• Compliance Alert-OOP Maximums

Out-of-Pocket Maximums

Issue Date: March 2015

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In final regulations published in February 2015, the Department of Health and Human Services (HHS) and Centers for Medicare and Medicaid Services (CMS) set forth 2016 various limits and coverage requirements for 2016.  In regards to the out-of-pocket (OOP) maximum that applies to essential health benefits, the agencies not only set forth the 2016 limits, but also clarified in the preamble that the self-only OOP maximum applies to each individual, regardless of whether the individual is enrolled in single or family coverage.  In addition, CMS recently provided an FAQ further clarifying its commitment to this new requirement that is effective for plan years beginning in 2016.

Background

Beginning in 2014 the Affordable Care Act (ACA) required that all non-grandfathered group health plans limit participant out-of-pocket (OOP) maximums. The OOP maximum includes deductibles, co-insurance, co-payments toward essential health benefits covered under the plan. The maximum OOP expense limits are adjusted annually for increases in the cost of living.  For 2016, the maximum OOP expense limit cannot exceed $6,850 for self-only coverage and $13,700 for family coverage.

Embedded Individual Limit

For any group health plan offering coverage options beyond self-only (single) coverage, HHS states that plans offering family coverage (or anything other than self-only coverage) are required to have an embedded OOP limit for each individual covered under family coverage.  The following example is provided in the preamble to illustrate their intent:

“…if an other than self-only plan has an annual limitation on cost sharing of $10,000 and one individual in the family plan incurs $20,000 in expenses from a hospital stay, that particular individual would only be responsible for paying the cost sharing related to the costs of the hospital stay covered as EHB up to the annual limit on cost sharing for self-only coverage (…$6,850 for 2016)”

Summary

Beginning with 2016 plan years, employers that apply only an aggregate OOP limit for family coverage in regards to essential health benefits will need to make adjustments to their plan design to include an embedded individual OOP limit for all covered individuals. HHS has also stated they intend to issue formal guidance regarding this requirement.

 

While every effort has been taken in compiling this information to ensure that its contents are totally accurate, neither the publisher nor the author can accept liability for any inaccuracies or changed circumstances of any information herein or for the consequences of any reliance placed upon it. This publication is distributed on the understanding that the publisher is not engaged in rendering legal, accounting or other professional advice or services. Readers should always seek professional advice before entering into any commitments.

• Compliance Alert- IRS Releases Final Reporting Forms and Instructions

IRS Releases Final Reporting Forms and Instructions

Issue Date: February 2015

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The IRS has released final forms and instructions for the ACA employer reporting requirement. Applicable large employers (ALEs, generally those with 50 or more FTEs), and small employers with self-funded group health plans, are required to report certain plan information to the IRS and to provide statements to employees, beginning in 2016 for calendar year 2015 health plan and coverage data. The final forms and instructions are similar to the proposed forms previously released by the IRS, with a few minor modifications.

Background

ALEs must report to the IRS information about the health care coverage they offered to full-time employees. The IRS will use this information to administer the employer shared responsibility provisions and the premium tax credit. ALEs also must provide employees a statement (generally a 1095) that includes the same information provided to the IRS.

ALEs are required to report to the IRS, as well as to their full-time employees, regardless of whether the ALE actually offers health insurance coverage. Even if an ALE with at least 50 but fewer than 100 full-time equivalents (FTE) is eligible for the transition relief for 2015 from the employer shared responsibility provision, the ALE is still required to complete the information reporting for 2015.

All reporting is based on calendar year data regardless of the employer’s plan year. ALE members must file Form 1095-C (Employer-Provided Health Insurance Offer and Coverage) and Form 1094-C (Transmittal of Employer-Provided Health Insurance Offer and Coverage) Information Returns with the IRS annually, no later than February 28 (March 31 if filed electronically). This is the same filing schedule applicable to other information returns commonly filed by employers, such as Forms W-2 and 1099.

Also, affected employers are required to furnish a statement to each full-time employee and each covered individual that includes the same information provided to the IRS, by January 31. In most cases the employer will provide employees with a copy of the Form 1095-C. Employers must file their first information returns with the IRS and furnish statements to their full-time employees and covered individuals in 2016 for the 2015 calendar year. Thus, the first statements to employees must be furnished by January 31, 2016, and the first information returns to the IRS must be filed by February 28, 2016 (March 31, 2016, if filed electronically).

Preparing for 2016

With the release of the final forms, employers can now begin to implement the procedures necessary to complete the first required reporting early in 2016. It is likely that most employers will use a third-party administrator, benefits administration system, payroll vendor, or other vendor to assist with the reporting process. In general, employers will need to know the following information to properly complete the reporting.

All ALEs – Including self-funded or fully-insured

  • Contact name and phone number for the individual that will be responsible for fielding questions in regards to the reporting on behalf of the employer
  • The employer’s status as a single employer or a member of a controlled group/affiliated service group, and a list of other member employers in the controlled group (if applicable)
  • 4980H transition relief and employer safe harbor information applicable to the employer
  • Total employees for each month
  • Number of full-time employees as defined by ACA for each month
  • For each full-time employee:
    • Name, SSN, Address
    • Which months coverage was offered to the employee and/or dependents
    • Employee contribution required for lowest cost, minimum value, single coverage option for which that employee is eligible

All Self-funded Employers (including small employers who are not an ALE)

  • Coverage-related information required for all covered individuals and dependents:
    • Name
    • SSN (in some cases DOB may be used if SSN is not available)
    • Whether individual had coverage in any employer sponsored Minimum Essential Coverage (MEC) for each calendar month

Typically, no single vendor or system currently contains all of the data necessary to complete the reporting. For example:

  • Payroll providers will not generally know whether an employer is taking advantage of one of the IRS affordability safe harbors, or of an ACA transition relief rule.
  • Employer’s systems generally contain an employee’s enrollment data, but may not currently keep track of the lowest plan cost option on an employee-by-employee basis.
  • Employer’s payroll and HRIS systems may currently identify employees as full-time based on criteria other than the applicable ACA definition of full-time. This data will also depend on whether an employer is using the optional IRS look-back method of defining full-time.

Summary

The biggest issue facing employers now is identifying where required data currently resides, and figuring out the best process for meeting the reporting requirements. Employers should not jump at the first offer from a vendor to assist with the reporting process. We have heard reports of payroll vendors “automatically” signing up and charging clients for reporting services, implying that they are ready to complete the reporting. While the payroll provider may be the right choice for some employers, the truth is that the vendor does not yet have much of the required information.

The final 1095 and 1094 reporting forms and instructions can be found at http://www.irs.gov/pub/irs-pdf/i109495c.pdf.

 

While every effort has been taken in compiling this information to ensure that its contents are totally accurate, neither the publisher nor the author can accept liability for any inaccuracies or changed circumstances of any information herein or for the consequences of any reliance placed upon it. This publication is distributed on the understanding that the publisher is not engaged in rendering legal, accounting or other professional advice or services. Readers should always seek professional advice before entering into any commitments.

• Issue Brief- SBC and Uniform Glossary Modifications

SBC and Uniform Glossary Modifications

 Issue Date: January 2015

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On Dec. 22, 2014, the Department of Labor (DOL), Health and Human Services (HHS) and the Treasury (IRS) jointly released proposed rules regarding the requirements relating to the summary of benefits and coverage (SBC) and the accompanying uniform glossary. Most notably, these proposed rules shorten the template to 2½ pages; add a new example to illustrate coverage; add new definitions to the uniform glossary; and provide updated templates, instructions, and other related documents.

Background

The Affordable Care Act (ACA) requires that an SBC and an accompanying uniform glossary be provided for all group health plans “to help plans and individuals better understand their health coverage, as well as to gain a better understanding of other coverage options for comparison.”

On July 29, 2011, the Departments released proposed rules which were then followed by final rules and accompanying templates and instructions on February 14, 2012. In addition, the Departments released various FAQs providing further clarification, safe harbors, and templates. Responding to ongoing feedback, the Departments released these latest proposed rules to amend some of the previous requirements and to provide new templates and examples, as well as an updated uniform glossary.

Effective Date

These proposed rules apply for plan years beginning on or after September 1, 2015.

Who Must Comply

Generally, all group health plans (but not excepted benefits) are required to distribute the SBC upon certain events. The insurance carrier (issuer) will generally provide the SBC on behalf of fully insured plans, but the plan administrator should ensure that is the case as the plan administrator is jointly responsible. For self-funded plans, the plan administrator (typically the employer) must provide the SBC.

The proposed rules clarify that Medicare Advantage plans are exempt from these requirements and also continue to provide expatriate plans with relief from these requirements until further guidance is provided.

The proposed rules add a few provisions to prevent duplication of efforts:

  • A plan administrator may enter into a contractual agreement for responsibility of providing the SBC so long as the plan administrator monitors performance under the contract and takes steps as soon as is practicable to correct things if the administrator becomes aware that the SBC requirements are not being met.
  • For a group health plan that uses two or more insurance products provided by separate issuers, the plan administrator is responsible for providing complete SBCs with respect to the plan. The plan administrator may contract with one of its issuers (or other service providers) to perform that function, but absent a contract, an issuer has no obligation to provide coverage information for benefits that it does not insure.
  • A previous FAQ safe harbor for a group health plan that uses two or more insurance products provided by separate issuers with respect to a single group health plan allowed the plan administrator to provide the information in a single SBC or via multiple partial SBCs to meet the SBC content requirements. This safe harbor remains available.

SBC Distribution and Timing

The new regulations did not significantly change the SBC distribution rules. The SBC must be provided to participants and beneficiaries (including COBRA-qualified beneficiaries) at open enrollment or renewal, upon initial enrollment and special enrollment, and also upon request (within 7 business days). Previous regulations state that as long as the SBC is provided to the employee, the distribution requirement is met for all dependents living at the same address.

SBC Content Requirements

The proposed rules continue to require that certain content be included in the SBC, but the new rules also add and modify a number of requirements:

  • New requirements:
    • For plans that maintain a network of providers, an Internet address (or similar contact information) for obtaining a list of the network providers;
    • For plans that use a formulary in providing prescription drug coverage, an Internet address (or similar contact information) for obtaining information on prescription drug coverage under the plan or coverage; and
    • An Internet address for obtaining the uniform glossary, as well as a contact phone number to obtain a paper copy of the uniform glossary, and a disclosure that paper copies of the uniform glossary are available.
  • A plan or issuer may choose to add premium information to the SBC. If a plan or issuer wishes to include this information, it should be added at the end of the SBC template.
  • The statements regarding MEC and MV are required to be included in the SBC. The option previously available to include this information in a cover letter or similar disclosure furnished with the SBC is no longer available.
  • It is no longer necessary to include information regarding annual limits on essential health benefits or preexisting conditions.
  • All plans and issuers must include contact information for questions. However, only issuers (not employers) must also include an Internet web address where a copy of the actual individual coverage policy or group certificate of coverage can be reviewed and obtained.
  • Previous rules required the SBC to include two coverage examples (hypothetical situations describing a sample treatment plan and medical costs and how much the patient will be responsible for paying, including deductibles, copayments and coinsurance):

 i.         having a baby (normal delivery), and
ii.         routine maintenance of well-controlled type 2 diabetes.

The proposed regulations require a third coverage example—a simple foot fracture (with emergency room visit). The proposed regulations also provide updated claims and pricing data for the two existing coverage examples.

  • A calculator was provided that plans could use as a safe harbor for the first year of applicability to complete the coverage examples in a streamlined fashion. The calculator allows plans and issuers to input a discrete number of informational elements about the benefit package, and the output of the calculator is a coverage example that can be added to the SBC.

SBC Appearance and Language

The SBC is to be presented in a uniform format in a culturally and linguistically appropriate manner, utilizing terminology understandable by the average plan enrollee. The SBC is not to exceed four double-sided pages in length and is not to include print smaller than 12-point font.

The new SBC template eliminates some information from the SBC that is not required by statute to make it easier to include all of the required information while satisfying the statutory page limit. The sample template has been reduced from four double-sided pages to two and a half double-sided pages (i.e. five single-sided pages).

SBCs provided in connection with group health plan coverage may be provided either as a stand-alone document or in combination with other summary materials (e.g. SPD), if the SBC information is complete and is prominently displayed at the beginning of the materials (such as immediately after the Table of Contents in an SPD) and in accordance with the SBC timing requirements.

The proposed rules retain the requirement that in specified counties, plans and issuers must provide interpretive services and written translations upon request, in certain non-English languages. The applicable counties are those in which at least 10% of the population residing in the county is literate only in the same non-English language—this determination is based on U.S. Census data and includes four languages: Spanish, Chinese, Tagalog, and Navajo. To comply with the language requirement, SBCs sent to addresses in an applicable county must include a one-sentence statement clearly indicating how to access the language services provided by the plan (or insurer). To help plans meet the language requirements, HHS has provided written translations of the SBC template, sample language, and the uniform glossary in Chinese, Navajo, Spanish, and Tagalog. HHS may also make these materials available in other languages to facilitate voluntary distribution of SBCs to other individuals with limited English proficiency.

SBC Distribution

SBCs may be provided in either paper or electronic form. The proposed regulations adopt the safe harbors related to electronic delivery of SBCs provided via previous FAQs. SBCs may be provided electronically to participants and beneficiaries in connection with their online enrollment or online renewal of coverage under the plan, and may be provided electronically to participants and beneficiaries who request an SBC online. But in either case, the individual must have the option to receive a paper copy upon request and free of charge. Therefore,

  • For current participants who actually enroll online, the SBC may be provided electronically in conjunction with and at the same time as other online enrollment material (prior consent not required);
  • For current participants who enroll using any other means, the SBC may be provided electronically to those individuals who satisfy the DOL’s safe harbor for electronic distribution; and
  • For individuals not currently enrolled, the SBC may be provided electronically if the individuals are notified (either in paper form or by email) that the documents are available on the Internet.

In addition, the proposed rules provide model language to meet the requirement to advise participants and beneficiaries that the SBC is available on the Internet:

Availability of Summary Health Information

As an employee, the health benefits available to you represent a significant component of your compensation package. They also provide important protection for you and your family in the case of illness or injury.

Your plan offers a series of health coverage options. Choosing a health coverage option is an important decision. To help you make an informed choice, your plan makes available a Summary of Benefits and Coverage (SBC), which summarizes important information about any health coverage option in a standard format, to help you compare across options.

The SBC is available on the web at: www.website.com/SBC. A paper copy is also available, free of charge, by calling 1-XXX-XXX-XXXX (a toll-free number).

Uniform Glossary

Group health plans are required to provide a uniform glossary of insurance and medical-related terms to accompany the SBC in the appearance specified by the Departments without modification. Plans must include an Internet address in each SBC for the uniform glossary developed by the Departments so that the glossary is presented in a uniform format and uses terminology understandable by the average plan enrollee.

The proposed rules revise definitions for several of these terms and add several new terms.

Penalties for noncompliance

A group health plan that “willfully fails to provide the information required under this section shall be subject to a fine of not more than $1,000 for each such failure.” In addition, a separate fine may be imposed for each individual or entity for whom there is a failure to provide an SBC (consistent with section 4980D of the Code—$100 per day per affected individual).

Summary

These proposed rules provide a variety of modifications and additions to the previous SBC content and appearance requirements effective for plan years beginning on or after September 1, 2015. To incorporate many of the proposed rules and previously issued FAQs, the Departments have also provided an updated SBC template, a uniform glossary, and other related documents.

The proposed regulations, fact sheets, templates and additional information can be found at the links set forth below:

 

While every effort has been taken in compiling this information to ensure that its contents are totally accurate, neither the publisher nor the author can accept liability for any inaccuracies or changed circumstances of any information herein or for the consequences of any reliance placed upon it. This publication is distributed on the understanding that the publisher is not engaged in rendering legal, accounting or other professional advice or services. Readers should always seek professional advice before entering into any commitments.

• Compliance Alert- CMS Extends the Deadline to Report Membership Data for the Transitional Reinsurance Contribution

CMS Extends the Deadline to Report Membership Data for the Transitional Reinsurance Contribution

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Issue Date: November 2014

On Friday November 14th the Department of Health and Human Services’ Centers for Medicare & Medicaid Services (CMS) announced an extension of the deadline for submission of plan membership data for the transitional reinsurance program (TRP). Employer/plan sponsors of self-funded plans were originally required to report membership by November 17th, 2014, but the filing deadline has now been extended to December 5th, 2014.

Overview

The Affordable Care Act (ACA) creates the transitional reinsurance program to help stabilize the individual health insurance market. For three years (2014 – 2016) “contributing entities” are required to make reinsurance payments for ‘major medical coverage’ that provides minimum value as defined by the ACA. Health insurance carriers (Issuers) are responsible for making reinsurance contributions for fully insured plans. The plan sponsor (generally the employer) is responsible for making reinsurance contributions for self-funded plans. However, the plan sponsor is allowed to delegate the reporting and payment process to a third party.

Reinsurance contributions for 2014 are $63 per covered life and are due in two installments. The first installment of $52.50 per covered life is due by January 15, 2015. The balance of $10.50 per covered life must be paid no later than November 15, 2015. Employers may choose to pay the entire contribution in a single payment by the first deadline. Important Note: The payment deadline has not been changed by this announcement extending the date for filing the membership data.

To determine the appropriate membership count, there are four methods to choose from – the actual count method, snapshot method, snapshot factor method, or the Form 5500 method.  Payments are calculated by multiplying the average number of covered lives (based on one of these methods) by the contribution rate for the applicable year.

Contributing entities report the fee and schedule payments using the “ACA Transitional Reinsurance Program Annual Enrollment and Contributions Submission Form” on www.pay.gov. The only payment method available is via an ACH debit. The payment arrangement and payment dates must be set up at the time the contributing entity reports the annual membership totals.

Summary

While the extension is a welcome development, employers still have less than three weeks to complete the process. Since a data file with the appropriate form must be created prior to reporting membership, employers who have not yet completed the process should act quickly.

CMS has provided a webpage with TRP details at http://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/The-Transitional-Reinsurance-Program/Reinsurance-Contributions.html. This page also contains:

  • A detailed 64 page CMS manual describing the process (which can also be found here).
  • A manual to assist in creating the supporting documentation file.
  • An MS Excel template “job aide” which can be used to create the supporting documentation file.

 

While every effort has been taken in compiling this information to ensure that its contents are totally accurate, neither the publisher nor the author can accept liability for any inaccuracies or changed circumstances of any information herein or for the consequences of any reliance placed upon it. This publication is distributed on the understanding that the publisher is not engaged in rendering legal, accounting or other professional advice or services. Readers should always seek professional advice before entering into any commitments.

• Compliance Alert- Employer Can Not Pay for Employee’s Individual Health Insurance

Employer Can Not Pay for Employee’s Individual Health Insurance

Issue Date: November 2014

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In the most direct guidance released to date, the DOL has issued new FAQs that make it clear employers are not permitted to pay for the cost of individual health insurance for employees, even if the payments are made on an after tax basis. The guidance also prohibits employers from providing cash to employees to encourage them to waive the employer’s plan and purchase individual health insurance instead.

No Employer Payment of Individual Health Insurance Premiums Allowed

The DOL, IRS, and HHS have previously released guidance limiting the employer’s ability to pay for individual health insurance premiums for employees, but prior guidance was somewhat unclear and left room for some alternative interpretations. As a result, a number of vendors have offered programs designed to allow employers to pay for their employee’s purchase of individual health insurance policies.

This new DOL guidance effectively puts an end to that practice. The DOL states that the payment of individual health insurance premiums by an employer constitutes a group health plan under federal law. A group health plan made up of individual health insurance policies violates a number of ACA related provisions. The first question in the FAQ states:

Q1: My employer offers employees cash to reimburse the purchase of an individual market policy. Does this arrangement comply with the [ACA] market reforms?

No. If the employer uses an arrangement that provides cash reimbursement for the purchase of an individual market policy, the employer’s payment arrangement is part of a plan…maintained for the purpose of providing medical care to employees, without regard to whether the employer treats the money as pre-tax or post-tax to the employee.

Therefore, the arrangement is group health plan coverage within the meaning of…(ERISA)…and is subject to the market reform provisions of the (ACA) applicable to group health plans. Such employer health care arrangements…will violate PHS Act sections 2711 and 2713, among other provisions, which can trigger penalties such as excise taxes under section 4980D of the Code.

No Cash to Employees to Encourage Purchase of Individual Health Insurance

The DOL guidance also addresses reports that some employers have begun to provide cash incentives to high risk employees to encourage them to waive coverage on the employer’s plan, and instead purchase individual health insurance. The DOL states this practice is a violation of the HIPAA rules that prohibit discrimination against individuals based on their health status. According to the DOL, this practice is discriminatory even if the employee agrees to the payment.

Summary

As the rules related to the ACA continue to evolve and be clarified by the regulatory agencies, employers should be cautious when adopting strategies that are not clearly within the framework of existing guidance. The complete text of the DOL FAQs can be found at http://www.dol.gov/ebsa/faqs/faq-aca22.html

 

While every effort has been taken in compiling this information to ensure that its contents are totally accurate, neither the publisher nor the author can accept liability for any inaccuracies or changed circumstances of any information herein or for the consequences of any reliance placed upon it. This publication is distributed on the understanding that the publisher is not engaged in rendering legal, accounting or other professional advice or services. Readers should always seek professional advice before entering into any commitments.

• Compliance Alert- Supreme Court to Hear ACA Case

Supreme Court to Hear ACA Case

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Issue Date: November 2014

On Friday Nov. 7th the Supreme Court announced they plan to consider challenges to the government’s policy of providing subsidies to individuals who purchase health insurance through Healthcare.gov, the federally run Marketplace. The case will be heard early in 2015, with a decision likely at the end of the Court’s term early in the summer of 2015.

Background

At issue is whether Congress intended the ACA tax credits and subsidies provided to low and middle income individuals to be available in states that have chosen not to operate their own public Marketplace, and instead rely on the federally operated platform. It is estimated that about 17 million people would qualify for the ACA subsidies nationwide if they were to purchase individual health insurance through a state or federal Marketplace.

Currently sixteen states and the District of Columbia operate their own Marketplace. Seven states have a hybrid, or partnership arrangement with the federal government, and twenty-seven states rely solely on the federal Marketplace. For details on where each state stands, see Kaiser Family Foundations Health Reform page at www.kff.org/health-reform.

In King vs. Burwel, a three-judge Appeals Court panel ruled unanimously that Congress intended to allow subsidies nationwide. In a separate case, Halbig vs. Burwell, a panel of the U.S. Court of Appeals for the D.C. Circuit had ruled 2 to 1 in favor of those challenging the law. However, the full D.C. Circuit vacated the panel’s ruling and was planning for the full District court to decide the case in December.

What Does the Decision Mean to Employers?

The ACA requires applicable large employers (generally those with 50 or more FTEs) to provide health coverage to full-time employees, or pay an employer shared responsibility payment. However, the employer shared responsibility payments are triggered only if at least one full-time employee purchases individual health insurance, and receives an ACA subsidy, through a public (state or federal) Marketplace.

If ACA subsidies are not available to individuals in states using the federal Marketplace, employers who have employees only in those states would not be liable for the shared responsibility payments. It remains to be seen how the IRS would interpret the law in cases where the employers have employees in multiple states. Obviously, if the Supreme Court upholds the law as currently administered, application of the employer shared responsibility rules would move forward unchanged.

While every effort has been taken in compiling this information to ensure that its contents are totally accurate, neither the publisher nor the author can accept liability for any inaccuracies or changed circumstances of any information herein or for the consequences of any reliance placed upon it. This publication is distributed on the understanding that the publisher is not engaged in rendering legal, accounting or other professional advice or services. Readers should always seek professional advice before entering into any commitments.

• Compliance Alert- IRS Announces 2015 Adjustments for Certain Benefit Items

IRS Announces 2015 Adjustments for Certain Benefit Items

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Issue Date:  November 2014

In Revenue Procedure 2014-61, the IRS set forth a variety of 2015 adjusted tax limits. Among other things the notice addresses benefits related limits for health flexible spending accounts (FSAs), adoption assistance, and qualified transportation benefits.

Health Flexible Spending Account (FSA) – 2015 annual limitation of $2,550

Health care reform imposed a $2,500 limit on annual salary reduction contributions to health FSAs offered under Section 125 (Cafeteria) plans, effective for plan years beginning after December 31, 2012.  The $2,500 amount is indexed for cost-of-living adjustments for plan years beginning after December 31, 2013, but was not changed for 2014.  For 2015, the annual limitation on salary reductions is increased to $2,550.

Qualified Transportation Fringe Benefit – $130 for transit pass / $250 for qualified parking

  • Monthly limitation for commuter highway vehicle or transit pass is $130, which is unchanged
  • Monthly limitation for qualified parking provided by an employer is $250, which is unchanged

Adoption Assistance – $13,400 for adoption of a child

Amounts paid by an employer for “qualified adoption expenses” incurred in connection with the adoption of a child are excludable from an employee’s gross income if furnished pursuant to an “adoption assistance program” of the employer.  The limit on such amount has increased from $13,190 for 2014 to $13,400 for 2015.

Summary

A summary release of the various 2015 amount limits may be found here. The full text of the notice may be found here.

• Compliance Alert- Health Plan ID (HPID) Requirement Delayed

Health Plan ID (HPID) Requirement Delayed

Issue Date: November 2014

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On October 31st The Centers for Medicare and Medicaid Services (CMS) announced an indefinite delay in the Health Plans ID (HPID) requirements applicable to self-funded employer sponsored health plans. Officially described as an enforcement delay, the announcement means that large self-funded employers will not be required to obtain an HPID by November 5th, 2014 as originally required. No further information regarding a new deadline, or other changes to the HPID requirements, was contained in the announcement.

Background

Existing regulations require employers who sponsor self-funded health plans to obtain an HPID from CMS. Prior to the delay, large health plans (with annual receipts of $5 million or more) were required to obtain an HPID by November 5, 2014. Small health plans had until November 5, 2015.

What Does the Delay Mean to Employers?

Employers who have already obtained an HPID number should maintain their records, and wait for further information from CMS. Employers who have not yet obtained an HPID may choose to wait until further guidance is issued before attempting to obtain an HPID.

Note that the HPID is unrelated to the ACA Transitional Reinsurance Program reporting deadline which is still in place. This HPID delay has no effect on the existing requirement for self-funded employers to report membership to CMS by November 17, 2014, for purposes of paying the reinsurance contribution.

The official announcement of the HPID delay can be found on the CMS website at: http://www.cms.gov/Regulations-and-Guidance/HIPAA-Administrative-Simplification/Affordable-Care-Act/Health-Plan-Identifier.html.

 

• Issue Brief- Transitional Reinsurance Contribution Form to be available Oct 24th

Transitional Reinsurance Contribution Form to be available Oct 24th

Issue Date: October 2014

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The first submission of membership numbers to the Department of Health and Human Services (HHS) for purposes of the transitional reinsurance contributions is due by November 15th of this year.  Employers who sponsor self-funded health plans must report membership and schedule the first payment via a form on www.pay.gov. CMS has just announced that the form will be available on October 24th. In addition, CMS has provided a form manual with detailed instructions as to the submission process.

Background

The Affordable Care Act (ACA) creates a transitional reinsurance program to help stabilize premiums for coverage in the individual market from 2014 through 2016. ‘Contributing entities’ (either health insurance companies or sponsors of self-funded plans) are required to make reinsurance payments annually for ‘major medical coverage’.  Payments are calculated by multiplying the average number of covered lives during the benefit year by the contribution rate for the applicable year.

Plans Subject to the Reinsurance Contribution

The reinsurance contribution is required for major medical plans that provide “minimum value”. Minimum value is generally defined as a plan that has an actuarial value of at least 60%.

Reinsurance contributions do not apply to:

  • Health Savings Accounts (HSAs);
  • Health flexible spending accounts (FSAs);
  • Health reimbursement accounts (HRAs) that are integrated with a group health plan;
  • Self-funded dental and vision plans that meet the requirements of being an excepted benefit;
  • EAPs, disease management or wellness programs not providing significant medical benefits;
  • Stop-loss or indemnity reinsurance policies; and
  • For individuals with employer-sponsored group coverage and other coverage (i.e. Medicare, individual policy or coverage under a spouse’s plan), and the other coverage is primary.

With respect to fully-insured coverage, issuers (health insurance carriers) are responsible for making reinsurance contributions. With respect to a self-funded group health plan, the plan sponsor (generally the employer) is responsible for making reinsurance contributions.  If the plan funding changes from fully-insured to self-funded during the calendar year, the insurer/carrier and plan sponsor are each responsible for paying a pro rata portion of the fee.

Submission Process for Reinsurance Contributions

Reporting Membership

Contributing entities must first report the plan’s membership by November 15th each year.  To determine the membership count, there are three methods to choose from – actual count method, snapshot method or the Form 5500 method.  The actual count method and snapshot method generally consider data from January – September (regardless of the employer’s plan year), while the Form 5500 method considers data from the most recently filed Form 5500.

Contributing entities will access the “ACA Transitional Reinsurance Program Annual Enrollment and Contributions Submission Form” on www.pay.gov to enter the annual enrollment count. CMS has announced that this form will be available as of October 24th of this year.  The form will auto-calculate the annual contribution amount to be remitted based on the annual enrollment (membership) count, and the contributing entity will then schedule payment for the calculated reinsurance contributions on the payment page.

Paying the Fee

Reinsurance contributions for 2014 are $63 per covered life and are due in two installments. The first installment of $52.50 per covered life is due by January 15, 2015. The balance of $10.50 per covered life must be paid no later than November 15, 2015. Employers may choose to pay the entire contribution in a single payment by the first deadline.

Summary

The recent CMS announcement regarding the availability of the form and the manual providing submission instructions confirms that the reinsurance contributions will be collected in accordance with the timeframes set forth in the regulations.  Employers with self-insured plans will need to either negotiate with their administrator to make payments on behalf of the plan or prepare to calculate and report applicable plan membership by November 15th using the form which is to be available by October 24th.

For more details on the counting methods and the reinsurance contributions generally, access our previous issue brief here.

CMS has provided a summary of the transitional reinsurance contributions here.

And finally, the Annual Enrollment and Contributions Submission Form Manual can be found here.

 

While every effort has been taken in compiling this information to ensure that its contents are totally accurate, neither the publisher nor the author can accept liability for any inaccuracies or changed circumstances of any information herein or for the consequences of any reliance placed upon it. This publication is distributed on the understanding that the publisher is not engaged in rendering legal, accounting or other professional advice or services. Readers should always seek professional advice before entering into any commitments.

• Issue Brief- Self-funded Employers Must Report Membership by Nov. 17th for Purposes of Making ACA Reinsurance Payments

Self-funded Employers Must Report Membership by Nov. 17th for Purposes of Making ACA Reinsurance Payments

Issue Date: October 2014

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Employers who sponsor self-funded health plans must report their average membership numbers to the Department of Health and Human Services (HHS) no later than Nov. 17th. The reported membership will be used to calculate the amount due for 2014 contributions to the transitional reinsurance program. Employers will also need to schedule the first payment at the time the membership is reported. The first reinsurance contribution payment must be made no later than January 15, 2015. The reinsurance fee will be paid by the health insurance company on behalf of fully-insured employer-sponsored plans.

Background

The Affordable Care Act (ACA) creates a transitional reinsurance program to help stabilize premiums for coverage in the individual market from 2014 through 2016. ‘Contributing entities’ (either health insurance companies or sponsors of self-funded plans) are required to make reinsurance payments annually for ‘major medical coverage’.  Payments are calculated by multiplying the average number of covered lives during the benefit year by the contribution rate for the applicable year.

Contributing Entities

A ‘contributing entity’ is defined as “a health insurance issuer or a self-insured group health plan.”

  • With respect to fully-insured coverage, issuers (health insurance carriers) are responsible for making reinsurance contributions.
  • With respect to a self-funded group health plan, the plan sponsor is responsible for making reinsurance contributions. Because this is a plan responsibility, generally the employer (acting as the plan sponsor), will be required to make the payments for self-funded plans.

Note: If the plan funding changes from fully-insured to self-funded during the calendar year, the insurer/carrier and plan sponsor are each responsible for paying a pro rata portion of the fee.

Which Employer Plans are Subject to the Reinsurance Contribution?

For the purpose of employer-sponsored group health plans, the reinsurance contribution is required for major medical plans that provide “minimum value”. Minimum value is generally defined as a plan that has an actuarial value of at least 60%.

HHS recently released guidance that clarifies employers are not required to make reinsurance contributions on behalf of health FSAs and health reimbursement arrangements (HRAs) that are integrated with a group health plan.

In addition, reinsurance contributions do not apply to:

  • Health Savings Accounts (HSAs);
  • Self-funded dental and vision plans that meet the requirements of being an excepted benefit;
  • EAPs, disease management or wellness programs that do not provide significant medical benefits;
  • Stop-loss or indemnity reinsurance policies; and
  • For individuals with both Medicare coverage and employer-sponsored group coverage, and the Medicare coverage is primary.

Amount and Timing of Reinsurance Contribution

Each year HHS will publish the national per capita contribution rate.

  • 2014 benefit year contribution = $63 per participant
  • 2015 benefit year contribution = $44 per participant
  • 2016 benefit year contribution = TBD

Reporting Membership

Contributing entities must first report the plan’s membership by November 15th each year. In 2014 membership must be reported by Monday November 17th since the 15th falls on a Saturday.

Contributing entities will use the federal website Pay.gov to report and pay the fee. The contributing entity will access the “ACA Transitional Reinsurance Program Annual Enrollment and Contributions Submission Form” to enter the annual enrollment count. The form will auto-calculate the annual contribution amount to be remitted based on the annual enrollment count, and the contributing entity will then schedule payment for the calculated reinsurance contributions on the payment page.

Important Note: as of the publication of this summary, the “ACA Transitional Reinsurance Program Annual Enrollment and Contributions Submission Form” is not yet available on Pay.gov.

Paying the Fee

Reinsurance contributions are due in two installments. For the 2014 benefit year the first installment of $52.50 per covered life is due by January 15, 2015. The balance of $10.50 per covered life must be paid no later than November 15, 2015. Employers may choose to pay the entire contribution in a single payment by the first deadline. Payments for all plans will need to be made at the same time regardless of the employer’s actual plan year.

Membership Counting Methods

The count must be determined using one of the three specified methods described below. These membership counting methods are similar to those used to calculate membership for payment of the PCORI fee, but different timeframes are used. When using the actual count or the snapshot method for calculating the membership for the reinsurance fee, the employer must use the plan’s membership during the first three quarters of the calendar year, regardless of the plan year.  If the 5500 method is used, the employer must use the participant count reported on the most recently filed Form 5500.

  • Actual Count Method – calculate the sum of lives covered for each day from January 1 – September 30 and divide by the number of days in the period.
  • Form 5500 Method – use the number of “5500 participants” actually reported on the Form 5500 for the plan year. Total number of lives is determined by adding the total participant counts at the beginning and end of the year.
    • A participant for 5500 purposes includes only the principal “subscriber” (i.e. employee or COBRA participant), not the dependents.
    • Only employers who actually file a Form 5500 may use this method.
  • Snapshot Method – add the total number of lives covered on any date (or more dates if an equal number of dates are used for each quarter) during the same corresponding month in each quarter, and divide that total by the number of dates on which a count was made.
  • Snapshot Factor Method – same as the snapshot method except that the number of lives covered on a date is calculated by adding the number of participants with self-only coverage to the product of the number of participants with coverage other than self-only coverage times a factor of 2.35.

Summary

The Department of Labor advised that paying reinsurance contributions would constitute a permissible expense of the plan for purposes of ERISA because the payment is required by the plan under the ACA.

Employers with fully-insured plans will not need to do anything regarding this payment, but need to be aware that the cost will be factored into the premiums paid to the carrier. Employers with self-insured plans will need to either negotiate with their administrator to make payments on behalf of the plan or prepare to calculate and report applicable plan membership by November 17, 2014.

While every effort has been taken in compiling this information to ensure that its contents are totally accurate, neither the publisher nor the author can accept liability for any inaccuracies or changed circumstances of any information herein or for the consequences of any reliance placed upon it. This publication is distributed on the understanding that the publisher is not engaged in rendering legal, accounting or other professional advice or services. Readers should always seek professional advice before entering into any commitments.