• 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.

• Compliance Alert- Time is Running Short for Large Self-funded Employers to Obtain a HIPAA HPID Number

Time is Running Short for Large Self-funded Employers to Obtain a HIPAA HPID Number

Issue Date: October 2014

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 Time is running short for large self-funded employers to acquire a Health Plan ID Number (HPID) as required by HIPAA and the ACA. Employers who sponsor large health plans must obtain at least one Health Plan ID Number (HPID) by November 5th, 2014. A large self-funded employer health plan is generally defined as a plan that had more than $5 million in claims paid during the previous plan year.

Employers who sponsor self-funded “small health plans” have until Nov. 5, 2015 to acquire an HPID number. Employers who sponsor fully insured plans are not required to obtain an HPID. The carrier which insures the plan is responsible for the HIPAA transaction rules on behalf of the fully insured plan.

Background

Most employer sponsored group health plans are considered Covered Entities, and are subject to the HIPAA privacy, security, and transaction rules. HIPAA requires Covered Entities to conduct certain transactions electronically using standards set by the Centers for Medicare and Medicaid Services (CMS). Generally, an employer health plan contracts with another entity to process their plan’s HIPAA transactions. For example, most self-funded employer plans contract with a third-party administrator who handles claims, eligibility, and reimbursement transactions for the plan.

Employers who sponsor self-funded health plans must complete certain steps to comply with the HIPAA HPID rules:

  1. All employers with self-funded health plans will be required to obtain an HPID from CMS.
  2. Employers will need to get assurance from plan administrators and vendors who process transactions for the plan that the vendor has gone through a required testing process, and has received the necessary certification from CMS. All health plans, large and small, must then certify to CMS that the plan is in compliance with certain standard transaction rules by December 31, 2015, or within one year of obtaining their HPID number, whichever is later.

When Does an Employer Need to Get their HPID Number(s)

Large health plans must obtain an HPID by November 5, 2014. Small health plans (with annual “receipts” of $5 million or less) have until November 5, 2015 to register for an HPID.

Determining Small Health Plan Status

When determining small plan status, an employer must consider a number of factors. The Department of Health and Human Services (HHS) provided informal guidance on this issue in 2002, but formal regulations were never issued.

  • Fully insured health plans should use the amount of total premiums which they paid for health insurance benefits during the plan’s last fiscal (i.e. plan) year
  • Self-insured plans should use the total amount paid for health care claims during the plan’s last full fiscal (i.e. plan) year. A separate HHS Q&A noted that “the premiums or amounts paid for stop-loss insurance by an employer or sponsor of a self-insured plan should not be included.”

Obtaining the HPID

All self-funded health plans must obtain an HPID from HHS, even when the employer’s plan is not directly handling HIPAA transactions. Fortunately, CMS has released guidance clarifying that employers are not required to obtain an HPID for most HRAs and Health FSAs.

HPIDs are obtained through CMS’s Health Plan and Other Entity Enumeration System (HPOES). HPOES is housed within the CMS Health Insurance Oversight System (HIOS). To apply for an HPID, employers must complete a number of steps:

  • First, the employer must create an account in the CMS Enterprise Portal to obtain a user ID and password.  This is a separate process and system which will verify the user’s identity and ensure that only authorized/registered users will access protected information and systems.
  • Second, the employer selects the link within the CMS portal to register for HIOS.  Registering in HIOS may take up to 48 hours to complete as it involves CMS review of submitted information.
  • After registering in HIOS employers use HPOES to apply for the HPID.

Recently CMS removed the requirement that an authorizing official from the employer must approve the application for the HPID. This means that now only one individual is required to register on the CMS portal to acquire a number for an organization. Prior to this change both a submitter and an authorizing official were required to register with CMS for each organization.

CMS has established a website where health plans can register and obtain their HPID. The site lists steps the employer must take to provide information about the plan sponsor and plan. The CMS site can be found at: http://www.cms.gov/Regulations-and-Guidance/HIPAA-Administrative-Simplification/Affordable-Care-Act/Health-Plan-Identifier.html.

Summary

While it is good news that CMS has removed the requirement to register an authorizing official, the process of acquiring an HPID number still requires the employer to complete a number of steps on three different CMS systems. With November 5th fast approaching, employers who sponsor large health plans should start this process immediately to ensure that they acquire their HPID by the deadline.

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- Final Rules Amending Definition of Excepted Benefits

Final Rules Amending Definition of Excepted Benefits

Issue Date: October 2014

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The Departments of the Treasury, Labor, and HHS (the Departments) have released final rules that amend regulations regarding the definition of “excepted benefits.” The guidance specifically addresses limited-scope dental and vision plans as well as employee assistance programs (EAPs) and what requirements must be met for such plans to be considered excepted benefits exempt from the requirements of the Health Insurance Portability and Accountability Act (HIPAA) and the Affordable Care Act (ACA). For the most part, the final rules adopt the proposed rules from December 2013. The final rules do not address the rules regarding the ability of an employer to sponsor “wraparound” coverage offered to employees who qualify for subsidized individual coverage through a public Exchange/Marketplace, but promise that further guidance is coming.

Effective Date

These final rules apply to group health plans and group health insurance issuers for plan years beginning on or after January 1, 2015.

Background

In general, excepted benefits are exempt from the HIPAA and Affordable Care Act market reform requirements. In addition, excepted benefits will not cause an individual to lose eligibility for subsidies for coverage obtained through the public Marketplace (Exchange). These final rules provide clarity specifically related to how limited-scope dental and vision benefits and EAPs qualify as excepted benefits.

Limited-Scope Dental and Vision Benefits

Under existing regulations, dental and vision benefits are excepted if they are limited in scope (described as benefits, substantially all of which are for treatment of the eyes or mouth) and are either: (1) provided under a separate policy, certificate, or contract of insurance; or (2) otherwise not an integral part of a group health plan.

  • Only fully insured coverage may qualify under the first test (provided under a separate policy, certificate, or contract of insurance).
  • Fully insured and self-funded plans may both qualify under the second test (not an integral part of a group health plan).

2nd Test – Not Integral to the Group Health Plan

For employers to meet this second test, originally the requirement was that participants must have the right to elect not to receive coverage for the benefits, AND if participants elect to receive coverage, they must be required to pay an additional contribution. The proposed rules eliminated the requirement that participants pay an additional contribution for limited-scope dental or vision benefits. Consistent with the proposed rules, the final rules require only that participants be able to decline coverage. This requirement is satisfied if participants may decline coverage or the claims for the benefits are administered under a contract separate from claims administration for any other benefits under the plan.

In addition, the final rules clarify that the benefits do not have to be offered in connection with a separate offer of major medical or “primary” group health coverage under the plan in order to satisfy this second test. In other words, limited-scope vision or dental benefits can be provided without connection to a primary plan or offered separately from the major medical or “primary” coverage under the plan to satisfy this requirement.

Employee Assistance Programs

The proposed regulations set forth four criteria for an EAP. The final rules adopted the four criteria with some clarification as to what constitutes “significant benefits in the nature of medical care” and a minor modification to the second criterion eliminating the requirement that EAP benefits cannot be financed by another group health plan in order to qualify as excepted benefits.

To qualify as excepted benefits beginning in 2015:

1. The program cannot provide significant benefits in the nature of medical care. For this purpose, the amount, scope, and duration of covered services are taken into account. Examples:

    • Benefits are not significant – EAP provides only limited, short-term outpatient counseling for substance use disorder services (without covering inpatient, residential, partial residential, or intensive outpatient care) without requiring prior authorization or review for medical necessity.
    • Benefits are considered significant – EAP provides disease management services (such as laboratory testing, counseling, and prescription drugs) for individuals with chronic conditions such as diabetes.

2. The EAP cannot be coordinated with benefits under another group health plan.

    • Participants in the other group health plan must not be required to use and exhaust benefits under the EAP (making the EAP a “gatekeeper”) before an individual is eligible for benefits under the other group health plan; and
    • Participant eligibility for benefits under the EAP must not be dependent on participation in another group health plan.

3. Employees cannot be required to make a contribution to participate in the EAP.

4. There can be no participant cost sharing (such as a co-pay) under the EAP.

Summary

These final rules adopt much of what was previously provided for guidance in the proposed rules. Most employers of self-funded plans welcome the elimination of the requirement that participants pay an additional contribution for limited-scope dental or vision benefits. To ensure excepted benefit status, employers sponsoring self-funded dental and vision plans may need to modify current enrollment polices so that participants are allowed to waive dental or vision coverage, even if no employee contribution is required. In regard to EAP benefits, further guidance regarding what constitutes significant medical benefits is helpful. The Departments have indicated that additional guidance may be provided in this area as needed.

For more details on excepted benefits and the proposed rules, see our previous issue brief – Click 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- PCORI Fee Increase

PCORI Fee Increase

Issue Date:  September 2014

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In Notice 2014-56, the IRS provided the amount for the Patient-Centered Outcomes Research (PCORI) fees for plan years ending after Sept 30, 2014 and before Oct 1, 2015.  The fee for such plan years is $2.08 (up from $2) multiplied by the average covered lives for the plan year.  The carriers/insurers will pay the fee on behalf of fully-insured plans, but self-funded plans are responsible for paying the fee on behalf of any applicable group health plans.

Background

The Affordable Care Act (ACA) created a new nonprofit corporation, the Patient-Centered Outcomes Research Institute (PCORI) to support clinical effectiveness research.  It is funded in part by fees paid by health insurers and sponsors of self-funded health plans (PCORI fees).

PCORI fees apply to plan years ending after Sept 30, 2012 and before Oct 1, 2019.  The fee is paid using quarterly Form 720 and must be paid no later than July 31 of the calendar year following the last day of the plan year.

The PCORI fee generally applies to all group health plans, but not to excepted benefits.

See DOL chart – http://www.irs.gov/uac/Application-of-the-Patient-Centered-Outcomes-Research-Trust-Fund-Fee-to-Common-Types-of-Health-Coverage-or-Arrangements

The amount of the fee differs based on plan year.  The applicable fee for the year is multiplied by the average number of covered lives for the plan.  Self-funded group health plans may determine the average number of covered lives using one of the following 3 methods:

  1. Actual Count Method
  2. Snapshot Method
  3. Form 5500 Method

Applicable Fee Amount

The applicable fee is:

– $1 for plan years ending before October 1, 2013

– $2 for plan years ending after September 30, 2013 and before October 1, 2014

– Thereafter the fee increases based on the percentage increase in the projected per capita amount of National Health Expenditures, as published by the Treasury each year

IRS has set the fee for plan years ending after September 30, 2014 and before October 1, 2015 at $2.08.  Further guidance will be provided indicating the fee for future plan years ending after September 30, 2015.

Additional details on calculating amount of the fee due were described in our earlier issue brief on this topic, ‘Details on Paying the ACA Research Fee.’

 

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- Section 125 rules to recognize two new permitted election changes

Section 125 rules to recognize two new permitted election changes

Issue Date: September 2014

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Last Thursday, the IRS released guidance regarding current Section 125 rules that is likely to be well-received by most employers. The guidance permits two new permitted election changes (prospective revocations) to correspond with some unintended consequences created under the employer shared responsibility rules under Section 4980H and new coverage options available through the public Marketplace (Exchange). For those employers who choose to adopt such changes, the new rules provide more flexibility for individuals in either of two scenarios: (i) those changing from employer-sponsored group health coverage to other minimum essential coverage (MEC) options due to a reduction in hours; or (ii) those changing from employer-sponsored group health coverage to a qualified health plan (QHP) during a special enrollment period or annual open enrollment period through a public Marketplace (Exchange).

Effective Date

The guidance is effective immediately. Section 125 rules will be updated accordingly, but pending further guidance, employers may amend Section 125 (Cafeteria) plans to adopt the new permitted election changes in accordance with the guidance currently provided.

Background

In general, Section 125 (Cafeteria) plan rules do not allow mid-year changes in elections through the end of a plan year. If premiums for employer-sponsored group health plan coverage are taken on a pre-tax basis, Section 125 rules allow mid-year election changes only for certain specified events, such as:

  • Changes in status (e.g. marriage, adoption, change in employment status, residence change);
  • Significant cost changes or significant coverage curtailment/improvement;
  • Changes under another employer’s plan; and
  • HIPAA special enrollment rights.

Keep in mind that even if the Section 125 rules allow for a mid-year election change, the employers ultimately may decide whether to allow such changes. It is necessary for the plan document to address which, if any, of the events allowed under the Section 125 rules will be recognized for purposes of participant mid-year election changes.

Section 125 Issues Addressed by This Guidance

The guidance addresses two issues that have arisen relative to the interaction between current Section 125 rules and coverage requirements/availability under the Affordable Care Act (ACA).

1. Coverage eligibility due to Section 4980H requirements

Regarding the change in employment status rule, the current Section 125 rules allow an individual to make a mid-year election change only if the change in employment status is accompanied by a change in eligibility for coverage (e.g. change from full-time to part-time and part-time not eligible under the terms of the plan). For those employers choosing to implement the look-back measurement method to determine full-time status beginning in 2015, employees determined to be full-time are generally considered eligible for coverage through a full corresponding stability period, regardless of whether hours are reduced. The requirement, which is meant to provide a predictable and stable method of offering coverage, created the unintended consequence of requiring that employee contributions be run through a Section 125 (Cafeteria) plan to continue through the end of the stability period regardless of whether the individual is still able to afford the coverage, because the individual does not lose eligibility.

2. Coverage eligibility for a QHP through a public Marketplace (Exchange)

Currently, if an individual is eligible to enroll under another employer-sponsored plan with a different plan year (e.g. eligible under a spouse’s employer-sponsored group health plan), Section 125 rules allow for a mid-year election change to correspond with the change in coverage from one plan to the other during the applicable plan’s open enrollment period. However, Section 125 rules do not currently recognize the availability of coverage for a qualified health plan (QHP) through a public Marketplace (Exchange) during the annual open enrollment period. For those individuals with employer-sponsored group health coverage contributions run through a Section 125 (Cafeteria) plan with a calendar year plan, this is not an issue; however, for those with a non-calendar year plan, there is no way to make mid-year election changes to avoid overlapping coverage or a lapse in coverage while transferring between an employer-sponsored group health plan and coverage through a public Marketplace (Exchange).

In addition, the Section 125 rules do not currently recognize the special enrollment period rules of the public Marketplace (Exchange) that allow for enrollment outside of the annual open enrollment period. In most cases, the situations overlap, allowing for a mid-year election change under Section 125 rules and special enrollment rights through a public Marketplace (Exchange), but there are a few exceptions (e.g. for the individual newly eligible for subsidies for a QHP).

Section 125 rule updates

Participants permitted to revoke Section 125 elections due to a reduction in hours

Participants are allowed to prospectively revoke elections for an employer-sponsored group health plan providing minimum essential coverage (MEC) if:

  • The employee was in a position that was expected to be full-time (i.e. average 130 or more hours of service per month during the look-back measurement period) and there was a change in status in which the employee was now expected to be part-time but would not lose eligibility for coverage (i.e. eligibility continued through the end of the applicable stability period even though employee would now average fewer than 130 hours of service per month); and
    • The employee and any dependents for whom coverage elections were revoked intended to enroll in a MEC plan no later than the first day of the second month following the revocation of coverage.

Participants permitted to revoke Section 125 elections due to QHP coverage availability

Participants are allowed to prospectively revoke elections for an employer-sponsored group health plan providing minimum essential coverage (MEC) if:

  • The participant chooses to enroll for a QHP during the public Marketplace (Exchange) annual open enrollment period or the participant qualifies for a special enrollment period to enroll in a qualified health plan (QHP) through a public Marketplace (Exchange); and
    • The participant(s) for whom coverage elections are revoked intend to enroll in a QHP plan no later than the day immediately following the revocation of coverage.

NOTE – under either of the revocations allowed above, the employer may rely on a reasonable representation that the participants intend to enroll in a QHP or another MEC plan in accordance with the allowable timeframes.

Plan Amendments

To allow the newly permitted election changes under this notice, a Section 125 (Cafeteria) plan must be amended to adopt such changes on or before the last day of the plan year in which the elections are allowed. The adopted changes may be effective retroactively to the first day of the plan year, provided that the employer informs participants of the amendment and allows participant mid-year election changes only on a prospective basis.

Summary

This welcome guidance allows employers wishing to provide individuals with additional flexibility in regard to Section 125 mid-year election changes due to a reduction in hours or eligibility for a QHP through a public Marketplace (Exchange) to do so, effective immediately, by adopting such changes in their Section 125 plans and notifying participants accordingly.

 

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