• Issue Brief- Small Group Market – Changing Definition

Small Group Market – Changing Definition

Regan Blomme J.D. MBA,
Senior Consultant
Benefit Comply, LLC

Issue Date: July 20

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Beginning in 2016, the definition of “small employer” for insurance rating and underwriting purposes changes. In general, employers with 51–100 full-time equivalents (FTEs) may now fall into the small employer category, and such groups will be subject to community rating and required to offer essential health benefits for the first time. However, transition relief issued by the Department of Health & Human Services (HHS) and the Centers for Medicare & Medicaid Services (CMS) allows states and insurers to choose to renew current policies through October 1, 2016. In other words, depending upon which state the insurance policy is being issued out of, employers with 51–100 FTEs who would otherwise be required to purchase a small group policy beginning in 2016 may have the option to renew their current policies through October 1, 2016.

Background

Under the Affordable Care Act (ACA), the definition of a small employer is “an employer who employed an average of at least 1 but not more than 100 employees on business days during the preceding calendar year and who employs at least 1 employees [sic] on the first day of the plan year.”

In November 2013, CMS announced a one-year transition policy allowing insurers in the small group market to renew policies that would otherwise have been canceled due to noncompliance under health care reform beginning in 2014. Then in March 2014, HHS announced a two-year extension of this policy. 

Although the transition relief primarily affects the small group market by allowing the renewal of non-compliant plans, the transition relief also applies to employers who currently purchase insurance in the large group market, but who as of January 1, 2016 will be redefined as a small employer required to purchase insurance in the small group market. 

In states that choose to adopt the transition relief, insurers have the option of renewing current policies without being considered out of compliance with various small group market requirements that do not apply to the large group market (e.g. rating rules and requirement to offer essential health benefits). CMS has clarified that an employer with 51–100 FTEs qualifies for transition relief with respect to a large group policy purchased before January 1, 2016 if the policy is renewed for a plan year beginning January 1, 2016 through October 1, 2016. 

Determining Employer Size

Small group versus large group for purposes of insurance rating is determined on a state-by-state basis through 2015. Most states currently define small group as 50 or less, but many define that count differently (e.g. number enrolled, number of full-time or total employees). Beginning in 2016, however, the same calculation used to determine whether an employer is an applicable large employer under Section 4980H (the “employer mandate”) must be used by all states, and those employers with 100 or less FTEs will be considered small group for insurance rating purposes. This includes the requirement under 4980H rules to aggregate employees across all entities that are part of the same controlled group or affiliated service under §414 rules.

Interaction with Section 4980H

Employers with 50 or more FTEs are considered “applicable large employers” subject to 4980H requirements. Such employers may face potential shared responsibility payments if coverage meeting certain requirements is not offered to substantially all of their full-time employees. Note: An employer with 50–100 FTEs may be considered a small employer for insurance rating purposes and an applicable large employer required to comply with Section 4980H requirements.

For the first year of 4980H application, 2015, a variety of transition relief is available. However, almost all transition relief is conditional upon the requirement that the plan year cannot be changed to be later in the year after February 9, 2014.This includes the transition relief that generally allows employers with 50–99 FTEs to avoid any potential penalties until plan year 2016.

Some employers with 51–100 FTEs may consider moving their current plan year to be later in the year to extend the option to renew their current policies in the large group market through late 2017 rather than having to move to the small group market sooner. However, it is important for such employers to consider whether moving the plan year to allow them to remain in the large group market for another year or two is worth losing transition relief during 2015 from 4980H penalties.

Summary

Whether it is advantageous to be in the small group or large group market depends largely on the products and pricing available in the state issuing the insurance policy. In states that choose to adopt the transition relief, if there are insurers willing to renew existing policies, some employers in the 51–100 range may find it advantageous to remain in the large group market as long as possible (which may make a plan year move to later in the year attractive). For such employers who already offer generous coverage to most full-time employees, such a strategy may be the best option. However, for employers who may be depending upon 4980H transition relief through at least 2015 as they work to redesign their benefits and eligibility to be in compliance, it is important to consider whether the advantages (perhaps better rates) of moving the plan year to remain in the large group market longer outweigh the potential penalties that may apply upon losing 4980H transition relief. And finally, regardless of whether the employer is worried about 4980H transition relief or not, keep in mind that a change in plan year does not generally take place without some administrative hassle (e.g. short plan year, COBRA rates, health FSA elections, etc.).

CMS FAQs (Question #8 & 11) – http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/Final-Master-FAQs-5-16-14.pdf

CMS Transition Relief (Mar. 5, 2014) – http://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/transition-to-compliant-policies-03-06-2015.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.

_________________________________________________________________________

Regan Blomme J.D. MBA,
Senior Consultant
Benefit Comply, LLC

Regan Blomme has experience working as an attorney for a major Fortune 500 company, and for a PEO providing benefits and HR services to small employers. She also worked as a legal researcher for Thomson Reuters prior to obtaining her law degree. Regan received her law degree from William Mitchell College of Law, her MBA from The University of St. Thomas, and is a member of the Minnesota Bar Association.

 

• Issue Brief- Employer Reporting Requirements

Employer Reporting Requirements

Issue Date: May 2015

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Beginning in early 2016, employer reporting will be required for the first time based on data from the 2015 calendar year. Depending on the size of the employer and the funding arrangement of the benefits offered, employer reporting requirements vary in regard to what type of information needs to be reported (if any) and whether the employer is required to use Forms 1094-B and 1095-B (the “B” forms) or Forms 1094-C and 1095-C (the “C” forms). This issue brief covers who is responsible for reporting and which forms should be used in different situations.

Background
All applicable large employers — those with 50 or more full-time equivalents (FTEs) — will be required to report whether minimum value, affordable coverage was offered to any employees who were full-time for at least one month during the year based on the 4980H definition of full-time (using the monthly measurement method or the look-back measurement method). And all employers sponsoring a self-funded medical plan will be required to report which individuals were covered under the plan. The employer will report by using Forms 1094 and 1095. Employers filing 250 or more Form 1095s are required to file electronically using the Affordable Care Act Information Returns (AIR) system. Those filing fewer than 250 Form 1095s have the option to file by paper or electronically.

Reporting Requirements by employer and plan type
The table below sets forth which forms employers should use depending on the size of the employer and the funding arrangement of the medical plan offered (if any). In all cases, Forms 1094 and 1095 are provided to the IRS, and a copy of Form 1095 is provided to full-time employees and covered individuals as applicable. Below the table is a more detailed description of each possible arrangement.

 

[table “15” not found /]

Applicable Large Employer: 50 or more FTEs, including FTEs from any related entities under a controlled group or affiliated service group (Section 414 rules)

Fully-insured plan offered by a single employer:

  • Employer is responsible for reporting whether or not a minimum value, affordable offer of coverage was made to any employees who were full-time for at least one month during the year (based on monthly measurement method or look-back measurement method), using Form 1094-C and Parts I and II of Form 1095-C.
  • The insurance carrier is responsible for reporting on any covered individuals, using Forms 1094-B and 1095-B.
  • Full-time employees will receive a Form 1095-C from the employer, and individuals covered under the fully-insured plan will receive a Form 1095-B from the insurance carrier.

Fully-insured plan offered by multiple employers either through a multiple employer welfare arrangement (MEWA) or due to a controlled group/affiliated service group relationship:

  • Each employer is responsible for reporting whether or not a minimum value, affordable offer of coverage was made to his or her respective employees who were full-time for at least one month during the year (based on monthly measurement method or look-back measurement method), using Form 1094-C and Parts I and II of Form 1095-C.
  • The insurance carrier is responsible for reporting on any covered individuals, using Forms 1094-B and 1095-B.
  • Full-time employees will receive a Form 1095-C from the employer, and individuals covered under the fully-insured plan will receive a Form 1095-B from the insurance carrier.

Fully-insured plan offered by a single employer to non-union employees and a self-funded plan offered by a multiemployer plan (a collectively bargained plan) to union employees:

  • Employer is responsible for reporting whether or not a minimum value, affordable offer of coverage was made to any employees (including union employees) who were full-time for at least one month during the year (based on monthly measurement method or look-back measurement method), using Form 1094-C and Parts I and II of Form 1095-C; some coordination with the union may be required to obtain this information, but ultimately it is the employer’s responsibility.
  • The insurance carrier is responsible for reporting on any non-union covered individuals, using Forms 1094-B and 1095-B; the multiemployer (i.e. union) plan sponsor is responsible for reporting on any union covered individuals, using Forms 1094-B and 1095-B.
  • Full-time employees will receive a Form 1095-C from the employer; non-union individuals covered under the fully-insured plan will receive a Form 1095-B from the insurance carrier; and union individuals covered under the self-funded plan will receive a Form 1095-B from the multiemployer (i.e. union) plan sponsor.

Self-funded plan offered by a single employer:

  • Employer is responsible for reporting whether or not a minimum value, affordable offer of coverage was made to any employees who were full-time for at least one month during the year (based on monthly measurement method or look-back measurement method), using Form 1094-C and Parts I and II of Form 1095-C.
  • Employer is also responsible for reporting on any covered individuals, using Form 1094-C and Part III of Form 1095-C; Forms 1094-B and 1095-B may be used instead of the “C” forms for non-employees (i.e. COBRA participants, retirees) at the employer’s discretion.
  • Full-time employees and individuals covered under the self-funded plan will receive a Form 1095-C from the employer (covered non-employees may receive a Form 1095-B from the employer instead).

Self-funded plan offered by multiple employers either through a multiple employer welfare arrangement (MEWA) or due to a controlled group/affiliated service group relationship:

  • Each employer is responsible for reporting whether or not a minimum value, affordable offer of coverage was made to his or her respective employees who were full-time for at least one month during the year (based on monthly measurement method or look-back measurement method), using Form 1094-C and Parts I and II of Form 1095-C.
  • Each participating employer is also responsible for reporting on his or her respective covered individuals, using Form 1094-C and Part III of Form 1095-C; Forms 1094-B and 1095-B may be used instead of the “C” forms for non-employees (i.e. COBRA participants, retirees) at the employer’s discretion.
  • Full-time employees and individuals covered under the self-funded plan will receive a Form 1095-C from the employer (covered non-employees may receive a Form 1095-B from the employer instead).

Self-funded plan offered by a single employer to non-union employees and a self-funded plan offered by a multiemployer plan (a collectively bargained plan) to union employees:

  • Employer is responsible for reporting whether or not a minimum value, affordable offer of coverage was made to any employees (including union employees) who were full-time for at least one month during the year (based on monthly measurement method or look-back measurement method), using Form 1094-C and Parts I and II of Form1095-C; some coordination with the union may be required to obtain this information, but ultimately it is the employer’s responsibility.
  • The employer is also responsible for reporting on any non-union covered individuals, using Form 1094-C and Part III of Form 1095-C; Forms 1094-B and 1095-B may be used instead of the “C” forms for non-employees (i.e. COBRA participants, retirees) at the employer’s discretion; the multiemployer (i.e. union) plan sponsor is responsible for reporting on any union covered individuals, using Forms 1094-B and 1095-B.
  • Full-time employees and non-union individuals covered under the self-funded plan will receive a Form 1095-C from the employer (covered non-employees may receive a Form 1095-B from the employer instead); union individuals covered under the self-funded plan will receive a Form 1095-B from the multiemployer (i.e. union) plan sponsor

Mix of fully-insured and self-funded plan options offered by a single employer:

  • Employer is responsible for reporting whether or not a minimum value, affordable offer of coverage was made to any employees who were full-time for at least one month during the year (based on monthly measurement method or look-back measurement method), using Form 1094-C and Parts I and II of Form 1095-C.
  • Employer is also responsible for reporting on any individuals covered under the self-funded plan, using Form 1094-C and Part III of Form 1095-C; Forms 1094-B and 1095-B may be used instead of the “C” forms for non-employees (i.e. COBRA participants, retirees) at the employer’s discretion; the insurance carrier is responsible for reporting on any individuals covered under the fully-insured plan, using Forms 1094-B and 1095-B.
  • Full-time employees and individuals covered under the self-funded plan will receive a Form 1095-C from the employer (covered non-employees may receive a Form 1095-B from the employer instead); individuals covered under the fully-insured plan will receive a Form 1095-B from the insurance carrier.

Small employer: fewer than 50 FTEs, including FTEs from any related entities under a controlled group or affiliated service group (Section 414 rules)

Fully-insured plan offered by a single employer:

  • No reporting by the employer is required; the insurance carrier is responsible for reporting on any covered individuals, using Forms 1094-B and 1095-B.
  • Individuals covered under the fully-insured plan will receive a Form 1095-B from the insurance carrier.

Fully-insured plan offered by multiple employers either through a multiple employer welfare arrangement (MEWA) or due to a controlled group/affiliated service group relationship:

  • No reporting by the employer is required; the insurance carrier is responsible for reporting on any covered individuals, using Forms 1094-B and 1095-B.
  • Individuals covered under the fully-insured plan will receive a Form 1095-B from the insurance carrier.

Fully-insured plan offered by a single employer to non-union employees and a self-funded plan offered by a multiemployer plan (a collectively bargained plan) to union employees:

  • No reporting by the employer is required; the insurance carrier is responsible for reporting on any non-union covered individuals, using Forms 1094-B and 1095-B; the multiemployer (i.e. union) plan sponsor is responsible for reporting on any union covered individuals, using Forms 1094-B and 1095-B.
  • Non-union individuals covered under the fully-insured plan will receive a Form 1095-B from the insurance carrier; union individuals covered under the self-funded plan will receive a Form 1095-B from the multiemployer (i.e. union) plan sponsor.

Self-funded plan offered by a single employer:

  • Employer is responsible for reporting on any covered individuals, using Forms 1094-B and 1095-B.
  • Individuals covered under the self-funded plan will receive a Form 1095-B from the employer.

Self-funded plan offered by multiple employers either through a multiple employer welfare arrangement (MEWA) or due to a controlled group/affiliated service group relationship:

  • Each participating employer is responsible for reporting on his or her own respective covered individuals, using Forms 1094-B and 1095-B.
  • Individuals covered under the self-funded plan will receive a Form 1095-B from the employer.

Self-funded plan offered by a single employer to non-union employees and a self-funded plan offered by a multiemployer plan (a collectively bargained plan) to union employees:

  • Employer is responsible for reporting on any non-union covered individuals, using Forms 1094-B and 1095-B; the multiemployer (i.e. union) plan sponsor is responsible for reporting on any union covered individuals, using Forms 1094-B and 1095-B.
  • Non-union individuals covered under the self-funded plan will receive a Form 1095-B from the employer; union individuals covered under the self-funded plan will receive a Form 1095-B from the multiemployer (i.e. union) plan sponsor.

Summary
Except for those employers with fewer than 50 FTEs offering no plan or only a fully-insured plan, all other employers are required to do at least a portion of the reporting using either the “B” or “C” versions of Forms 1094 and 1095. Small employers will use the “B” forms, and applicable large employers will generally use the “C” forms (although the “B” forms can be used for coverage of non-employees).  Depending on the funding arrangement of the plans, it is possible that employees will receive more than one Form 1095 (i.e. one from the employer and one from the insurance carrier).

IRS FAQ in regard to employer reporting can be found here.

Final employer reporting forms and instructions can be found here.

IRS draft electronic reporting guide 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.

• Compliance Alert- EEOC issues regulations addressing ADA requirements for employer wellness programs

EEOC issues regulations addressing ADA requirements for employer wellness programs

Issue Date: April 2015

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The EEOC has issued long-awaited proposed regulations addressing ADA requirements for employer wellness programs. The guidance also addresses the interaction between the new EEOC rules and the existing ACA and HIPAA wellness rules.

Background

In general, the Americans with Disabilities Act (ADA) prohibits employment discrimination based on disability. The ADA directly affects employer wellness programs in a number of ways. For example, the ADA restricts when an employer may make disability-related inquiries or require medical examinations. Wellness programs often include elements of both. For example, a health risk assessment (HRA) may include disability-related questions, and biometric screening programs are considered medical examinations.

Importantly, the ADA includes exceptions for certain types of health plan and wellness programs.  Specifically, an employer may make disability-related inquiries or conduct medical examinations if the program is “voluntary.” Until now, the EEOC had provided very little guidance on how it would determine the voluntary nature of a program, leaving employers in the dark regarding how to design a wellness program that would be in compliance with the ADA rules.

Proposed Regulations

The proposed regulations address the extent to which employers can offer incentives in wellness programs that include disability-related inquiries and/or medical examinations. In some ways, the new EEOC guidance tracks closely with the existing ACA and HIPAA wellness rules. However, it imposes lower limits on the size of the incentive for many common wellness strategies than the limits in the HIPAA wellness rules allow. Importantly, the new rules will not be effective until after publication of the final rules.

Changes to Incentive Limits
Under the EEOC rules, if the wellness program includes disability-related inquiries and/or medical examinations, employers can offer incentives of up to 30% of the total cost of employee-only coverage and the program will still be considered voluntary. This limitation applies to all wellness programs, regardless of whether the program is participatory, health-contingent, or a combination of the two. This is an area in which the EEOC rules differ significantly from existing HIPAA wellness rules. The current HIPAA restrictions on incentives do not apply to participatory programs, so this EEOC rule effectively imposes a new maximum on many types of wellness-related incentives. Prior to this rule, employers could have designed participatory programs with incentives exceeding 30% of the premium. Now if that incentive involves a program that includes disability-related inquiries and/or medical examinations, the maximum incentive possible will be 30%, even if it is a participatory program.

The proposed regulations include special rules for smoking cessation programs. A smoking cessation program that only asks employees whether they use tobacco would not be considered a disability-related inquiry or medical examination, and would not be subject to the EEOC rules. In this case HIPAA rules would still allow an incentive of up to 50% of the premium. However, a wellness program requiring employees to submit to medical testing to determine whether they use nicotine or tobacco is a medical examination and the rules would apply, thereby limiting even tobacco-related incentives to 30%.

Other Changes
In defining a voluntary program, the EEOC takes the position that wellness incentives can be offered to employees as long as participation is not required and nonparticipating employees are neither denied coverage under any employer group health plan nor subject to any adverse employment action. This condition directly addresses a strategy that some employers have begun to adopt in which participation in the employer’s health plan is contingent on the employee’s completing an HRA. Under these new rules, this strategy would violate the ADA.

Employer must also provide employees with a notice that includes a description of the medical information collected, who will have access to it, and how it will be used and kept confidential.

Summary

The proposed regulations address many employer questions, but some issues still need clarification. For example, the proposed rules do not address how the 30% maximum incentive applies when family members also participate in a wellness program. The EEOC is taking comments on the proposed rules and will then issue final regulations. Additional issues may be addressed in those final rules.

 

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-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.