverage to its own employees is exempt from making reinsurance contributions for the 2015 and 2016 benefit years.
Lastly, according to FAQ #3541, if a plan provides minimum value, but not necessarily a broad range of services and treatments provided in various settings, it is still deemed to be major medical coverage, and therefore would be subject to the reinsurance contribution requirement.
On July 21, 2014, CMS issued a bulletin and user manual relating to electronic opt‑out procedures for self‑insured non‑federal governmental entities. As background, prior to PPACA, self‑insured, non‑federal governmental plans could elect to opt out of certain HIPAA portability and Public Health Services Act (PHSA) requirements. PPACA, however, generally eliminated the right to opt out of certain HIPAA portability requirements, including pre‑existing condition exclusions limitations, special enrollment periods and some nondiscrimination prohibitions. The opt‑out remains available for certain mandates, including benefits for newborns and mothers, mental health and substance use disorder benefits, coverage for reconstructive surgery following mastectomies, and coverage of dependent students on leaves of absence that are medically necessary.
CMS previously issued guidance stating that beginning Jan. 1, 2015, the opt‑out must be performed electronically. The bulletin describes the electronic opt‑out election requirements and process, including a reminder of the requirement to notify affected enrollees of the opt‑out and its consequences. According to the bulletin, the notice can be satisfied by including a prominent statement in the SPD at open enrollment annually or by email so long as the DOL electronic disclosure requirements are met. The user manual provides detailed information on the system that will be used to submit the opt‑out election.
Employers that sponsor self‑insured, non‑federal governmental plans should review the bulletin and user manual, particularly if they want to opt out of some of the HIPAA and PHSA requirements described above. Such employers should also know that opt‑out elections must be renewed before the first day of each plan year.
On July 24, 2014, the IRS released three separate revenue procedures, proposed regulations, and final and temporary regulations addressing a number of factors affecting premium tax credits available to individuals through the health insurance marketplace.
Within the guidance, the IRS finalized rules regarding the health insurance premium tax credit, effective July 28, 2014, and published in the Federal Register the same day. The guidance also included temporary regulations regarding reconciling the premium tax credit with advance credit payments. The IRS simultaneously issued proposed rules regarding the health insurance premium tax credit, which propose to incorporate both the final and temporary regulations within the section of the tax code (Section 36(b)) pertaining to the individual mandate and eligibility for premium tax credits.
The additional guidance contained within several Revenue Procedures provides relief for a number of complex premium tax credit situations. For instance, although married taxpayers generally must file a joint return to claim the premium tax credit, the regulations extend a 2014 IRS exception for certain married victims of domestic abuse who live apart, file returns as "married filing separately" and meet a number of other requirements. The relief is available for up to three consecutive years for any individual and is also available to victims of spousal abandonment. Definitions of domestic abuse and spousal abandonment are included. Guidance is also provided on how to allocate advance credit payments in various complex situations, such as divorced or separated taxpayers and midyear changes in dependent status.
Additionally, the guidance contained information regarding the indexing of certain percentages. For example, in computing the premium tax credit, taxpayers determine the amount they must contribute by multiplying an "applicable percentage" (which increases with income) by their household income. Beginning in 2015, the applicable percentage is to be adjusted based on the excess of the projected growth rate of employer‑sponsored health insurance premiums over the projected growth rate of per‑capita gross domestic product. The regulations describe the bases for the adjustments and explain that the "affordability percentage," which is used to determine whether employer‑sponsored coverage is "affordable," is updated in the same manner for plan years beginning in 2015. On point with this, Rev. Proc. 2014-37 provided details on the indexing methodology and updated applicable percentage tables for 2015, which included an increase in the affordability percentage from 9.5 percent to 9.56 percent.
It is true that this increased affordability percentage affects both employees (who are ineligible for premium tax credits if offered employer‑sponsored coverage that is affordable and provides minimum value) and employers (who are potentially liable for shared responsibility penalties if they do not offer affordable, minimum value coverage to full‑time employees). However, contrary to what numerous outlets are reporting, the guidance released by the IRS does not appear to have actually adjusted the safe harbor percentages that an employer may use to determine affordability under the mandate. It is unclear at this time whether the IRS will be issuing an update to reflect the affordability safe harbor that employers may use when determining whether coverage is affordable. This would require the IRS to amend the regulations for the affordability safe harbor so that employers may substitute 9.56 percent of Form W‑2 wages for the 9.5 percent of W‑2 wages that had previously been set as safe harbor. This guidance did not amend those regulations. Therefore, employers who have already set their contribution cost for 2015 at the lower 9.5 percent value will have some cushion and should watch for additional guidance prior to raising the cost to 9.56 percent.
The guidance also included Rev. Proc. 2014‑46, which provides the national average premium to be used to determine maximum individual shared responsibility payments for 2014. In other words, the IRS provided the dollar amount that an individual will be capped at for failing to maintain health insurance in 2014. The caps are $2,448 per person ($204 per month) and $12,240 for a family of five ($1,020 per month). A family of five is the maximum number of individuals in the shared responsibility family. While many are aware that the penalty for the first year of coverage starts at $95 per person, the penalty assessed can actually rise to as much as 1 percent of taxable income, within the cap set by the IRS. In other words, this cap limits the total possible penalty to the annual premium for the national average of what it would cost to purchase a bronze‑level health plan. Note that the penalty amounts are calculated on a month‑by‑month basis, and are ultimately reported by taxpayers on their income tax returns.
Finally, the IRS also released draft Form 8962 (Premium Tax Credit), which taxpayers will use to calculate their premium tax credit and reconcile the actual credit amount with advance payments, and draft Form 8965 (Health Coverage Exemptions), which taxpayers will use if they claim specified exemptions from the individual mandate.
On Aug. 1, 2014, CMS published a document containing several FAQs relating to the interaction of Medicare and marketplace coverage. The FAQs do not contain additional requirements for employers, but may be of general interest, particularly for employers with Medicare‑eligible employees and employers that are purchasing coverage through SHOPs.
The FAQs clarify that individuals who are covered by Medicare cannot enroll in individual market coverage, since the Social Security Act prohibits the sale or issuance of individual coverage to a Medicare beneficiary. However, if the individual was first covered under the individual plan and later enrolls in Medicare, the individual can remain on the individual plan, although he or she may lose any premium tax credits or cost-sharing subsidies for which they were eligible. Also, and importantly for employers, Medicare beneficiaries whose employers purchase SHOP coverage are treated the same as any other person with employer group health plan coverage.
The FAQs also clarify that coverage under Medicare Part B alone does not constitute minimum essential coverage for purposes of PPACA's individual mandate. The FAQs address many other issues as well, including the interaction between marketplace coverage and Medicare late enrollment penalties and coordination of benefits between Medicare and marketplace coverage.
As reported in the last edition of Compliance Corner, CMS recently issued guidance related to the reinsurance contributions that are first payable Jan. 15, 2015. Plan sponsors of self-insured plans must report the average enrollment count by Nov. 15, 2014, unless they have an agreement with a TPA or administrative services carrier to do so on their behalf.
REGTAP is hosting a series of webinars to educate contributing entities, including plan sponsors of self-insured plans. The recently issued guidance was also presented in a webinar entitled "The Transitional Reinsurance Program: Submission of Annual Enrollment and Contributions Through Pay.gov." The slide deck for that webinar is now available online at www.regtap.info. The next webinar in the series, "The Transitional Reinsurance Program: Submission of Supporting Documentation Through Pay.gov," will be presented Aug. 11–13 and Aug. 15. The same material will be presented all four days, and attendees may register for the date of their choice. Individuals who are new to REGTAP will need to first register for a website ID and password before registering for the presentation.
In 2016, applicable large employers with 50 or more full‑time‑equivalent employees must file new reporting forms with the IRS, as required by IRC Section 6056. Employers will need to report employer‑sponsored coverage that was offered to full‑time employees during 2015. The purpose of the reporting is to administer and enforce the employer mandate, also known as employer shared responsibility. While employers with 50 to 99 full‑time‑equivalent employees may be eligible for relief delaying compliance until 2016, they will still be required to report certain information for 2015. On Aug. 14, 2014, the IRS will host a webinar summarizing employer requirements under Section 6056.
On July 22, 2014, two federal appeals courts issued conflicting rulings on a key PPACA provision relating to the availability of premium tax credits and cost-sharing subsidies on the federally facilitated exchanges. First, the U.S. Court of Appeals for the D.C. Circuit, in Halbig v. Burwell, No. 14-5018 (D.C. Cir. July 22, 2014), overturned this provision, stating that PPACA does not authorize the IRS to provide premium tax credits and cost-sharing subsidies for insurance purchased on the federally facilitated exchanges (as the law does for insurance purchased on state-established exchanges). Shortly thereafter, the U.S. Court of Appeals for the Fourth Circuit, in King v. Burwell, No. 14-1158 (4th Cir. July 22, 2014), upheld the same PPACA provision, stating that PPACA does authorize the IRS to provide premium tax credits and cost-sharing subsidies on federally facilitated exchanges. Parties in both cases plan to appeal the rulings, and the cases appear to be headed to the U.S. Supreme Court, particularly with the circuit split.
If the provision is struck down, there could be deep ramifications for PPACA. To begin with, only 14 states and the District of Columbia have established their own exchanges. Individuals who purchase exchange coverage in states with federally facilitated exchanges (i.e., the other 36 states) would not be able to qualify for premium tax credits or cost-sharing subsidies. Thus, costs for those individuals would increase dramatically. Second, qualification for either a premium tax credit or a cost-sharing subsidy may trigger employer mandate penalties. Without premium tax credits and cost-sharing subsidies, the employer mandate may be rendered ineffective. Other PPACA provisions also rely on the provision, and if it is struck down, PPACA itself may be seriously threatened.
It remains unclear how the federal government may react to the rulings. Congress could act by passing some sort of measure to clarify that PPACA does indeed authorize the IRS to provide credits and subsidies through federally facilitated exchanges. Doing so, though, would reintroduce the entire PPACA debate. The federal government may also choose to delay (or further delay) certain PPACA requirements, including the individual and employer mandates, pending judicial clarity on the tax credits and subsidies. Until the government acts, however, PPACA's requirements and obligations remain intact.
On July 17, 2014, the DOL published FAQ Part XX addressing the recent U.S. Supreme Court decision in Burwell v. Hobby Lobby, 2014 WL 2921709 (U.S. June 30, 2014). The FAQ is very narrow in scope, addressing only closely held for-profit corporations that may discontinue providing coverage for some or all contraceptive services mid-plan year as a result of the Supreme Court's decision. The question is whether such a reduction in coverage will trigger any notice requirements to plan participants and beneficiaries.
The answer, as expected, is that plans subject to ERISA (which applies to for-profit corporations) are required to disclose information about preventive services, including contraceptive coverage, covered under the plan. If an employer reduces available coverage, they are required to notify plan participants no later than 60 days after the date of adoption of the change, using an SMM. Going forward, an SMM must be included with the SPD anytime it is required to be distributed (within 90 days of participation under the plan, for example). Together, the SMM and SPD make up the full disclosure to plan participants required under ERISA.
Although the FAQ did not address the SBC requirement, it should be noted that excluding some or all contraceptive coverage under the plan may additionally require updates to the SBC. Specifically, Page 2 requests an explanation of limitations and exclusions for preventive services covered by the plan. When an employer or insurer makes midyear changes to the plan affecting SBC content, an updated SBC should normally be provided to plan participants 60 days in advance of the change. Note that providing an updated SBC can simultaneously satisfy the plan's SMM disclosure requirement.
To summarize, for-profit, closely held corporations considering reductions in contraceptive coverage under an ERISA plan, whether effective immediately or in the future, should consult with experienced legal counsel to ensure proper notification to plan participants. Legal counsel should also assist with updates to all written plan documents, including the SPD, SMM and SBC, reflecting the change in plan design.
On July 24, 2014, the IRS released the long awaited reporting forms that employer plan sponsors and health plans will use to satisfy their obligations under Sections 6055 and 6056 of the IRC. The reporting forms are in draft form, and the IRS is currently accepting comments. The instructions for the forms have not yet been released, but the IRS expects to release the draft version of the instructions in August.
Beginning in 2016, Section 6055 requires that health plans report certain information to plan participants and the IRS to help administer and enforce the individual mandate. Thus, the form distributed to the employee, Form 1095-B, will identify the employee, any covered family members, the group health plan and the months in 2015 for which the employee and family members had minimum essential coverage under the employer's plan. The employee will subsequently file the form with his/her individual tax return. Form 1094-B simply identifies the individual and is used to transmit the corresponding Form 1095-B to the IRS. An insurer is responsible for reporting a fully insured plan. An employer plan sponsor is responsible for a self-insured plan.
Also beginning in 2016, Section 6056 requires that employers who are subject to the employer mandate report certain information to the IRS to help administer and enforce the employer mandate (i.e., the employer shared responsibility). Employers will use Form 1095-C to identify the employer, each employee, any covered family members, whether the employer offered minimum value coverage to the employee and children, the cost of the lowest plan option and the months for which the employee and family members had coverage under the employer's plan. Of particular interest is Part II, Line 16, where the employer will have an opportunity to indicate any safe harbor utilized by the employer for a particular employee. For example, if an employee was a variable-hour or seasonal employee in a measurement period, the employer would indicate such for the applicable months by using the code 2D for a limited non-assessment period.
Whereas Form 1095-C reports coverage information at the participant level, Form 1094-C reports employer-level information to the IRS. An employer will use this form to identify the employer, number of employees, whether the employer is related to other entities under the employer aggregation rules, whether minimum essential coverage was offered and if the employer qualified for the 2015 transition relief for employers with 50 to 99 employees.
On July 17, 2014, CMS issued guidance related to the transitional reinsurance program and contributions, as required by PPACA. As background, group health plans are required to report enrollment calculations to CMS annually from 2014 through 2016. The first report is due by Nov. 15, 2014, and will be completed through www.pay.gov. Plans will be assessed a fee per covered life. For 2014, that fee is $63. Payment is broken into two installments, with the first payment due by Jan. 15, 2015. For fully insured plans, the insurer is generally responsible for the filing and payment. The employer plan sponsor is responsible for filing and payment for a self‑insured plan.
The new guidance clarifies the calculation methods a group health plan will use when determining the number of covered lives. The calculation methods for a self-insured plan are similar to those used for PCOR fee purposes: actual count, snapshot count, snapshot factor and Form 5500. However, while the PCOR fee takes into account the average number of covered lives over the plan year, the reinsurance fee calculates the average number of covered lives over a nine-month period (January through September) regardless of plan year. For example, a plan calculating the reinsurance contribution amount due using the snapshot method will select at least one day in each of the three quarters to determine the total number of covered lives and then divide by three. The number of covered lives should be rounded to the nearest hundredth.
If an employer plan sponsor maintains multiple group health plans that provide coverage for the same covered lives, the sponsor may choose whether to report the enrollment count separately for each plan or combined into a single plan. If the sponsor chooses to aggregate the plans into one report, they must use the actual count or snapshot counting method if at least one plan is fully insured. If none of the plans are fully insured, the sponsor must use actual count, snapshot or snapshot factor.
Reinsurance contributions are not required for individuals who have dual coverage under the group health plan and Medicare, and for whom Medicare is primary. This applies to employers with fewer than 100 employees who have a participant enrolled in Medicare due to a disability and also to employers with fewer than 20 employees. Additionally, reinsurance contributions are not required for individuals who reside in a U.S. territory.
Reporting entities must maintain documents to substantiate the enrollment count for at least 10 years.
On July 17, 2014, CMS posted several new FAQs to REGTAP related to the federally facilitated SHOP (FF‑SHOP). Selected FAQs are summarized below, addressing issues such as COBRA; spousal, dependent and newborn coverage; and employee choice.
Spouse, Dependent and Newborn Coverage
On July 14, 2014, the IRS posted an FAQ intended to provide information that may be helpful in understanding the Aug. 13, 2013, final regulations issued about IRC Section 6103(I)(21). These final regulations were reported in the Aug. 27, 2013, edition of Compliance Corner. IRC Section 6103(I)(21) is the section authorizing the IRS to disclose certain taxpayer information for use in verifying eligibility for health care affordability programs. Among the questions addressed are what information can be shared (the taxpayer's filing status, number of individuals on the return, information about the taxpayer's income and income of any dependents claimed on the return), with whom it can be shared (designated officers, employees and contractors of HHS who may, in turn, disclose this information to the marketplace and state agencies), and safeguards that must be in place to protect this information. Finally, the posting addresses that criminal and civil causes of action would normally be available if HHS, the marketplace or a state agency improperly uses or discloses tax return information.
HHS recently launched a new website intended to provide employers with a library of online resources with cost-effective tips and solutions for any industry setting in order to comply with the nursing mothers accommodation requirements under health care reform.
As background, PPACA amended the FLSA to require employers to provide breaks for mothers to express breast milk each time a non-exempt employee has a need to do so. In addition, the employer must provide a place, other than a bathroom, that is private and free from intrusion from co-workers for mothers to express breast milk. Employers with fewer than 50 employees are not required to provide the breaks "if such requirement would impose an undue hardship by causing the employer significant difficulty or expense when considered in relation to the size, financial resources, nature or structure of the employer's business."
This new website provides welcome clarification on this topic, addressing topics such as:
Finally, the new website includes a sample breastfeeding policy for employers to utilize.
On July 16, 2014, HHS sent letters to the insurance commissioners of the five U.S. territories, clarifying the applicability of certain PPACA provisions to the territories. As background, the insurance reforms of Title I of PPACA were adopted as amendments to the Public Health Services (PHS) Act. The PHS Act defined "states" to include the U.S. territories, and HHS relied upon that definition of "state" in determining that the insurance market reforms applied to the territories as well.
After reviewing the statutory language and the implications for the territories, HHS determined that the definition of "state" found in Title I of PPACA is actually the controlling definition. The definition does not include the territories. This means the territories are exempt from certain state insurer requirements under the PHS Act. Specifically, individual or group health insurance issuers in the territories are not subject to the guaranteed availability, community rating, single risk pool, rate review, medical loss ratio or essential health benefits requirements.
Although health insurers in the territories are exempt from the PHS Act requirements at issue, the new interpretation of "state" under the PHS Act does not make the territories exempt from all the provisions of PPACA. In the letter, HHS distinguished between the rules governing health insurance issuers and group health plans. They explained that their new analysis applies only to health insurance issuers as they are governed by the PHS Act. It does not affect the PHS Act requirements that apply to group health plans. As a result, the PHS Act, ERISA and IRC requirements applicable to group health plans still apply. Specifically, group health plans in the territories are still subject to the other PPACA protections, including the prohibition on lifetime and annual limits, the prohibition on rescissions, coverage of preventive health services and the revised internal and external appeals processes.
The effective date of the new interpretation is immediate and prospective only in application.
On July 3, 2014, CMS posted five new frequently asked questions (FAQs) to REGTAP related to the federally facilitated SHOP (FF‑SHOP).
On July 1, 2014, CMS released a proposed regulation on how the exchange will determine eligibility to enroll in qualified health plans (QHPs) and receive premium tax credits and cost-sharing reductions for that coverage. The proposed regulation also addresses the re‑enrollment process for individual and small group exchange plans for 2015. Under the proposed regulation, many who have already enrolled in exchange coverage in the individual market, even subsidized coverage, will not have to fill out a new application or go back through healthcare.gov in 2015.
Redeterminations for Subsidies
The regulation provides three options for redeterminations of eligibility for the premium tax credits or cost-sharing subsidies. Exchanges can choose one of the three sets of procedures for making annual eligibility redeterminations:
Alternative Procedures for 2015
Contemporaneously with the proposed regulation, HHS released a separate memorandum specifying what its alternative procedures would be for 2015 if the proposed regulation is finalized. Under these alternative procedures, exchanges would request updated tax data only from the IRS and only for individuals currently receiving affordability assistance. These individuals will receive a standard notice describing the annual redetermination and renewal process, the requirements and process for reporting changes affecting eligibility for affordability assistance, and the eligibility determination for 2015. Additional notices would be required for individuals with income levels near or above the eligibility threshold for affordability assistance. Some consumers may have to go back into the exchange and renew their coverage if, for example, their income changed, they experienced a qualifying event or they want to switch their health insurance plan.
Enrollment Process for 2015
Under the proposed regulation, insurance carriers will issue notices to consumers informing them that unless the consumer instructs otherwise, they will be re-enrolled in the same plan and receive the same subsidy, unless their income has changed in 2015. In the event that a consumer is enrolled in a plan that will no longer be offered on the exchange in 2015 and the consumer does not proactively select a new insurance plan, that consumer will be automatically enrolled in a different plan of the same carrier and metal level. If the carrier does not offer a different plan of the metal level the consumer was previously enrolled in, the consumer will be enrolled in a plan one metal level higher or one metal level lower than the plan in which they were previously enrolled. If none of the above options are available, the consumer will be enrolled in "any other plan offered under the product in which the enrollee's current QHP is offered in which the enrollee is eligible to enroll." Further, if a consumer's cancelled plan is not available on the exchange the next year and the above scenarios are not possible, the carrier may re-enroll the consumer in a different product offered by the same carrier if permitted by state law. In this case, if the consumer is enrolled in an off-exchange plan, any potential subsidies would no longer be available.
Separately, HHS issued draft standard notices for insurers to use when discontinuing or renewing a product in the small group or individual markets. In addition to content required by the eligibility redetermination regulation described above, the renewal and discontinuation notices include insurer contact information and information about other health coverage options. Renewal notices also address premiums, premium tax credits and plan changes. Insurers will provide notices for the small group market to the employer sponsoring the plan. An accompanying memorandum explains that HHS is accepting comments before finalizing the notices, but the draft notices may be used at least through Sept. 30, 2015.
There was a 30-day comment window on this regulation with comments due by July 28, 2014.
The Joint Committee on Employee Benefits of the American Bar Association issued a report on its May 2014 Q&A session with IRS officials. There are 30 questions and answers in total; however, Q/A-24 through Q/A-29 are of particular note. These directly address the employer shared responsibility penalty, specifically:
The remaining questions not specifically listed relate to 401(k) issues, including correction of several common operational errors, the stock diversification requirement, safe harbor limitations and Roth contributions.
On June 30, 2014, the U.S. Supreme Court, in a 5-4 ruling in Burwell v. Hobby Lobby, held that PPACA's contraceptive mandate, as it applies to closely held for-profit employers, violates the Religious Freedom Restoration Act of 1993 (RFRA). As background, PPACA requires non‑grandfathered group health plans to provide coverage for women's preventive services – including Federal Drug Administration-approved contraceptive services (e.g., birth control) – with zero cost-sharing to the participant. On the contraceptive services, there is a limited exception for religious employers and their affiliates and for certain nonprofit organizations — described in more detail below. However, those exceptions do not extend to private for-profit employers. The application of the contraceptive coverage mandate to for-profit employers is the central issue in the Burwell v. Hobby Lobby case.
Background on Hobby Lobby Case
In Burwell v. Hobby Lobby, several closely held for-profit employers (including Hobby Lobby and Conestoga Wood Specialties Corporation), based on their owners' sincere religious beliefs, objected to covering some or all contraceptive services. The essential question addressed by the court was whether for-profit corporations can be considered "persons" that can have and exercise their own religious beliefs — a right protected under the RFRA. Very generally, the RFRA prohibits the government from substantially burdening a person's religion unless the government demonstrates that the burden has a compelling governmental interest and is the least restrictive means of furthering that interest.
Supreme Court Ruling
The U.S. Supreme Court held that the government failed to show that the contraceptive coverage mandate is the least restrictive means of advancing its interest in guaranteeing cost-free access to birth control. Thus, PPACA's contraceptive mandate cannot be imposed on a closely held for-profit company, meaning such companies do not have to provide contraceptive coverage at zero cost-sharing. The ruling applies specifically to "closely held corporations," a term generally defined by state corporate law, but which very generally includes companies whose stock is not publicly traded and whose ownership is controlled by members of a single family or limited number of investors.
Importantly, the court qualified the decision, stating that it relates only to the contraceptive mandate and should not be understood to mean that all insurance mandates (e.g., those for blood transfusions or vaccinations) necessarily fail if they conflict with an employer's religious beliefs. The court also stated that it would most likely reject broad religious claims to discriminate generally; for example, a religious claim that would result in discrimination based on race or sexual orientation.
Impact on Different Types of Employers
For closely held for-profit employers, the ruling means that they no longer have to comply with PPACA's contraceptive mandate. It remains unclear whether such employers will have to certify their religious objections. Also, it remains unclear whether HHS can or will extend the nonprofit exception (described below) to closely held corporations or whether the government will otherwise cover contraceptive services for the employees of employers that do not.
Since the opinion was drafted narrowly to apply only to closely held for-profit corporations, the ruling does not apply more broadly to other types of for-profit corporations. Thus, for example, non-grandfathered plans of publicly traded for-profit employers are subject to PPACA's contraceptive coverage requirements.
For religious and nonprofit employers, such as churches and convents, the ruling has no effect on the previous exemption for religious employers and nonprofit organizations that religiously object to contraception. On the first, a religious employer is exempt from the contraceptive coverage mandate if they satisfy the definition found in IRC Section 6033(a)(3)(A)(i) or (iii) — meaning churches (including their integrated auxiliaries, and conventions or associations of churches) or the exclusively religious activities of any religious order.
For nonprofit organizations, there are special rules. A nonprofit that is not a religious employer but that holds itself out as a religious organization and has religious objections to covering some or all of the mandated contraceptive services does not have to contract, arrange, pay or refer those services for insurance coverage. The responsibility for contraceptive coverage for these types of nonprofits falls on either the insurer (for fully insured plans) or the third-party administrator (TPA, for self-insured plans). The insurer or TPA, therefore, will provide payments for contraceptive services for participants and beneficiaries and may not require cost-sharing from plan participants and beneficiaries for those services. Nonprofit organizations seeking accommodation must self-certify to their insurers or TPAs that they are eligible for the accommodations, and insurers and TPAs must provide an annual notice to participants and beneficiaries of the availability of the contraceptive coverage.
NFP Benefits Compliance will continue to monitor the development of this important issue, and will provide additional information on future guidance in future editions of Compliance Corner.
On June 25, 2014, the IRS, EBSA and HHS jointly issued final regulations related to orientation periods. An orientation period is a new provision that was first introduced in proposed regulations issued Feb. 20, 2014 (see the Feb. 25, 2014, edition of Compliance Corner). The final regulations incorporate the proposed regulations without any substantive changes.
Effective Jan. 1, 2014, group health plans may not impose a waiting period greater than 90 days. The waiting period begins after an employee is determined to be otherwise eligible for coverage. Examples include: The employee obtains a certain licensure, has a change in status to a benefits-eligible classification or completes a bona fide employment-based orientation period. The orientation period may be up to a maximum period of one month for new employees who begin employment in a position that is otherwise eligible for coverage. The orientation period cannot be used with seasonal or variable-hour employees. The purpose of this period is for the employer and employee to evaluate whether the employment situation is satisfactory to both parties, and for orientation and training to take place. The plan's waiting period begins after the orientation period was completed.
As an example, if a new employee began employment on Jan. 15 in a position that is typically eligible for benefits, the employer may impose an orientation period until Feb. 14. The waiting period would begin Feb. 15. It is important for large employers to understand the interaction of the orientation period with the employer mandate obligations. An employer with 50 or more full-time employees who is subject to the employer mandate is at risk for a penalty if it fails to offer coverage to a full-time employee by the first day of the fourth full month of employment. Following the example above, if the employer imposed a 90-day waiting period, coverage would not begin until May 16. To avoid a penalty under the employer mandate, the employer would need to offer coverage by May 1. Thus, the orientation period may only be practical for small employers that are not subject to the employer mandate, which offers coverage to part-time employees, or large employers with waiting periods of less than 90 days.
The final regulations are effective for plan years starting on or after Jan. 1, 2015. Employers may rely on the proposed regulations through 2014.
On June 30, 2014, final regulations were published in the Federal Register implementing the small business health care tax credit for plan years beginning on or after Jan. 1, 2014. Employers can continue to rely on previously issued proposed regulations for guidance for taxable years beginning after 2013 but before 2015. The final regulations generally adopt the proposed regulations as issued, with a few changes.
The final regulations add two definitions. The first is for the term "tobacco surcharge," which refers to the surcharge in addition to the premium that may be charged in the SHOP Exchange attributable to tobacco use. The second is for the term "wellness program," which refers to a program under which discounts or rebates are offered for employee participation in programs promoting health.
With regard to wellness programs, for purposes of meeting the uniform percentage requirement to receive the tax credit, any additional amount of the employer contribution attributable to an employee's participation in a wellness program with respect to an employee that does not participate in the wellness program is not taken into account. This is the case whether the difference is due to a discount for participation or a surcharge for nonparticipation. For purposes of determining the tax credit, however, employer contributions, including those attributable to an employee's participation in a wellness program, are taken into account.
The final regulations provide clarification on a few other minor points, including that employers may use a good faith definition for seasonal workers, but generally rejected the 14 comments they received in response to the proposed rule.
NFP has a Small Business Health Care Tax Credit Calculator for 2015 coverage. Ask your advisor for details.
On May 27, 2014, HHS issued final regulations regarding the employee choice model available through the SHOP. Under those final rules, states with a federally facilitated SHOP (FF-SHOP) have the option to delay the provision an additional year, through 2015, if it was in the best interest of small group market consumers in that state. Of primary concern is the possibility of increased rates to account for adverse selection. The employee choice model gives employees of small employers who offer coverage through the SHOP the option of selecting from a number of qualified health plans in an employer chosen level of coverage (i.e. bronze, silver, gold, platinum). Employees who live in one of the 18 states that have chosen to delay the employee choice model, and enroll through the SHOP, will only have one plan, selected by the small employer, in which to enroll. The remaining 14 states (not listed below) with a FF-SHOP will have employee choice available to small businesses in 2015.
HHS has published the list of states that have delayed employee choice in the SHOP until 2016. They are: Alabama, Alaska, Arizona, Delaware, Illinois, Kansas, Louisiana, Maine, Michigan, Montana, New Hampshire, New Jersey, North Carolina, Oklahoma, Pennsylvania, South Carolina, South Dakota, and West Virginia.
On May 27, 2014, the IRS posted to its website Publication 5156, entitled "Facts About the Individual Shared Responsibility Provision." The individual shared responsibility provision, also known as the individual mandate, went into effect Jan. 1, 2014. The fact sheet explains that, unless they qualify for an exemption, U.S. residents must have qualifying health coverage, called "minimum essential coverage," in 2014. Those individuals who do not comply are subject to a shared responsibility payment when filing their federal income tax return. The fact sheet provides examples of minimum essential coverage and exemptions.
If an individual is subject to a shared responsibility payment, the amount is the greater of 1 percent of that individual's household income above the tax return filing threshold, or $95 per adult and $47.50 per child (up to a family maximum of $285). Employers may find the fact sheet a helpful resource in understanding PPACA's provisions generally and in helping employees understand their individual mandate obligations.
On May 16, 2014, CMS issued FAQs on market reform implementation in the individual and small group health plan market. The FAQs include guidance on:
Although the FAQ guidance applies to insurers, it is also relevant for employers with small group plans.
Finally, CMS previously announced that for policy years beginning on or after Jan. 1, 2014, and before Oct. 1, 2016, there will be no penalty for insurers that continue non‑PPACA‑compliant individual and small group (defined as those with 50 or fewer employees) health insurance policies. The new guidance explains how the transitional rule applies to employers with 51 – 100 employees after PPACA changes the definition of "small group" (effective Jan. 1, 2016, "small group" includes employers with 51 – 100 employees).
Beginning Jan. 1, 2016, an employer with 51 – 100 employees is covered by the transition rule (i.e., non‑enforcement provision) with respect to a large group policy purchased before Jan. 1, 2016 (and that does not conform to small group rules), so long as the policy is renewed for a plan year beginning on or after Jan. 1, 2016, and on or before Oct. 1, 2016.
On May 22, 2014, CMS released an FAQ providing details about the submission process for the collection of reinsurance contributions. The FAQ states that HHS will implement a streamlined process for the collection of reinsurance contributions.
As a reminder, contributing entities responsible for making reinsurance contributions include insurers, employers that sponsor self-insured plans and third-party administrators that pay contributions on behalf of self-insured plans. Self-insured plans that self-administer claims processing or adjudication are exempt from the reinsurance rate for 2015 and 2016. Such entities are required to provide basic company and contact information via a form available at www.pay.gov no later than Nov. 15.
HHS anticipates offering training beginning in late June. Registration on www.regtap.info is encouraged in order to receive notice regarding upcoming training opportunities.
On May 2, 2014, CMS announced three types of special enrollment periods (SEPs) for individuals seeking to enroll in a qualified health plan through the federally facilitated marketplace. As background, open enrollment for the marketplace has closed. The next open enrollment period will not begin until November 2014. Until then, an individual may only enroll if they qualify for a SEP. Examples of an SEP include loss of minimum essential coverage, marriage, birth and adoption. Pursuant to the announcement, individuals who are eligible for COBRA or COBRA beneficiaries qualify for a new SEP and may purchase a qualified health plan from the exchange through July 1, 2014. There are also two other SEPs related to individuals whose individual market plans are renewing outside of open enrollment and individuals who are beginning or concluding service in the AmeriCorps State and National, Volunteers in Service to America or National Civilian Community Corps programs. These SEPs are only effective in the federally facilitated marketplace. State marketplaces are encouraged to adopt them as well.
The memo also announces a new hardship exemption to the individual mandate. Individuals who purchased a qualified health plan outside of the marketplace with a May 1, 2014, effective date are eligible for a hardship exemption. Such individuals will not be subject to an individual mandate penalty for January through April 2014. A similar exemption was already available for individuals who purchased qualified health plans through the marketplace.
On May 13, 2014, the IRS posted new frequently asked questions (FAQs) addressing various areas affecting employer-sponsored health plans, including the employer mandate, seasonal worker coverage, minimum value and small business tax credits.
Of specific interest are clarifications for the requirements that non-calendar-year plan sponsors must comply with in order to ensure that such plans are eligible to delay compliance with the employer mandate requirements until the first plan year beginning in 2015 (FAQ 30). A new FAQ (54) also clarifies the two separate definitions that apply for purposes of "seasonal workers" and how each definition is important to understand in the appropriate context. One definition is used for purposes of determining if the employer is large enough for the employer mandate to apply, while a completely separate definition is used for purposes of determining whether coverage must be offered to the seasonal worker.
Finally, the IRS posted two FAQs addressing the consequences an employer will face if it does not maintain its own group health plan, but instead decides to reimburse employees for premiums they pay for individual policies purchased either inside or outside the marketplace. Consistent with previous guidance, these FAQs reiterate that this practice is explicitly prohibited as explained in IRS Notice 2013-54. The penalties for such actions can be as high as $100/day per employee ($36,500 per year, per employee). Employers are highly discouraged from pursuing any strategy that provides pretax reimbursements for individual policy premiums.
On May 16, 2014, HHS issued the final rule on exchange and insurance market standards, effective for 2015 and beyond. The rule will be published in the Federal Register on May 27, 2014. The final rule addresses a wide number of provisions, including: the discontinuation of certain products, clarifications on the SHOP exchanges, guidance for both navigator and non-navigator assistance personnel, quality reporting, nondiscrimination standards (for health care providers), minimum certification standards and responsibilities of issuers and premium stabilization and enforcement remedies, among other provisions.
The rule also provides for a modification of the reinsurance contributions if the actual contributions do not meet projections, allows for certain changes to the risk corridors calculation and modifications for the way that the annual limit on cost sharing is calculated, provides for clarifications on indexing the contributions used to determine eligibility from the individual mandate, updates standards for consumer assistance programs and standards related to the opt-out provisions for self-funded, non-federal governmental plans under HIPAA, and provides for certain changes with respect to exchange appeal standards and coverage enrollment/termination standards. Finally, time-limited adjustments to standards related to the MLR program are included.
While nearly all of these provisions do not directly affect employers sponsoring group health plans, some of these provisions have an indirect effect. For example, the rule requires that individual fixed indemnity insurance products can only be sold going forward to individuals who have other health coverage that is minimum essential coverage in order for such products to continue to be considered an excepted benefit. Essentially, an individual purchasing a fixed indemnity policy must perform a one-time attestation upon issuance of the first policy issued on or after Jan. 1, 2015, that the individual has minimum essential coverage, and those policies may only pay a fixed-dollar amount per period of hospitalization or illness and/or per service (consistent with the group market rule on hospital and fixed indemnity policies). Employers who currently facilitate the purchase of an individual fixed indemnity product to employees should be aware of the changes affecting these plans and contact your insurance advisor for assistance.
In another significant change, state exchanges were previously planning to rely upon the federal HHS to conduct verifications of enrollment in eligible employer-sponsored plans for purposes of eligibility for employees who sought an advance premium tax credit for determinations made on or after Jan. 1, 2015. However, HHS has determined that state exchanges will have to perform their own separate verifications of enrollment in employer-sponsored plans instead of relying on HHS to act as a comprehensive national resource to perform the advance premium tax credit determinations. States administering their own exchanges will be able to implement sample-based reviews to determine eligibility for premium tax credits beginning Jan. 1, 2016. This change will not affect eligibility determinations made in states being run by the federally facilitated exchange.
The rule also finalizes rules for self-funded, non-federal governmental plans to opt out of certain provisions under HIPAA that have previously been in effect, including benefits for newborns and mothers, parity in mental health and substance use disorder benefits, required coverage for reconstructive surgery following mastectomies, and coverage of dependent students on a medically necessary leave of absence. However, the rule finalizes the amendments with one clarification: that in the case of a plan sponsor submitting opt-out elections for more than one collectively bargained health plan, each plan must be separately listed in the opt-out election, or in the case of group health plans not subject to a collective bargaining agreement, the sponsor must submit separate election documents for each plan.
A new notice requirement will apply for insurers who are discontinuing policies in the individual and small group markets. These discontinuation notices will be provided to all enrollees under the plan or coverage at least 90 days prior to the discontinuation. Thus, small employers who took advantage of an early renewal strategy and continue to sponsor a PPACA non-compliant plan should be aware that enrollees in the plan will begin to receive such discontinuation notices, even if the employer intends to transition the coverage to a PPACA-compliant plan for the 2014 – 2015 plan year.
There were additional clarifications with respect to the special enrollment periods available for individuals to enroll on exchange coverage midyear. You may recall that employers are required to comply with midyear qualifying events as governed by Section 125 for pretax elections, as well as HIPAA special enrollment rights, but are not responsible for advising employees on what special enrollment periods are available through the exchanges. However, some employers may find it beneficial to be familiar with such requirements as explained in this final rule in the event an employee requests to move off of the employer-sponsored plan and enroll in exchange coverage.
Finally, with respect to SHOP exchanges, there was an additional one-year delay to implement the employee-choice provision in SHOP coverage in cases where an insurance commissioner in a state submits evidence that delaying employee choice will be in the best interest of small employers if implementing employee choice would cause issuers to price their products and plans higher than they would otherwise price them. State insurance commissioners whose states are participating in the federally facilitated SHOP (FF-SHOP) must submit their recommendations as to whether employee choice will be implemented on or before June 2, 2014. Also with respect to SHOP exchanges, the final rule clarified that the open enrollment period in FF-SHOPs will occur between Nov. 15 and Dec. 15 each year, and group coverage purchased during this time frame is not subject to employer contribution or group participation rules. Minimum participation requirements will be enforced upon initial enrollment and at renewal outside of this window. State-based SHOPs may begin the 2015 employer and employee election periods prior to Nov. 15, 2014, in a manner that works with their small group markets.
On May 7, 2014, the IRS issued final regulations relating to state health insurance exchange reporting requirements to the IRS. As background, PPACA requires exchanges (marketplaces) to report certain information to the IRS and to some individuals. The marketplace reporting is meant to assist the IRS in administering the premium tax credit and cost-sharing subsidies available to individuals who purchase health insurance through the marketplace, including IRS reconciliation of advance credit payments. The final regulations mostly track proposed regulations issued last year.
The final regulations state that marketplaces must report to the IRS on a monthly and annual basis, and must provide annual summary reports to applicable individuals (those who have purchased coverage through the marketplace and qualify for a premium tax credit or cost-sharing subsidy). The first monthly reports are due sometime after June 15, 2014 (actual date to be determined by the IRS), and will include cumulative information for previous months in 2014, and the first annual reports are due by Jan. 31, 2015.
The reports will contain detailed information on the individuals enrolled in marketplace coverage, including the identity and contact information of each individual's employer, whether that employer offered affordable minimum value coverage, and the amount of the employee's required contribution for self-only coverage. Importantly, the final regulations require reporting only on coverage obtained through the marketplace by an individual (for single or family coverage and not SHOP coverage). The IRS will further describe SHOP marketplace reporting details in future regulations.
The marketplace reports will be sent directly to the IRS, and so employers will not furnish or receive them. The marketplace will contact employers directly, however, if the marketplace determines that one of the employer's employees qualifies for a premium tax credit. The employer would then have an opportunity to appeal that determination. Regardless, employers should be aware that the marketplace reports may contain information relating to the employer's plan (e.g., minimum value and affordability determinations).
On May 2, 2014, the DOL, HHS and Treasury (collectively, the Departments) jointly issued eight new frequently asked questions related to PPACA implementation, limitations on cost-sharing, coverage of preventive services, health FSA carryovers and excepted benefits, and the summaries of benefits and coverage (SBC) requirement. The guidance provides the location of the newest model notices, including the recently updated COBRA general notice and COBRA election notice (addressed in the article below).
On limitations on cost-sharing, the Departments advised that balance billing from an out-of-network provider may, but need not, be counted toward the plan's out-of-pocket maximum. A plan has similar leeway regarding out-of pocket costs for a brand-name prescription where a generic was available and medically appropriate. A plan may provide that all or some of the amount counts toward the out-of-pocket maximum, so long as the ERISA plan document describes which covered benefits will or will not count.
On preventive services, the guidance provides information on tobacco cessation interventions. Specifically, a group health plan will be in compliance with the requirement to cover tobacco use counseling and interventions if the plan covers the following without cost-sharing:
Covering a tobacco cessation attempt includes coverage for four tobacco cessation counseling sessions of at least 10 minutes each (including telephone, group and individual counseling) without prior authorization and all Food and Drug Administration (FDA)-approved tobacco cessation medications for a 90-day prescribed regimen (without prior authorization).
On health FSA carryover and excepted benefits, one of the requirements for a health FSA to be an excepted benefit is that the maximum benefit payable under the plan cannot exceed either two times the employee's salary reduction election or $500 plus the amount of the salary reduction election. The guidance clarifies that amounts from a health FSA carryover should not be taken into account when determining whether the maximum benefit payable has been exceeded, rendering the health FSA non-excepted.
On the SBC requirement, when final SBC regulations were released in 2012, they were released in tandem with a notice announcing the availability of templates, instructions and related materials for coverage provided in plan years beginning before Jan. 1, 2014. Guidance in April 2013 provided similar instruction, materials and an updated template for coverage beginning on or after Jan. 1, 2014, and before Jan. 15, 2015. The new guidance establishes that, until further guidance is issued, employers and insurers may continue to use the template (and sample SBC) provided in April 2013.
Overall, the Departments reiterate their basic approach to PPACA implementation; namely to work with employers, issuers, states, providers and other stakeholders to help them come into compliance. The approach is to assist, not to punish, those that are working diligently to understand the new law and come into compliance. To this end, the guidance extended the applicability of previously issued enforcement and transition relief guidance originally intended to apply to SBCs only in the first two years.
On April 23, 2014, CMS announced the availability of two new tools for employers using SHOP exchanges: a small business health care tax credit estimator and a full-time equivalent (FTE) employee calculator.
The small business health care tax credit estimator can help an employer determine the potential small employer health coverage tax credit, a credit of up to 50 percent of the premiums paid by an employer, if certain conditions are met. Information necessary to use the estimator includes the entity's tax status, a list of all full- and part-time employees, the hours worked by part-time employees, wage and tax forms and health and dental insurance premiums paid by the entity in the previous year.
The FTE calculator is meant to help employers determine if they would be small businesses eligible for SHOP coverage through a federally run exchange. An employer will need certain information to run the calculator, including a list of an entity's full- and part-time employees and the weekly hours worked per week by part-time employees. Some states that run their own SHOP marketplaces count FTEs for SHOP eligibility differently. Contact the SHOP marketplace to learn more.
On April 21, 2014, CMS issued guidance, in the form of a frequently asked question (FAQ), clarifying how COBRA coverage impacts an individual's eligibility to enroll in the exchange and to receive a premium tax credit. As background, the open enrollment period for almost all exchanges ended March 31, 2014. Individuals may only enroll in the exchange midyear if they qualify for a special enrollment period due to a qualifying event. The FAQ clarifies that during the open enrollment period for the exchange, an individual who has voluntarily terminated his/her COBRA coverage (i.e., COBRA coverage has not been exhausted) will be eligible to enroll in a qualified health plan through the exchange. The individual may also be eligible to receive a premium tax credit.
Conversely, if it is outside the open enrollment period for the exchange, the voluntary termination of COBRA coverage does not trigger a special enrollment period. Thus, a COBRA participant who has not exhausted his/her maximum COBRA coverage period will not be eligible to enroll in the exchange midyear, nor will he/she will be eligible to receive a premium tax credit.
On April 1, 2014, President Obama signed HR 4302 into law, creating Public Law No. 113-92. The law, Protecting Access to Medicare Act of 2014, includes a provision eliminating the annual deductible maximum of $2,000 for single and $4,000 for other than self-only coverage. This annual deductible applied only to non-grandfathered small group insurance market plans (not to grandfathered small group, self-insured employer plans or large group plans). Due to this repeal, small employers will have the flexibility to offer high-deductible plans (and pair them with consumer reimbursement arrangements such as HSAs, HRAs and health FSAs) in the small-group market, without concern that these policies will be restricted or eliminated in the future. The law is effective retroactively to March 23, 2010 (the date health care reform originally was enacted).
On Mar. 21, 2014, HHS proposed regulations regarding a variety of issues related to exchanges and insurance market reforms. Of particular interest to employers are proposed rules relating to SHOP elections and employee choice and guidance on guaranteed renewability.
The proposed SHOP rules aim to align the start dates for SHOP annual election periods with the open enrollment periods for individual coverage through exchanges beginning in 2015. In addition, the rules eliminate the 30-day minimum periods during which employers and employees may select a SHOP plan. Furthermore, the rules allow states to request a delay regarding the employee choice option for another year if there are too few plans available to yield a meaningful choice or if the employee choice option would result in significant adverse selection in the small group market.
Under the new guidance on guaranteed renewability, insurers generally must renew coverage at the option of the policyholder. However, the insurer may modify small group and individual coverage at renewal if the modification is uniform. Under certain circumstances, insurers need not continue every product sold (whether in the group or individual market) if they would rather discontinue the product than provide guaranteed renewability. The guidance contains criteria by which small group and individual plans will be judged to determine if there has been a "uniform modification of coverage." If the criteria are not satisfied, then the existing product is considered to have been discontinued and a new product offered. If a modification is a uniform modification of coverage, the policyholder has a guaranteed right to renew the product (albeit subject to the modification). On the other hand, if the product is discontinued, policyholders generally have the right to purchase on a guaranteed availability basis any other health insurance coverage offered by the same insurer in the same market, including the "new" product. A proposed form of notice for the insurer to send at the time of renewal or discontinuance has also been released.
On March 14, 2014, CMS issued a bulletin that makes certain clarifications to CMS' Feb. 27, 2014, bulletin titled "Bulletin to Marketplaces on Availability of Retroactive Advance Payments of the Premium Tax Credit (PTC) and Cost-sharing Reductions (CSRs) in 2014 Due to Exceptional Circumstances" (covered in the March 11, 2014, edition of Compliance Corner). The Feb. 27, 2014, bulletin is directed toward state-based marketplaces (SBMs) and provides relief for individuals who — due to technical issues in the marketplaces — did not receive timely eligibility determinations and enrollment in a marketplace qualified health plan (QHP). That relief comes in the form of retroactive enrollment in a marketplace QHP and the retroactive application of the premium tax credit and cost-sharing subsidies.
The new bulletin clarifies that SBMs are not required to implement the relief described in the earlier bulletin, but that they have the option to do so (and that CMS will assist the SBM in the process of providing advance payments of the premium tax credit and cost-sharing reductions). Importantly, the new bulletin reiterates that the QHP issuer will be required to adjudicate or re-adjudicate an enrollee's claims incurred during the retroactive period (and refund or credit any excess cost-sharing or premium paid).
The new bulletin also clarifies that SBMs must act no later than the last day prior to the start of the open enrollment period for plan year 2015 to establish retroactive coverage effective dates. CMS expects that all SBM technical difficulties will be resolved by that time (and therefore there will be no need for the retroactive relief going forward).
Employers should familiarize themselves with the marketplace rules, since they may have employees with questions on SBM enrollment and premium tax credits.
On March 5, 2014, the IRS released highly anticipated final regulations on the information reporting that insurers and applicable large employer members will have to perform beginning in 2015. The reporting is divided into two major areas. As background, beginning in 2014, individuals have the choice of maintaining minimum essential coverage (MEC) or paying an individual shared responsibility payment with their income tax returns (payable in 2015). This requirement is generally referred to as the individual mandate. MEC may be health insurance coverage offered in the individual market, such as through an exchange, an employer-sponsored health plan or a government-sponsored health program. The reporting rules are important because they will play an integral role in helping the IRS to determine (and enforce) whether taxpayers were covered by MEC and their months of enrollment during a calendar year.
Minimum Essential Coverage Reporting by Providers (Section 6055)
Code Section 6055(a) generally requires every health insurance issuer, sponsor of a self-insured health plan, government agency that administers government-sponsored health insurance programs and any other entity that provides MEC to file annual returns reporting information for each individual for whom MEC is provided. An entity filing an information return reporting MEC must furnish a written statement to each individual listed on the return that shows the information that must be reported to the IRS for that individual.
The final regulations generally adopt the proposed regulations, but with certain revisions in light of comments received.
Coverage subject to reporting. The final regulations require Code Section 6055 information reporting for all covered individuals. Comments asking to exclude individuals who may be exempt from the individual shared responsibility payment under Code Section 5000A were rejected, noting that providers of MEC may not have the information necessary to determine an individual's exempt status.
Supplemental plans. The IRS further clarified that Code Section 6055 reporting is not required for on-site medical clinics, Medicare Part B, wellness programs that are an element of other MEC, or MEC that supplements either a primary plan of the same plan sponsor or government-sponsored coverage.
Entities required to report. Entities subject to Code Section 6055 information reporting include: health insurance issuers, or carriers, for all insured coverage (with limited exceptions); plan sponsors of self-insured group health plan coverage; the executive department or agency of a governmental unit that provides coverage under a government-sponsored program; and any other person who provides MEC to an individual.
Controlled group members. Since most employers that sponsor self-insured group health plans are applicable large employer members (i.e., a person that, together with one or more other persons, is treated as a single employer that is an applicable large employer) required to report under both Code Sections 6055 and 6056, a single information return can be filed that combines reporting under both provisions, with the reporting entities identified under rules in Code Section 6056. Employers in controlled groups that are not applicable large employer members may report under Code Section 6055 as separate entities, or one entity may report for the group.
SHOP and government-sponsored programs. Issuers are required to report coverage obtained through the Small Business Health Options Program (SHOP). In addition, the final regulations specify that the rule under which the responsible government department or agency, and not the issuer, is the reporting entity for coverage under a government-sponsored program provided through a health insurance issuer also applies to coverage under the Medicare Advantage program.
Time and manner of filing. A reporting entity must file the required return and transmittal form on or before Feb. 28 (March 31 if filed electronically) of the year following the calendar year in which the entity provided MEC to an individual.
The final regulations also provide that any person required to file under Code Section 6055 must file electronically if the person is required to file at least 250 Forms 1095-B or 1095-C (the forms that the IRS said will soon be available in draft form).
Statements furnished to individuals. Under Code Section 6055, a reporting entity is required to furnish the Code Section 6055 statement on or before Jan. 31 of the year following the calendar year in which MEC is provided. The final regulations add procedures for extending the time to furnish the Code Section 6055 statement such that entities showing good cause have the flexibility to apply for an extension of up to 30 days.
Combined reporting. Applicable large employer members (more about this below) that provide MEC on a selfὝinsured basis are subject to the reporting requirements of both Code Sections 6055 and 6056. The proposed regulations did not contain a provision that would permit combined reporting, and a number of commenters noted that there was significant duplication in the information reported under Code Sections 6055 and 6056 and suggested combined reporting. In response, the final regulations provide that applicable large employer members will file a combined return and statement for all reporting under Code Sections 6055 and 6056. Thus, an applicable large employer member that sponsors a self-insured plan will report on Form 1095-C, completing both sections to report the information required under Code Sections 6055 and 6056. An applicable large employer member that provides insured coverage also will report on Form 1095-C, but will complete only the section of Form 1095-C that reports the information required under Code Section 6056.
Code Section 6055 reporting entities that are not applicable large employer members or are not reporting as employers, such as health insurance issuers, sponsors of multiemployer plans and providers of government‑sponsored coverage, will report under Code Section 6055 on Form 1095-B.
Penalties and transitional relief. Under Notice 2013-45, the IRS will not apply penalties for failure to comply with Code Section 6055 for 2014. The IRS received additional requests from commenters to further extend the effective date of Code Section 6055 reporting and/or to waive penalties for a period of time. The IRS noted that, in implementing new information reporting requirements, short-term relief from penalties is often provided. Thus, the IRS will not impose penalties under Code Section 6721 and Code Section 6722 on reporting entities that can show that they have made good faith efforts to comply with the information reporting requirements. Specifically, relief is provided from penalties under Code Section 6721 and Code Section 6722 for returns and statements filed and furnished in 2016 to report coverage in 2015, but only for incorrect or incomplete information reported on the return or statement.
Effective/applicability date. The final regulations apply for calendar years beginning after Dec. 31, 2014. However, even though reporting entities will not be subject to penalties for failure to comply with the Code Section 6055 reporting requirements for coverage in 2014, the IRS encouraged taxpayers to voluntarily comply in order to "contribute to a smoother transition to full implementation for 2015."
Minimum Essential Coverage Reporting by Applicable Large Employer Members (Section 6056)
Code Section 6056 requires annual information reporting by applicable large employers relating to the health insurance that the employer offers (or does not offer) to its full-time employees. Code Section 6056 also requires those employers to furnish related statements to their employees. The information that the employers report allows the IRS to administer the employer shared responsibility provisions, and allows employees to determine whether, for each month of the calendar year, they may claim on their individual tax returns a premium tax credit.
Applicable large employer members. An applicable large employer (ALE) member is any person that is an applicable large employer or a member of an aggregated group (under Code Section 414(b), Code Section 414(c), Code Section 414(m) or Code Section 414(o)) that is determined to be an applicable large employer. The Code Section 6056 filing and statement furnishing requirements apply on a member-by-member basis to each ALE member, even though the determination of whether an entity is an applicable large employer is made at the aggregated group level.
Under the final regulations, only ALE members with full-time employees are subject to the Code Section 6056 filing and statement furnishing requirements (and only with respect to their full-time employees). Generally, the ALE member providing the reporting is the common law employer. Special rules apply to ALE members that are a qualified subchapter S subsidiary.
General reporting method. The final regulations provide that a separate return is required for each full-time employee, accompanied by a single transmittal form for all of the returns filed for a given calendar year. The return can be made by filing Form 1094-C (a transmittal form) and Form 1095-C (an employee statement). Alternatively, the Code Section 6056 return may be made by filing other form(s) designated by the IRS or a substitute form.
Under the general Code Section 6056 reporting rules, each ALE member must file a Code Section 6056 return with respect to its full-time employees. A separate return is required for each full-time employee, accompanied by a single transmittal form for all of the returns filed for a given calendar year. The final regulations provide a single combined form for reporting the information required under both Code Sections 6055 and 6056 for use by all ALE members.
Relief provided. To minimize cost and ease the administration of the reporting, the final regulations do not require the reporting of: 1) the length of any permissible waiting periods under Code Section 4980H; 2) the employer's share of the total allowed costs of benefits provided under the plan; 3) the monthly premium for the lowest-cost option in each of the enrollment categories (such as self-only coverage or family coverage) under the plan; and 4) the months (if any) during which any of the employee's dependents were covered under the plan.
Filing content. Every ALE member required to file a Code Section 6056 return has to furnish a Code Section 6056 employee statement to each of its full-time employees that includes the name, address and employer identification number (EIN) of the ALE member, and the information required to be shown on the return with respect to the full-time employee. This statement does not have to include a copy of the transmittal form that accompanies the return. The regulations provide that the employee statement may be made by furnishing a copy of the Code Section 6056 return on Form 1095-C (or another form that the IRS designates) or a substitute employee statement.
Filing deadlines. The final regulations provide that Code Section 6056 returns must be filed with the IRS annually, no later than Feb. 28 (March 31 if filed electronically) of the year immediately following the calendar year to which the return relates — i.e., the same filing schedule applicable to Forms W-2 and 1099. Due to the reporting postponement under Notice 2013-45, the first Code Section 6056 returns required to be filed are for the 2015 calendar year and must be filed no later than March 1, 2016 (because Feb. 28, 2016, is a Sunday), or March 31, 2016, if filed electronically.
Statements to individuals. Under the final regulations, the Code Section 6056 employee statements must be furnished annually to full-time employees on or before Jan. 31 of the year immediately following the calendar year to which the employee statements relate. Thus, the first employee statements (i.e., for 2015) have to be furnished no later than Feb. 1, 2016 (because Jan. 31, 2016, is a Sunday).
Electronic reporting. The final regulations allow electronic furnishing of Code Section 6056 employee statements if notice, consent, hardware and software requirements modeled on existing rules are met. The final regulations require electronic filing of Code Section 6056 information returns (Forms 1094-C and 1095-C), except for an ALE member filing fewer than 250 returns under Code Section 6056 during the calendar year. Only Code Section 6056 returns are counted in applying the 250 return threshold.
Simplified reporting. The IRS provided simplified alternatives to reporting monthly, employee-specific information. An employer is allowed to use different alternative reporting methods for different employees at the employer's election, as specified in forms and instructions. Applicable large employers with at least 50 full-time employees but fewer than 100 full-time employees (including full-time-equivalent employees) that qualify for the employer mandate transition relief for 2015 (in the case of any non-calendar plan year that begins in 2015, the portion of the 2015 plan year that falls in 2016) still report under Code Section 6056 for 2015 in accordance with the final regulations.
The simplified reporting methods are:
Effective/applicability date. The regulations apply for calendar years beginning after Dec. 31, 2014. Entities will not be subject to penalties for failure to comply with the Code Section 6056 information reporting provisions for 2014 (including the provisions requiring the furnishing of employee statements in 2015 with respect to 2014). Thus, a reporting entity will not be subject to penalties if the entity first reports beginning in 2016 for 2015 (including the furnishing of employee statements). However, the IRS encourages taxpayers to voluntarily comply with Code Section 6056 information reporting for 2014.
On March 5, 2014, the Obama administration — via CMS — announced an additional two-year reprieve for individuals and small groups whose policies were cancelled last year. As background, on Nov. 14, 2013, President Obama — via a CMS letter — announced the availability of a transitional policy that allows individual and small group health insurance plans that were previously cancelled due to noncompliance with PPACA insurance mandates to be renewed in 2014 without being subject to PPACA-related penalties. (That announcement was addressed in the Nov. 19, 2013, edition of Compliance Corner.) Specifically, the Nov. 14, 2013, CMS letter states that health insurance coverage in the individual or small group market that is renewed for a policy year between Jan. 1, 2014, and Oct. 1, 2014, will not be considered to be out of compliance with the following market reforms:
Coverage that was in effect on Oct. 1, 2013, is eligible for the transitional policy. To utilize the policy, insurers must send a notice to individuals or small businesses who otherwise would have received cancellation notices, informing them of any changes in the options that are available to them, which of the above market reforms would not be included in coverage, the potential option to enroll in exchange coverage (including information on exchange access and the availability of a premium tax credit), and their right to enroll in coverage outside the exchange that complies with the above reforms.
The March 5, 2014, memo states that the transitional policy will be extended through Oct. 1, 2016, meaning that the extension will apply to policy years beginning on or before Oct. 1, 2016. The newer memo also states that CMS will at a later time consider whether an additional one-year extension (i.e., through Oct. 1, 2017) would be appropriate.
Although the transitional policy allows the continuation of noncompliant plans at a federal level, individual and small group policies must be approved by state insurance regulators (i.e., state insurance commissioners and departments). Many states have chosen not to adopt the transitional policy. Since that is a state-by-state decision, small employers with cancelled plans should reach out to their state insurance department or insurer to determine if their cancelled plans might continue into 2014 or beyond.
On March 5, 2014, CMS released final regulations related to benefit and payment parameters for 2015. The regulations included an announcement of the 2015 transitional reinsurance rate of $44 per covered life, which is a decrease from the 2014 rate of $63 per covered life. Self-insured plans that self-administer claims processing or adjudication will be exempt from the reinsurance rate for 2015 and 2016.
The fee will be payable in two installments. The reinsurance component of the fee will be due at the beginning of the calendar year following the year for which the fee is due. The component of the fee attributable to program expenditures will be due at the end of the calendar year following the year for which the fee is due. In practical terms, this means that for the 2014 benefit year, $52.50 per covered life is due in January 2015 and the remaining $10.50 is due in December 2015, for a total of $63 per covered life.
The open enrollment period in all exchanges for the 2015 benefit year will be Nov. 15, 2014, through Feb. 15, 2015. This is a change from the 2014 open enrollment period, which runs from Oct. 1, 2013, through March 31, 2014.
For 2015 plan years, the out-of-pocket maximum for non-grandfathered group plans (both self-insured and fully insured) may not exceed $6,600 for self-only coverage and $13,200 for family coverage (an increase from $6,350 and $12,700, respectively, in 2014).
On Feb. 27, 2014, CMS issued a "Bulletin to Marketplaces on the Availability of Retroactive Advance Payments of the Premium Tax Credits and Cost-sharing Reductions in 2014 Due to Exceptional Circumstances." As background, to be eligible for a premium tax credit or cost-sharing reduction, an individual must submit an application to the marketplace, receive an eligibility determination and enroll in a qualified health plan (QHP) in the exchange. In many marketplaces (including the federally facilitated marketplace), technical issues in establishing automated eligibility and enrollment functionality have resulted in some applicants not receiving timely eligibility determinations and not being enrolled in a marketplace QHP. The bulletin provides that individuals experiencing such exceptional circumstances will be eligible for retroactive enrollment, premium tax credit and cost‑sharing reduction.
If the individual has not been enrolled in any coverage since Jan. 1, 2014, when a determination of eligibility is received, he/she may be enrolled in a QHP through the marketplace retroactively to the date on which coverage would have been effective absent the exceptional circumstance. Similarly, the premium tax credit and cost-sharing reduction would be effective retroactively.
If the individual has enrolled in a QHP outside the marketplace, when a determination of eligibility is received, he/she is deemed to have been enrolled in a marketplace QHP and retroactively eligible for the premium tax credit and cost-sharing reduction, as described above. The individual will also be eligible for a special enrollment period if he/she would like to change to a marketplace QHP prospectively.
Any excess funds owed to the individual (because of premiums or expenses paid by the participant, which are now reduced because of the retroactive determination) may be paid to the individual by the insurer as either a refund or credit toward future amounts due.
CMS has released several resources related to the Small Business Health Options Program (SHOP). The first resource is a fact sheet detailing how a small employer may enroll in SHOP coverage now through the assistance of a broker and how to qualify for the Small Business Health Care Tax Credit.
The second resource now available is a slide presentation, which provides additional information on SHOP functions. While the presentation is aimed at insurers, it does provide information that may be helpful to small employers. CMS clarifies that effective Jan. 1, 2015, all SHOPs must provide employee choice at a single metal level of coverage. Also effective Jan. 1, 2015, the federally facilitated SHOP (FF-SHOP) will provide employers with the choice to offer employees a single qualified health plan (QHP) or all QHPs at a single metal level of coverage. Employers will use the FF-SHOP website to offer coverage to employees and dependents, download billing invoices and make premium payments.
Lastly, three new FAQs have been added to the technical assistance portal. Question 825 clarifies that an employer with only one common-law employee may be eligible for SHOP coverage, even if the state generally requires a small employer to have at least two employees. This is because PPACA includes an employer with only one employee in the definition of a small employer, and CMS requires SHOP insurers to follow the federal definition. Question 830 provides that dependents in the FF-SHOP will be required to enroll in the same QHP and stand-alone dental plan as the employee. In other words, a dependent could not choose coverage in a different plan than the employee. Question 834 clarifies that for plan years beginning on or after Jan. 1, 2015, a small employer in the FF-SHOP will be expected to pay either the total invoice amount or total account balance, which indicates that a small employer will not be permitted to short pay the invoice amount to reflect a dropped member.
On March 3, 2014, HHS extended the comment period regarding the Administrative Simplification: Certification of Compliance for Health Plans proposed rule. PPACA requires health insurers and other HIPAA-covered health plans to certify compliance with the standards and operating rules for certain electronic transactions — specifically, for eligibility for a health plan, health care claim status and health care electronic funds transfers and remittance advice. Published on Jan. 2, 2014, the proposed regulations explain how health plans would certify compliance with the adopted standards and operating rules for these three transactions, with an initial deadline of Dec. 31, 2015, for most plans.
The comment period for the proposed rule was to end on March 3, 2014. Representatives of entities that are new to HIPAA administrative simplification requirements had requested more time to analyze the Compliance Certification proposed rule. In response to that request, the comment period has been extended to April3,2014.
For plan years beginning on or after Jan. 1, 2014, health care reform provides that employer group health plans cannot apply any waiting period (for employee coverage) that exceeds 90 days. Under the law, a "waiting period" is defined as the period that must pass before coverage for an employee or dependent who is otherwise eligible to enroll under the terms of a group health plan can become effective.
In 2013, the IRS, EBSA and HHS issued proposed regulations and FAQs that set forth the parameters for complying with the 90-day waiting period. See the March 26, 2013, edition of Compliance Corner for a full summary of the proposed regulations.
On Feb. 20, 2014, the departments finalized the waiting period regulations, which generally retain the guidance from the previously issued proposed regulations. However, clarification was provided on several points, including:
The waiting period rules do not prohibit an employer from having substantive eligibility provisions under the plan. For example, the proposed regulations allowed an employer to base eligibility on inclusion in an eligible job classification or achieving job-related licensure requirements specified in the plan's terms, prior to beginning a waiting period.
The final regulations add a third example that allows an employer to require a new employee to successfully complete a "reasonable and bona fide employment-based orientation period" before beginning a waiting period for a group health plan. The final regulations do not specify the circumstances under which the duration of an orientation period would not be considered "reasonable or bona fide." However, proposed regulations (described in more detail in the next article) propose one month as the maximum length of any orientation period.
Clarification was also provided with respect to rehires. The final regulations provide that a former employee who is rehired may be treated as newly eligible for coverage upon rehire and, therefore, a plan may require that individual to meet the plan's eligibility criteria and to satisfy the plan's waiting period anew. However, the termination and rehire cannot be a subterfuge to avoid compliance with the 90-day waiting period limitation.
In other changes, the final regulations permanently remove the requirement to provide Evidence of Creditable Coverage for all plans, regardless of plan year, effective Dec. 31, 2014. Plans must continue to provide HIPAA Certificates of Creditable Coverage until this time.
The prohibition on excessive waiting periods is effective for plan years beginning on or after Jan. 1, 2014. For the HIPAA Creditable Coverage provisions, the final regulations apply effective Dec. 31, 2014. All other technical amendments apply for the first plan year beginning on or after April 25, 2014.
On Feb. 20, 2014, the IRS, EBSA and HHS released proposed regulations providing for an orientation period, which may precede the waiting period for new employees. On the same day, the agencies issued final regulations related to the 90-day waiting period limitation. The final regulations provide that a plan's waiting period, which cannot exceed 90 days, begins after an individual is determined to be otherwise eligible for coverage under the terms of the plan. Examples of being otherwise eligible for coverage include being in an eligible job classification, achieving job-related licensure requirements or satisfying a reasonable and bona fide employment-based orientation period. The orientation period may be a maximum period of one month, which is measured by adding one calendar month and subtracting one calendar day from an employee's start date. The purpose of the period is for the employer and employee to evaluate whether the employment situation is satisfactory for each party and for orientation and training processes to take place. The waiting period would begin following the completion of the orientation period.
The orientation period would only be used with new employees who start in a position that is otherwise eligible for coverage. It would not be used with new variable-hour employees who may be placed in a measurement period. Please note that while an employer may have relief under the 90-day waiting period limitation, a large applicable employer will still have responsibilities under the employer mandate. If a large applicable employer failed to offer minimum value, affordable coverage to a full-time employee following three months of employment, the employer may be at risk for a penalty under Section 4980H.
These proposed regulations may be relied upon through the end of 2014, and any subsequent final regulations issued will not be effective prior to Jan. 1, 2015. The proposal states that plans and issuers will be given a reasonable time period to comply.
On Feb. 10, 2014, the IRS issued much-anticipated guidance — in the form of final regulations — relating to PPACA's employer mandate. The final regulations reiterate much of the guidance published in the Dec. 27, 2012, proposed regulations, but add some very important clarifications. Ask your advisor for a copy of our white paper with more information.
The DOL published an updated Notice of Coverage Options (commonly referred to as the Exchange Notice) with an updated expiration date. The new notice expires Jan. 31, 2017. Employers should ensure they are providing the most recent version of the notice within 14 days of the hire date for all employees (not just those who are benefit-eligible or full-time). The prior notice contained an expiration date of Nov. 30, 2013, but the DOL did not address compliance for employers who distributed the outdated version during the months of December 2013 and January 2014 since the newest version had not yet been released. Recall that there is no fine for failure to provide the notice, nor did the DOL make any substantive changes to the notice, other than updating the expiration date.
On Jan. 23, 2014, the IRS published proposed regulations relating to PPACA's individual mandate, which requires individuals to carry minimum essential health insurance coverage or pay a tax (called a "shared responsibility payment"). The IRS has previously issued final regulations on the individual mandate (as covered in the Sept. 10, 2013, edition of Compliance Corner), but those final regulations indicated that subsequent guidance on certain issues was forthcoming. These proposed regulations appear to be that subsequent guidance.
As background, there are certain exemptions from the individual mandate, including an exemption for individuals who cannot afford minimum essential coverage. Coverage is unaffordable to an individual if the cost of that coverage (whether through an employer's plan or the lowest cost bronze plan on an exchange) exceeds a percentage (8 percent for 2014) of the individual's household income for the most recent taxable year. (This is separate from the affordability requirements under the employer mandate.) Generally, when coverage is through an employer's plan, that affordability analysis would be a simple comparison between the employee's required premium contribution toward the employer plan's cost and the employee's household income. However, following the final regulations on the individual mandate, the analysis remained unclear where the employer coverage is coupled with an HRA or a wellness incentive — either of which might reduce the employee's required premium contribution.
On the HRA, under the proposed regulations, an employer's contributions to an HRA are taken into account in determining (in other words, they reduce) an employee's required premium contribution toward the employer coverage if the HRA is integrated with the employer's plan and the employee may use the amounts to pay premiums. (Very basically, "integrated" means the HRA is connected to, and reimburses expenses related to, the employer plan.) On the other hand, amounts in an HRA that may be used only for cost-sharing are not taken into account when determining affordability because they cannot affect the employee's out-of-pocket cost of acquiring minimum essential coverage.
On wellness incentives, under the proposed regulations, a wellness incentive (i.e., premium reduction) is taken into account in determining an employee's required contributions only if the incentive is related to tobacco use.
Although the proposed regulations relate to requirements for individuals under the individual mandate, employers should be aware of the regulations, since an employer-sponsored HRA or wellness program (with tobacco use disincentives) may affect an individual's ability to qualify for the unaffordability exemption.
The IRS recently released the 2013 version of Form 8941, Credit for Small Employer Health Insurance Premiums, and the related instructions. As background, eligible small employers that offer health insurance coverage to their employees may be entitled to a tax credit of up to 35 percent of the non-elective contributions they make toward the premium cost. Generally, an eligible small employer is one that has no more than 25 full-time equivalent employees whose average annual wages do not exceed $50,000 (for 2013). In addition, the employer generally must contribute a uniform percentage of at least 50 percent of the premium cost for employees in order to qualify for the credit.
These eligible small employers use Form 8941 to calculate the credit. The credit is then claimed as a general business credit on Form 3800 (or, for tax-exempt small employers, as a refundable credit on Form 990-T). The 2013 versions of Form 8941 and instructions are substantially similar to the 2012 versions, but have been reorganized for simplicity purposes. The instructions identify the information needed to calculate the tax credit, including worksheets to determine the number of employees, average wages and average premiums for small group health insurance markets in each state.
On Jan. 10, 2014, Assistant Secretary for Tax Policy Mark Massur wrote a blog post on the U.S. Department of the Treasury's website. In the post, Assistant Secretary Massur stated that the upcoming final regulations regarding the employer mandate will contain a special carve-out for the volunteer emergency responder community.
Under the employer mandate, an applicable large employer must offer affordable, minimum value coverage to all full-time employees and their dependents, or risk a penalty. There were concerns raised by local fire and emergency medical service (EMS) departments (which rely heavily on volunteers). They commented that the employer mandate rules should not count volunteer hours of people in these professions in determining full-time employees (regarding both who is an applicable large employer and to whom coverage must be offered).
According to the blog, after reviewing the comments and studying the issue, the Treasury clarified that the forthcoming final employer mandate regulations will not require volunteer hours of bona fide volunteer firefighters and volunteer emergency personnel at governmental or tax-exempt organizations to be counted for employer mandate purposes.
On Jan. 15, 2014, the U.S. District Court for the District of Columbia, in Halbig v. Sebelius, 2014 WL 129023 (D.D.C. Jan. 15, 2014), upheld an IRS regulation authorizing the premium tax credit for individuals purchasing insurance on state or federal exchanges.
At issue in Halbig was whether PPACA allowed the IRS to provide premium tax credits to residents of states that declined to establish their own health insurance exchange; that is, in states where the federal government has stepped in to run the exchange. A group of individuals and employers sued HHS, the IRS and others, claiming the IRS exceeded its authority when it made a premium tax credit available to an employee whose employer failed to offer affordable coverage, when that employee procured insurance through a federally facilitated exchange. Specifically, the plaintiffs argued that the IRS regulation violated the plain language of PPACA, which provided that an individual tax credit is calculated based on the cost of insurance purchased on an exchange "established by the State" under 42 U.S.C. Section 18031. Plaintiffs, therefore, asserted that premium tax credits were unavailable for those individuals purchasing through a federally facilitated exchange.
The district court disagreed and dismissed the plaintiffs' claim, finding the IRS regulation was based on clear congressional intent. For example, PPACA's statutory provision generally authorizing premium tax credits does not distinguish between taxpayers in states with state-run exchanges and those in states with federally run exchanges. The court found additional support for the IRS' interpretation in PPACA's provision governing the advance payment of premium tax credits, which is expressly directed at every exchange, regardless of whether the exchange is state- or federally run. The district court explained that this statutory language, the statutory structure and the statutory purpose of PPACA "indicates that Congress assumed that premium tax credits would be available on any exchange," regardless of whether it is operated by a state or the federal government.
Under PPACA's individual mandate, most individuals must have health coverage or pay a tax (known as the "individual shared responsibility payment"). PPACA provides an exemption from this payment for individuals with a hardship making it difficult to afford health coverage. However, confusion continues as to when these hardship exemptions apply. In response, CMS recently clarified that in many circumstances individuals will not need to apply for a hardship exemption because they qualify for a special enrollment period.
A hardship exemption may be available if an individual recently experienced at least one of 13 enumerated events, including bankruptcy, eviction or the death of a close family member. Individuals claimed they were entitled to a hardship exemption in circumstances when they were unable to secure insurance during the initial open enrollment period due to difficulties during the exchange enrollment process — a circumstance not identified as a basis for claiming the exemption.
PPACA and exchange final regulations grant a special enrollment period for specific situations, however. A special enrollment period is a time when an individual is allowed to make changes to his or her health insurance plan even though it is not an open enrollment period. As of Jan. 1, 2014, individuals who contact CMS stating they 1) have evidence of an attempt to complete the enrollment process within the enrollment deadlines; and 2) believed they had enrolled in coverage for a Jan. 1, 2014, effective date but were not enrolled in a plan because of incorrect enrollment data transmitted by the federally facilitated marketplace to the issuer, may qualify for a special enrollment period with coverage retroactive to Jan. 1, 2014. To qualify for this special enrollment period, the individual must attest and provide proof that they completed the steps to enroll in a qualified health plan. Consumers who cannot provide proof of completion of the enrollment process by the enrollment deadline will receive coverage for a Feb. 1, 2014, or otherwise applicable effective date.
On Jan. 16, 2014, HHS posted four new frequently asked questions (FAQs) to its Web page dedicated to the Early Retiree Reinsurance Program (ERRP). The FAQs clarify that documents and materials should be maintained in accordance with HIPAA's recordkeeping requirements. HIPAA requires that records be maintained for a minimum of six years following the end of the plan year in which the costs were incurred, or upon a later date if the records must be maintained for a longer time period otherwise required by law. Records that must be maintained include claims information, enrollment materials, plan documents, early retiree lists, anti-fraud procedures, price concession documentation, early retiree response files and maintenance of contribution methods and documentation.
On Jan. 14, 2014, CMS posted a new slideshow presentation within the Registration for Technical Assistance Portal (REGTAP) Library, an online portal designed to provide technical assistance and training related to the health insurance marketplace. While the slideshow is primarily directed toward insurers, it includes information that may be helpful to employers, such as when online enrollment will be available, how to submit an application, and details on claiming the Small Business Health Care Tax Credit. To be apprised of future guidance, REGTAP registration is required.
On Jan. 10, 2014, CMS issued a bulletin providing clarification for a small group of Medicare beneficiaries who are losing coverage within the high-risk pools of several states. These individuals are identified as being under age 65 and entitled to Medicare due to a disability or end-stage renal disease. The bulletin provides that insurance carriers are permitted to sell individual health insurance policies to these Medicare beneficiaries, without risk of violating the anti-duplication provisions, which prohibit the sales of unnecessary and excessive coverage to Medicare beneficiaries. This special bulletin is necessary because, with the exception of individuals under age 65 who are receiving Medicare, persons who were previously receiving insurance through state high-risk pools will generally be eligible to purchase insurance in the individual market, both inside and outside the marketplace. In some states, individuals under age 65 with Medicare have a right under state law to purchase Medicare supplement insurance, but in other states, there is no such right. The bulletin provides for a special non-enforcement period until Dec. 31, 2015, to allow the affected states time to work through the issues presented through their legislative process.
In separate but related guidance issued on Jan. 24, 2014, the IRS issued Notice 2014-10, providing for yet another set of transition relief. This relief is directed not at the insurer, but rather at taxpayers who are currently receiving coverage under family planning services Medicaid, tuberculosis-related services Medicaid, pregnancy-related Medicaid, emergency medical conditions Medicaid, a Section 1115 demonstration project authorized under Section 1115(a)(2) of the Social Security Act (42 U.S.C. 1315(a)(2)), coverage for medically needy individuals, space available care, or line-of-duty care. The concern is that individuals receiving coverage under these government-sponsored programs may be unaware that such coverage is not considered minimum essential coverage under the individual mandate. As a result, the IRS is waiving any potential shared responsibility payment for these individuals in 2014.
While both exceptions issued by CMS and IRS do not directly impact employers sponsoring group health plans, it is important that both employers and employees stay abreast of the various exemptions and exceptions that will apply during the first year of implementation of the health insurance exchange marketplaces, especially due to the tax consequences associated with failing to maintain minimum essential coverage.
On Dec. 20, 2013, the U.S. Department of the Treasury, DOL and HHS jointly issued proposed regulations relating to the definition of “excepted benefits” under several federal laws, including PPACA and HIPAA. As background, excepted benefits are generally exempt from PPACA and HIPAA's requirements, including the prohibition on annual and lifetime dollar limits for essential health benefits, the prohibition on excessive waiting periods, the requirement to cover certain preventive care with zero cost-sharing, and PPACA's reinsurance and PCOR fees. Importantly, offering excepted benefits does not satisfy the employer's obligations under the employer mandate, and coverage under an excepted benefit does not satisfy the individual's obligations under the individual mandate (although such coverage does not disqualify that individual from premium tax credit eligibility).
The proposed regulations address limited-purpose dental, vision or long-term care plans and EAPs. For a limited-purpose plan to be considered an excepted benefit, the plan must either be insured under a separate contract of insurance or must otherwise not be an integral part of the major medical plan. A limited-purpose plan is not an integral part of the medical plan if participants: 1) have the right to elect not to receive coverage for the benefits, and 2) have to pay an additional premium or contribution for it (even if nominal). The proposed regulations eliminate the second requirement relating to paying an additional premium.
Therefore, under the proposed regulations, and until further guidance is issued to the contrary, limited-scope dental and vision benefits (through an HRA, FSA or otherwise) will be considered excepted benefits so long as participants have the right to elect not to receive coverage for the benefits. Although the regulations do not officially become effective until Jan. 1, 2015, they can be relied upon in 2014. This is good news for employers that sponsor HRAs. Although previous guidance prohibits general purpose non-integrated HRAs going forward (since they violate PPACA's annual dollar limits and preventive cost-sharing requirements), the proposed regulations allow limited-purpose dental or vision HRAs going forward.
The proposed regulations confirm that EAPs that do not provide significant medical care are considered excepted benefits. Although the regulations do not further explain what constitutes “significant” medical care, they do provide some conditions for excepted EAPs. First, the EAP benefits cannot be coordinated with another group health plan's benefits. Second, EAP eligibility cannot be conditioned on participation in another group health plan. Third, no employee contribution can be required as a condition of participation in the EAP. Although the regulations do not officially become effective until Jan. 1, 2015, they can be relied upon in 2014.
Finally, the regulations provide a new exception for “limited wraparound coverage.” This is a new term, and relates to coverage that wraps around and supplements an individual policy (including individual exchange coverage). To be considered excepted, the wraparound coverage must provide benefits in addition to essential health benefits (which the individual coverage would already provide), out-of-network coverage or cost-sharing under the individual plan. In addition, the employer must sponsor a minimum value plan in addition to the wraparound coverage, and that plan must be affordable (presumably per the employer mandate guidelines, although not entirely clear) for a majority of eligible employees. Importantly, only individuals eligible for the minimum value plan may be eligible for the wraparound coverage. Finally, the cost of the wraparound coverage may not exceed 15 percent of the primary plan's cost of coverage. The wraparound exception will not apply until 2015. Hopefully, the exception will be clarified in the future.
On Dec. 19, 2013, CMS issued a memo outlining the options available to individuals with cancelled health insurance policies. PPACA requires policies to contain a number of consumer protections starting in 2014, resulting in many non-conforming policies to be cancelled.
If an individual has been notified that their policy will not be renewed, they will be eligible for a hardship exemption and will be able to enroll in catastrophic coverage. Those who experience exchange coverage that is more expensive than their cancelled policy will be eligible for catastrophic coverage (if available in their area). A catastrophic plan provides coverage for essential health benefits but pays no benefits until the insured has incurred expenses equal to the annual cost-sharing limit ($6,350 for 2014). To enroll in catastrophic coverage, a completed hardship exemption form and supporting documentation (demonstrating the cancelled policy) must be submitted to an insurer in the consumer's area offering catastrophic coverage.
On Jan. 3, 2014, CMS released an FAQ clarifying the Dec. 19 memo. The FAQ confirms that those who experience exchange coverage that is more expensive than their cancelled policy will be eligible for catastrophic coverage (if available in their area). It further confirms what needs to be done to enroll in catastrophic coverage. Although the memo and FAQs relate only to individual policies, employers should be aware of the changes to better assist employees who may have individual coverage.
On Jan. 9, 2014, the DOL issued 12 new frequently asked questions and answers related to preventive services, wellness programs, cost-sharing, expatriate health plans, fixed indemnity insurance and mental health parity. It is Part XVIII of the department's FAQ series on PPACA's implementation. The guidance explains that the United States Preventive Services Task Force made a recommendation on Sept. 24, 2013, related to medications for risk reduction of primary breast cancer in women. Under PPACA's preventive services mandate, this means that non-grandfathered plans will be required to provide coverage for such medications, including tamoxifen and raloxifene, for plan years beginning on or after Sept. 24, 2014.
Related to wellness programs, the DOL clarified that a participant need only be given an opportunity once per year to qualify for a reward. If an employee initially waives participation in the program, the employer is not required to allow the employee to enter the program midyear.
Previous guidance from the DOL indicated that fixed indemnity plans would be considered an excepted benefit only if the benefits were paid on a per-period basis, as opposed to a per-service basis. Question 11 announces that HHS intends to propose amendments that would allow fixed indemnity coverage sold in the individual health insurance market to be considered an excepted benefit if it meets the following conditions: