The North Carolina Healthcare Reform Digest http://healthcarereformdigest.com Wed, 30 Apr 2014 19:47:27 +0000 en-US hourly 1 HHS Specifies End of PCIP Coverage as “Exceptional Circumstance” For Exchange Special Enrollment http://healthcarereformdigest.com/hhs-specifies-end-pcip-coverage-exceptional-circumstance-exchange-special-enrollment http://healthcarereformdigest.com/hhs-specifies-end-pcip-coverage-exceptional-circumstance-exchange-special-enrollment#respond Fri, 25 Apr 2014 22:35:38 +0000 http://healthcarereformdigest.com/?p=1037 On April 24, 2014, CMS flexed its regulatory muscle by issuing a notice allowing participants in the Pre-Existing Condition Insurance Program (PCIP) until June 30, 2014 to enroll in a qualified health plan offered through the Exchange, also known as the Health Insurance Marketplace.  Introduced as part of the Patient Protection and Affordable Care Act […]

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On April 24, 2014, CMS flexed its regulatory muscle by issuing a notice allowing participants in the Pre-Existing Condition Insurance Program (PCIP) until June 30, 2014 to enroll in a qualified health plan offered through the Exchange, also known as the Health Insurance Marketplace.  Introduced as part of the Patient Protection and Affordable Care Act (PPACA), PCIP was designed to provide health insurance for people with pre-existing conditions or who have been denied health insurance due to a health condition, and who have been without coverage for at least 6 months.

PCIP was slated to end in 2013 to coincide with the availability of coverage through the Exchanges and the requirement that most health plans eliminate pre-existing condition exclusions.  PCIP coverage will now end April 30, 2014.  Any participants who remain in the PCIP may contact their local Exchange prior to May 1, 2014 to begin the application for coverage.  As long as the application is completed by June 30, 2014, PCIP participants enrolling in a qualified health plan through an Exchange will have coverage retroactive to May 1.

Under the Special Enrollment Period rules for the Exchanges, HHS has the regulatory power to issue guidelines allowing a special enrollment period outside of the Exchange annual enrollment period if the individual meets “exceptional circumstances” specified by HHS and the Exchange.  This notice from CMS specifies the loss of PCIP coverage as a result of the program’s termination as an “exceptional circumstance” for PCIP participants.

 CMS previously issued guidance on other exceptional circumstances, namely natural disasters, cases of domestic abuse, and certain system errors, that may warrant a special enrollment period.  Click here to access this notice from March 26, 2014.

Why is this important?  Now that Exchange annual enrollment has ended and the final migration of PCIP participants to the Exchanges has been set in motion, the waiting game begins.  The combination of many of the market reforms, like guaranteed availability and guaranteed renewability, out-of-pocket limits, the elimination of pre-existing condition exclusions, and the prohibition of lifetime and annual limits on essential health benefits have led many industry stakeholders to frequent discussions on the topic of adverse selection.

In particular, discussions about the Exchanges and adverse selection leave industry stakeholders wondering what impact adverse selection might have on premium costs of qualified health plans offered through the Exchange in future years. Although PPACA contains measures to mitigate the impact of these requirements on rates and to shore up health insurers participating in the Exchange, the Exchanges are uncharted risk territory.  Only time will show the true cost impact, and whether other measures designed to focus provider reimbursements on quality and efficiency in healthcare delivery will have any effect on decreasing the costs of healthcare.

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To Be, or Not To Be (Compatible With an HSA When Enrolled in a Health FSA), That Is The Question http://healthcarereformdigest.com/compatible-hsa-enrolled-health-fsa-question http://healthcarereformdigest.com/compatible-hsa-enrolled-health-fsa-question#respond Fri, 28 Mar 2014 21:11:58 +0000 http://healthcarereformdigest.com/?p=1020 For some, it is a question as old as, well, a few months at least since the IRS sanctioned carryovers in health FSAs. On Friday March 28th, the IRS provided some answers. In the form of a Memo from the Office of the Chief Counsel dated February 24, 2014, the IRS provided some guidance on […]

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For some, it is a question as old as, well, a few months at least since the IRS sanctioned carryovers in health FSAs. On Friday March 28th, the IRS provided some answers. In the form of a Memo from the Office of the Chief Counsel dated February 24, 2014, the IRS provided some guidance on health flexible spending arrangement (health FSA) carryovers and eligibility for a health savings account (HSA). For those employers who have already struggled with the questions presented by having both a high-deductible health plan (HDHP) with an HSA and a health FSA with a carryover feature, the guidance is welcome.

compatibleHDHPs and HSAs go hand-in-hand. An employee is eligible to contribute to the HSA only if there is no other health plan that covers any benefit that is already covered by the HDHP. The difficulty often arises when an employee is enrolled in the HDHP and some other medical benefit, making the employee ineligible to contribute to the HSA. Having a HDHP without the benefit of an HSA can be an expensive venture.

Or perhaps the employee’s spouse enrolls in a health FSA through the spouse’s employer – the employee with the HDHP cannot contribute to an HSA. A health FSA that reimburses all qualified medical expenses is a health plan that constitutes other coverage, which makes the employee ineligible to contribute to the HSA. The employee is only eligible to contribute to the HSA if the health FSA is a limited purpose health FSA or a post-deductible health FSA.

Things get even trickier if there is a health FSA with a carryover provision involved. Even if the employee (or spouse) does not make an election for the health FSA in Year 2, anticipating the need to make HSA contributions, if the health FSA has money leftover from Year 1 the employee may be ineligible to contribute to the HSA for all of Year 2.

The memorandum from the IRS provides some helpful guidance in dealing with these practical, and common, questions:

  1. May an otherwise eligible individual contribute to an HSA if the individual participates in a general purpose health FSA solely as the result of a carryover of unused amounts from the prior year?  No.  Coverage in a general purpose FSA solely as a result of a carryover of unused amounts from the prior year is enough to make an otherwise eligible individual ineligible to contribute to an HSA for the entire FSA plan year.
  2. May an otherwise eligible individual who participates in a general purpose health FSA solely as the result of a carryover of unused amounts from the prior year contribute to an HSA for any month after all of the carried over health FSA amounts are paid or reimbursed for medical expenses? No.  Even after the carryover amount in the health FSA from Year 1 into Year 2 is spent down, the otherwise eligible individual cannot contribute to the HSA for the rest of the health FSA plan year.
  3. May an individual who participates in a general purpose health FSA and elects, for the following year, to participate in an HSA-compatible health FSA (that is, a limited purpose health FSA, a post-deductible health FSA, or combination of both) also elect to have any unused amounts from the general purpose health FSA carried over to the HSA-compatible health FSA? Yes, this is permissible.  Warning: The unused amounts cannot be carried over to a non-health FSA or another benefit in the cafeteria plan. 
  4. May an individual who participates in a general purpose health FSA and elects for the following year to participate in an HSA-compatible health FSA and have any unused amounts from the general purpose health FSA carried over to the HSA-compatible health FSA also contribute to an HSA during the following year? Yes. An otherwise eligible individual participating in a general-purpose health FSA in Year 1 can elect to have any unused amounts carry over into a limited purpose health FSA (or a post-deductible health FSA) in Year 2 and be eligible to contribute to an HSA in Year 2.
  5. May a cafeteria plan that offers both a general purpose health FSA and an HSA-compatible health FSA automatically treat an individual who elects coverage in a HDHP as enrolled in the HSA-compatible health FSA and carry over any unused amounts from the general purpose health FSA? Yes. The employee who elects the HDHP health plan for the next year can automatically be treated as having also elected the limited purpose health FSA (or post-deductible health FSA) for the next  year and carry over leftover amounts up to $500 from the general purpose health FSA.
  6. If a cafeteria plan provides that an individual who participates in a general purpose health FSA that provides for a carryover may decline the carryover for the following year, may the individual decline the carryover and contribute to an HSA during the following year? Yes. The cafeteria plan may allow the individual to decline or waive the carryover prior to the beginning of the next plan year, and the otherwise eligible individual can contribute to an HSA in the next plan year.
  7. If an individual elects to carry over unused amounts from a general purpose health FSA to an HSA-compatible health FSA, how do the uniform coverage rules apply during the run-out period of the general purpose health FSA? This is the most complicated issue of them all. Ordering of the claims and reimbursements in this situation is important.
    • In Year 1, employee was enrolled in a general purpose health FSA with a $500 carryover provision.
    • In Year 2, employee elects a HDHP and $2500 in a limited purpose health FSA with a $500 carryover provision.
    • At the end of Year 1 (December 31), $600 remains in the general purpose health FSA.
    • In January of Year 2, employee incurs and submits to the limited purpose health FSA a $2700 claim. As per the uniform coverage rules, the plan reimburses $2500, the full amount elected.
    • In February of Year 2, employee submits a $300 claim incurred in December of Year 1. The claim is reimbursed from the general purpose health FSA because it is within the Year 1 run-out period.
    • At the end of the Year 1 run-out period, $300 remains in the general purpose health FSA. The $300 remaining is carried over into the limited purpose health FSA.
    •  After the $300 is carried over to the limited purpose health FSA, the employee is reimbursed $200 for what remained on the claim incurred and submitted in January of Year 2.
    • $100 remains in the limited purpose health FSA, which can be used for expenses incurred in Year 2 or carried over into Year 3.
    •  Employee can contribute to an HSA for all months in Year 2.

Question and Answer 7 is not an easy one to follow. It takes more than one reading. No doubt in time, like everything else the regulators have given us lately, this will seem second nature.

One final note of caution … the IRS memorandum is not “official” guidance. It even says in the second line, “[t]his advice may not be used or cited as precedent.” Still, when given the choice, informal guidance is better than no guidance.

If you would like to refresh your knowledge of the new carryover feature that is allowed for health FSA plans, refer to IRS Notice 2013-71. The rules for when an individual is eligible to make HSA contributions can be found in Section 223(c)(1)(A) of the Code with additional information provided by IRS Notice 2005-86. Still need help? The consultants at Hill, Chesson & Woody are here to help, contact HCW at [email protected].

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PPACA’s Employer Mandate: Top 6 Play or Pay Traps to Avoid http://healthcarereformdigest.com/employer-mandate-top-6-play-pay-traps-avoid http://healthcarereformdigest.com/employer-mandate-top-6-play-pay-traps-avoid#respond Tue, 25 Mar 2014 15:49:07 +0000 http://healthcarereformdigest.com/?p=1003 It is no secret that the Patient Protection and Affordable Care Act (PPACA) requires many employers to provide health insurance coverage to full-time employees, or pay a tax penalty.  Employers subject to “Play or Pay” let out a collective sigh of relief when the final regulations, issued in February 2014, provided some additional transition relief in […]

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Avoid the Trap

It is no secret that the Patient Protection and Affordable Care Act (PPACA) requires many employers to provide health insurance coverage to full-time employees, or pay a tax penalty.  Employers subject to “Play or Pay” let out a collective sigh of relief when the final regulations, issued in February 2014, provided some additional transition relief in an attempt to ease the compliance burden for many companies.  However, things are not always as they seem.

Beginning in 2015, employers with 50 or more full-time equivalent employees must offer health insurance to full-time employees working an average of 30 or more hours per week (and their dependent children).  If coverage meeting certain minimum requirements is not offered, the employer may face non-deductible tax penalties.  Numerous clarifications and nuances in the final regulations could catch unsuspecting employers in a quagmire of non-compliance, resulting in tax penalties that could have been mitigated or avoided altogether.  Read on for our take on the 6 top play or pay traps to avoid.

#6: Neglecting to Count “Hours of Service”

What is an “hour of service” according to the employer mandate rules of healthcare reform?  An hour of service is any hour for which an employee is paid or entitled to be paid.  The definition includes hours that the employee is actually present at work performing services, but also include other hours that the employee is not at work but is entitled to be paid, like paid vacation days, paid holidays, jury duty days.  Employers must count “hours of service” to determine the amount of full-time equivalents necessary to calculate the employer’s size.  Hours of service must also be counted to determine whether an employee is considered full-time for purposes of offering coverage.

These rules have a direct impact on an employer’s liability under Code §4980H.  Counting hours of service can also be particularly difficult for certain types of employees, like adjunct professors.  Special rules exist for certain types of employees. Bottom line – don’t make the mistake of recording only the hours that employees are physically present at work.

#5:  Ignoring Other Employers Within the Same Controlled Group

Splitting up a single corporate entity into multiple entities owned by the same individual, holding company, or group of individuals was one of the initial reactions to the employer mandate and its application to employers with 50 or more full-time equivalent employees.  If each entity contained fewer than 50 full-time equivalent employees, the employer mandate could be avoided, right?  Wrong.

Under Code §414, a commonly owned group of entities – also known as a controlled group – may be treated as a single employer in certain circumstances. Both the proposed and final employer mandate regulations incorporate the provisions of Code §414.  This means that all of the employees of each entity within a controlled group must be counted for determining whether or not an employer has 50 or more full-time equivalent employees, and is subject to the employer mandate

Employers who are a subsidiary of a parent company, employers who own subsidiary companies, or employers who are owned by individual owners who have ownership in other companies should consult their attorney regarding whether or not the entity is part of a controlled group.  If the answer is yes, the employer mandate may apply even though the employer employs less than 50 full-time equivalent employees within a single corporate entity.

#4: Failing to Identify and Measure Variable Hour Employees

Healthcare reform presents many complex issues and challenges for employers, but one of the most difficult items is the Look-back Measurement Method for variable hour and seasonal employees.  A variable hour employee is an employee that the employer does not reasonably expect to work an average of 30 hours or more per week when that employee is hired.  Many employers have an internal definition of full-time that is something more than 30 hours per week – it could be 32 hours, 36 hours or 40 hours.  In this scenario, employers often ask if they can measure employees working fewer hours than what their internal definition of full-time requires, or measure employees whose hours vary from week to week but are always above 30.

For purposes of healthcare reform compliance, internal employer definitions of full-time are disregarded.  Employees reasonably expected to work an average of 30 hours per week when hired should be counted as full-time employees, regardless of the employer’s internal definition of full-time.  If an employee is expected to work fewer than 30 hours per week, the employer should be prepared to administer either the Look-back Measurement Method or the Monthly Measurement Method for that employee.

Failing to identify whether an employee is full-time or variable hour may throw off an employer’s size calculation, which may impact the availability of transition relief and penalty calculation.  Likewise, a failure to offer coverage to an individual who is considered full-time under the rules can expose an employer to unanticipated penalties.

#3: Classifying Short Term Workers as Seasonal

In the proposed regulations, the IRS and Treasury recognized that the rules are difficult to apply to certain categories of employees, particularly seasonal employees.  However, the Agencies provided very little guidance as to the meaning of seasonal under the rules.  In fact, the proposed regulations allowed employers to adopt a reasonable definition of a seasonal employee.  Employers, industry stakeholders and others clamored for a more concrete definition of a seasonal employee, and the Agencies provided one in the final regulations.

Under the final regulations, a seasonal employee is an employee whose customary annual employment is 6 months or less, and whose position begins about the same time each year.  Employers have adopted any variety of internal definitions of seasonal, and not all of these definitions align with the definition in the regulations.  Employers in some industries hire “seasonal” employees to work 8 or 10 months out of the year.  An employee who works 8 or 10 months out of the year is NOT a seasonal employee under the final employer mandate regulations.  Likewise, an employee who works 6 months or less, but whose position does not begin at a consistent time each year, is NOT a seasonal employee.  These employees are likely considered short-term employees under the rules and should be offered coverage if working full-time.

#2: Misclassifying Independent Contractors and/or Temporary Staffers

To avoid penalties, employers are required to offer coverage to their “common law” full-time employees. An individual is a common law employee of a company if the company has the right to “control and direct the individual who performs the work, not only as the result to be accomplished by the work but also as to the details and means by which that result is accomplished.” Wait…do employers who pay some individuals with a Form 1099 have to worry about this?  The answer is yes. If workers paid with a Form 1099 should actually be employees and are classified incorrectly as independent contractors, the employer could be on the hook for an offer of coverage.

When it comes to temporary staffers, an individual might be issued a Form W-2 by one company, but another company has the right to control and direct that individual as to what job needs to be done and how to do it.  Here, the company that has the right to control and direct that individual has the obligation to offer coverage, even though it is not the employer for payroll purposes.  There are rules that allow the client employer to take credit for an offer of coverage made by a staffing agency, but the arrangement between the client employer and the staffing agency must meet certain requirements.

There are specific rules that apply in this situation (the IRS has a 20 factor test!) and the results of the analysis may vary depending on the facts of the particular arrangement.  A failure to properly identify common law employees will impact an employer’s size calculation and may result in increased penalty exposure. In addition to the complications presented by healthcare reform, the Department of Labor and the IRS have active initiatives to identify individuals who have been misclassified, often with hefty fines and other consequences for the employer.

#1:  Failing to Comply on the Correct Date

The IRS and Treasury issued a plethora of transition relief rules for employers when the final regulations were published.  The final regulations modify and carry forward some of the transition relief rules contained in the proposed rules, but also add new transition relief rules.  A “delay” of the employer mandate until 2016 for employers with 50 to 99.9 full-time equivalent employees was widely publicized as a result of one of these transition rules.  However, this “delay” comes with a few strings attached.  Employers of this size who do not currently offer a plan, or who offer a plan but make significant changes to the benefits or employer contributions may not qualify for this delay.

The final regulations also contain transition relief rules for non-calendar year plans.  Non-calendar year plans may escape penalties for the months prior to the start of their 2015 plan year if certain conditions are met. If an employer either does not offer a plan or does not meet the required conditions, the employer may be penalized beginning January 1, 2015.

There is additional transition relief for employers who do not currently offer a plan, and other rules that modify the calculation of the penalties under Code 4980H for the 2015 calendar year.  Determining the date on which penalties may begin to apply if not in compliance, and how much exposure an employer may have, is a crucial step in developing a strategy to avoid penalties or mitigate the impact of the employer mandate.  Employers should work closely with an attorney or benefits consultant to determine the appropriate compliance date.

Now What?

More than 400 public comments urged the IRS and Treasury to provide rules or additional guidance regarding numerous situations in the employer mandate final regulations. The Agencies did just that, resulting in a new set of rules more complicated than the first.  Avoiding penalties may require changes to internal recordkeeping systems, personnel management, and budgetary planning.  Many of these changes cannot be accommodated overnight… or in the span of a few weeks.

For employers who have not analyzed how the employer mandate applies, the time to determine the best strategy for managing the mandate is now and the consultants at HCW are ready to help.

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MLR Rebate Checks May be a Little Smaller in the Summer 2015 http://healthcarereformdigest.com/mlr-rebate-checks-may-little-smaller-summer-2015 http://healthcarereformdigest.com/mlr-rebate-checks-may-little-smaller-summer-2015#respond Mon, 17 Mar 2014 18:54:35 +0000 http://healthcarereformdigest.com/?p=991 Many news outlets are reporting on the break the administration plans to give to insurers. (See the Kaiser report here.) The break is expected to come in the form of an adjustment to the MLR calculations. The Affordable Care Act (ACA) requires insurance carriers to maintain a certain medical loss ratio (MLR). The MLR requires carriers […]

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Man holding tiny dollar billsMany news outlets are reporting on the break the administration plans to give to insurers. (See the Kaiser report here.) The break is expected to come in the form of an adjustment to the MLR calculations.

The Affordable Care Act (ACA) requires insurance carriers to maintain a certain medical loss ratio (MLR). The MLR requires carriers to spend a defined percentage of premium dollars collected on clinical services and healthcare quality improvement. If the percentage is not met, the carrier is required to rebate a portion of the premiums collected. The rebate is provided to the plan or plan sponsor (generally the employer), which is then responsible for distribution of the rebate to plan participants. 

Currently, if a carrier fails to spend at least 85% of each premium dollar (80% in the small group market) on clinical services and healthcare quality improvement during the calendar year, a rebate must be provided to the plan or plan sponsor by August of the following year. The carriers are also required to provide notice of anticipated rebates to group policyholders and participants.  In North Carolina, United Healthcare, Coventry and Cigna distributed rebates for the 2012 calendar year for some, but not all, products. BCBS of NC and Aetna did not issue rebates for the 2012 calendar year.

In a final rule issued on March 11, 2014 by the Department of Health & Human Services (HHS) (the Notice of Benefit and Payment Parameters for 2015), the administration informed of its intention to propose amendments to the MLR regulations in the future. Specifically, HHS “intend[s] to propose standardized methodologies to take into account the special circumstances of issuers associated with the initial open enrollment and other changes to the market in 2014, including incurred costs due to technical problems during the launch of the State and Federal Exchanges.” In plain English, this means that HHS intends to adjust downward the percentage of premium dollars that carriers are required to spend on clinical services and healthcare quality improvement to make up for the added administrative burden imposed upon carriers required to keep up with the delays due to the bumpy roll-out of the Exchange (aka Marketplace). The relief is expected to be only temporary, and it is unclear when the rules will be proposed.

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Obama Administration Extends “Keep Your Plan” Health Insurance Transition Policy for Two More Years http://healthcarereformdigest.com/obama-administration-extends-keep-plan-health-insurance-transition-policy-two-years http://healthcarereformdigest.com/obama-administration-extends-keep-plan-health-insurance-transition-policy-two-years#respond Thu, 06 Mar 2014 22:17:55 +0000 http://healthcarereformdigest.com/?p=967 On March 5, 2014, after several days of speculation, the Obama Administration announced a two year extension of a policy designed to allow individuals and small employers to extend plans slated to be canceled due to noncompliance with certain Patient Protection and Affordable Care Act (PPACA) requirements.  A one year reprieve for canceled plans was […]

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time to planOn March 5, 2014, after several days of speculation, the Obama Administration announced a two year extension of a policy designed to allow individuals and small employers to extend plans slated to be canceled due to noncompliance with certain Patient Protection and Affordable Care Act (PPACA) requirements.  A one year reprieve for canceled plans was initially introduced in November of 2013.

Like the November 2013 policy, this transitional policy delegates the decision to implement the policy to the individual states and insurance carriers operating in the individual and small group markets within those states.  If a state adopts the policy and an insurance carrier continues to sell these plans in the individual and small group markets, plans that are not compliant with certain PPACA requirements may survive into 2016.  If such plans are renewed, they will not be considered out of compliance with PPACA’s adjusted community rating requirements, guaranteed availability and renewability requirements, prohibitions on pre-existing condition exclusions (individual market only), and the Essential Health Benefits and cost sharing requirements, among others.

Interestingly, the transitional policy issued on March 5, 2014 extends to employers with 51 to 100 full-time equivalent employees who are currently considered “large” by PPACA’s definition, but will be considered “small” when the definition of small employer expands to include employers with 100 or fewer full-time equivalent employees in 2016.  Employers in this size segment may renew their large group plan beginning on or before October 1, 2016 without being considered out of compliance with the PPACA requirements specific to plans sold in the small group market.  The transitional policy also contemplates an additional one year extension if appropriate.

Carriers that decide to renew policies in the individual or small group markets that are out of compliance with the PPACA requirements specified in the policy must provide a notice to each affected individual and small employer for each policy year through October 1, 2016.  The relevant notices are included in the transitional policy, which may be found here.

The IRS, Treasury, Department of  Labor, and Department of Health and Human Services also issued regulatory guidance in addition to this transitional policy.  Those final regulations provide information on the transitional reinsurance and risk corridor programs, the open enrollment period for the Health Insurance Marketplaces in 2015, and the employer health insurance reporting requirements to individuals and the IRS.  A number of news outlets reported on the regulatory push, including Kaiser Health News, The Hill’s HealthWatch Blog, and Politico.  We plan to address the employer reporting requirements in a future post.

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Employer Mandate Delay – Webinar Recording http://healthcarereformdigest.com/employer-mandate-delay-webinar-recording http://healthcarereformdigest.com/employer-mandate-delay-webinar-recording#respond Thu, 27 Feb 2014 18:29:54 +0000 http://healthcarereformdigest.com/?p=920 Did you miss the live webinar we held on the delay of the Employer Mandate? Listen in on this recorded presentation where we talk about the new Final Regulations given on February 10, 2014.  Here we discuss the new Transition Relief for employers of certain sizes and those with non calendar year plans, show the special […]

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Did you miss the live webinar we held on the delay of the Employer Mandate? Listen in on this recorded presentation where we talk about the new Final Regulations given on February 10, 2014.  Here we discuss the new Transition Relief for employers of certain sizes and those with non calendar year plans, show the special rules for seasonal and short-term employees, and give some clarification on certain categories of employees.

Get Reform Ready Webinar Series

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Let’s dig in: Join us tomorrow for a webinar on the Employer Mandate final regulations! http://healthcarereformdigest.com/lets-dig-join-us-tomorrow-webinar-employer-mandate-final-regulations http://healthcarereformdigest.com/lets-dig-join-us-tomorrow-webinar-employer-mandate-final-regulations#respond Tue, 18 Feb 2014 21:39:19 +0000 http://healthcarereformdigest.com/?p=912 Last week, the IRS and Treasury published the final regulations on the employer shared responsibility provision, also known as the employer mandate or Play or Pay, of the Patient Protection and Affordable Care Act (PPACA).  Since publication, Katharine Marshall and I  have spent a significant amount of time combing through the regulations to understand what has […]

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dig in

Last week, the IRS and Treasury published the final regulations on the employer shared responsibility provision, also known as the employer mandate or Play or Pay, of the Patient Protection and Affordable Care Act (PPACA).  Since publication, Katharine Marshall and I  have spent a significant amount of time combing through the regulations to understand what has changed, what has stayed the same, what questions are still unanswered, and what new questions have been created.  There is a lot of information to uncover! While we still have a ways to go before we see the true impact of these new rules on employers, it is important that employers begin to understand the new rules. Some employers may still face penalties if they are not in compliance on January 1, 2015.  To that end, we will be digging into the new rules and providing an overview of many of the issues addressed in the final regulations in a complimentary webinar entitled “Employer Mandate Delay: Overview of New Final Regulations.”  We will discuss the various types of transition relief provided in the final regulations, new information on seasonal and other special categories of employees, clarifications to the affordability safe harbors, and other information impacting employers.

The webinar begins at 10:00 AM EST on Wednesday, February 19th.  Please join us!  Click here to register.

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The Other Shoe has (Finally) Dropped: Treasury Issues Final Regulations, Announces Another Delay of PPACA’s Employer Mandate http://healthcarereformdigest.com/shoe-finally-dropped-treasury-issues-final-regulations-announces-another-delay-ppacas-employer-mandate http://healthcarereformdigest.com/shoe-finally-dropped-treasury-issues-final-regulations-announces-another-delay-ppacas-employer-mandate#respond Mon, 10 Feb 2014 23:18:24 +0000 http://healthcarereformdigest.com/?p=897 After more than a year of anticipation, on Monday, February 10, 2014, the US Treasury Department issued final regulations and announced yet another delay of the Patient Protection and Affordable Care Act’s Employer Shared Responsibility provision, which requires employers with more than 50 employees to offer health insurance coverage to full-time workers or pay a […]

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Now or Later CheckboxAfter more than a year of anticipation, on Monday, February 10, 2014, the US Treasury Department issued final regulations and announced yet another delay of the Patient Protection and Affordable Care Act’s Employer Shared Responsibility provision, which requires employers with more than 50 employees to offer health insurance coverage to full-time workers or pay a penalty.  Notably, the final regulations include welcome transition relief for employers with fewer than 100 full time equivalent employees and for employers with 100 or more full time equivalent employees.  Employers with fewer than 100 full time equivalent employees will not be required to offer health insurance coverage to full time employees until January 1, 2016 if the employer meets certain conditions.  Employers with 100 or more full time equivalent employees must offer coverage to at least 70% of their full-time employees in 2015.  This will increase to 95% in 2016.  The final regulations also include other transition relief for non-calendar year plans.

Other important changes and clarifications include the following:

  • COMMONLY OWNED ENTITIES: The final regulations have retained the rule applying the aggregation rules under the IRS Code to employers.  This means that all employees within a controlled group of corporations or affiliated service groups will be counted for determining the applicable large employer member’s size.  However, penalties will still be calculated on an entity-by-entity basis.
  • ROUNDING: When calculating full time equivalent employees, employers may round to the nearest one hundredth.
  • HOURS OF SERVICE: Equivalency methods for calculating an employee’s hours of service do not require that an employee must have actually worked one hour during a day or week to be credited with 8 or 40 hours respectively for that period.  Employees must be credited with hours of service for all paid hours.
  • VOLUNTEERS: Hours worked by a “bona fide volunteer” are not treated as hours of service.  A bona fide volunteer includes any volunteer who is an employee of a government entity or an organization described in section 501(c) that is exempt from taxation under section 501(a) whose only compensation from that entity or organization is in the form of (i) reimbursement for (or reasonable allowance for) reasonable expenses incurred in the performance of services by volunteers, or (ii) reasonable benefits (including length of service awards), and nominal fees, customarily paid by similar entities in connection with the performance of services by volunteers.
  • STUDENT EMPLOYEES: Hours of service for section 4980H purposes do not include hours of service performed by students in positions subsidized through the federal work study program or a substantially similar program of a State or political subdivision thereof. However, the final regulations do not include a general exception for student employees. All hours of service for which student employee of an educational organization (or of an outside employer) is paid or entitled to payment in a capacity other than through the federal work study program (or a State or local government’s equivalent) are required to be counted as hours of service.
  • ADJUNCT FACULTY: Employers of adjunct faculty are required to use a reasonable method for crediting hours of service.  However, the IRS and Treasury have proposed multiples that might be applied to credit additional hours of service for each credit hour or hour of classroom time assigned to the adjunct faculty member.
  • DEFINITION OF FULL-TIME EMPLOYEE:  The hours of service threshold for a full-time employee remains at an average of 30 hours of service per week.
  • SEASONAL EMPLOYEES:  A seasonal employee means an employee in a position for which the customary annual employment is six months or less.
  • BREAKS IN SERVICE: The length of the break in service required before a returning employee may be treated as a new employee is reduced from 26 weeks to 13 weeks (except for educational organization employers).
  • AFFORDABILITY SAFE HARBORS:  Employers are not permitted to use the prior year’s Form W-2 to determine affordability under the Form W-2 safe harbor.  Additionally, no accommodation was provided for tipped employees under the Rate of Pay safe harbor.  The IRS and Treasury advise employers with tipped employees to use either the Form W-2 safe harbor or the Federal Poverty Line safe harbor.
  • PARTICIPATION:  In the large group market, a minimum participation requirement cannot be used to deny guaranteed issue.
  • STAFFING AGENCIES:  Health insurance coverage offered by a staffing agency to its employees (in the typical case in which the staffing agency or PEO is not the common law employer of the employee) may be treated as an offer of coverage made on behalf of the client employer if the offer of coverage meets certain requirements.
  • PENALTY CALCULATION: The following two questions in the IRS Q&A also make an important change to the way penalty amounts will be calculated for employers with 100 or more full time equivalent employees in 2015. Notice the (minus 80) and (minus up to 80) parentheticals in the third line of each answer below:

38.  For 2015, if an employer with at least 100 full-time employees (including full-time equivalents) that does not offer coverage or that offers coverage to fewer than 70% of its full-time employees (and their dependents) owes an Employer Shared Responsibility payment, how is the amount of the payment calculated?

For any calendar month in 2015 or any calendar month in 2016 that falls within an employer’s non-calendar 2015 plan year, if an applicable large employer with at least 100 full-time employees (including full-time equivalents) does not offer coverage to at least 70% of its full-time employees (and their dependents), it owes an Employer Shared Responsibility payment equal to the number of full-time employees the employer employed for the month (minus 80) multiplied by 1/12 of $2,000, provided that at least one full-time employee receives a premium tax credit for that month.  See questions 24 and 25.

39.  For 2015, if an employer with at least 100 full-time employees (including full-time equivalents) offers coverage to at least 70% of its full-time employees, and, nevertheless, owes an Employer Shared Responsibility payment, how is the amount of the payment calculated?

For an employer with at least 100 full-time employees (including full-time equivalents) that offers coverage to at least 70% of its full-time employees in 2015, but has one or more full-time employees who receive a premium tax credit, the payment is computed separately for each month. The amount of the payment for the month equals the number of full-time employees who receive a premium tax credit for that month multiplied by 1/12 of $3,000. The amount of the payment for any calendar month is capped at the number of the employer’s full-time employees for the month (minus up to 80) multiplied by 1/12 of $2,000. See questions 24 and 25

 

The 227 pages of guidance issued contain many clarifications and additional rules – the bullets in this posting only provide highlights from the final regulations.  Please consult your legal counsel regarding the impact these rules might have on your organization.  You may find the Treasury Fact Sheet here and the final regulations herePolitico and the Washington Post were the first to report. We will continue to post additional insight into the impact of these final regulations in the future.

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Attention Employers! DOL Publishes Notice of Coverage Options with Updated Expiration Date http://healthcarereformdigest.com/attention-employers-dol-publishes-notice-coverage-options-updated-expiration-date http://healthcarereformdigest.com/attention-employers-dol-publishes-notice-coverage-options-updated-expiration-date#respond Wed, 05 Feb 2014 16:44:50 +0000 http://healthcarereformdigest.com/?p=876 The U.S. Department of Labor (DOL) has very quietly published a Notice of Coverage Options with an updated expiration date on its website.  The new copy of the notice contains an expiration date of January 31, 2017, but it does not appear that the DOL has changed the substance of the notice.  All employers subject to […]

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The U.S. Department of Labor (DOL) has very quietly published a Notice of Coverage Options with an updated expiration date on its website.  The new copy of the notice contains an expiration date of January 31, 2017, but it does not appear that the DOL has changed the substance of the notice.  All employers subject to the Fair Labor Standards Act were required to provide this notice to all employees, regardless of status, by October 1, 2013.  Although there is no requirement to distribute this notice to all employees on an annual basis, employers must also provide all new employees with a copy of the notice within fourteen days of their start date.  There are two separate forms: one for employers who offer a group health plan to some or all employees, and another for employers who do not offer health insurance at all.

Employers should begin using the current version of the notice to distribute to new employees.  The prior version of the notice contained an expiration date of November 30, 2013.  The new notice templates may be found in both English and Spanish on the DOL website.

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IRS Publishes New Proposed Regulations on the Individual Mandate and Minimum Essential Coverage http://healthcarereformdigest.com/irs-publishes-new-proposed-regulations-individual-mandate-minimum-essential-coverage http://healthcarereformdigest.com/irs-publishes-new-proposed-regulations-individual-mandate-minimum-essential-coverage#respond Fri, 24 Jan 2014 21:09:32 +0000 http://healthcarereformdigest.com/?p=873 The IRS and Treasury have published a new Notice of Proposed Rulemaking and Notice of Hearing providing additional clarifications on the Individual Mandate and Minimum Essential Coverage requirements under the Patient Protection and Affordable Care Act (PPACA).  This NPRM provides a number of clarifications and limited exemptions from the individual mandate in 2014 for individuals enrolled […]

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The IRS and Treasury have published a new Notice of Proposed Rulemaking and Notice of Hearing providing additional clarifications on the Individual Mandate and Minimum Essential Coverage requirements under the Patient Protection and Affordable Care Act (PPACA).  This NPRM provides a number of clarifications and limited exemptions from the individual mandate in 2014 for individuals enrolled in coverage for the medically needy, families receiving benefits as part of an expansion population under Section 1115(a)(2) of the Social Security Act, and individuals enrolled only in Space Available or Line-of-Duty Care under TRICARE.  Individuals enrolled in these types of care will not be penalized in months during 2014 because it was not clear during the 2014 open enrollment period whether or not these benefits would be considered Minimum Essential Coverage.  Minimum Essential Coverage is the type of coverage that must be maintained for individuals to avoid the individual mandate penalties.

The IRS and Treasury have also provided several other clarifications.  The Agencies have confirmed that Minimum Essential Coverage excludes any coverage that consists solely of excepted benefits, such as most health FSAs, stand-alone dental or vision plans, and certain fixed indemnity plans.  The Agencies have also solicited comments on how to treat employer contributions provided through Section 125 Cafeteria Plans that employees may not elect to receive as a taxable benefit for affordability purposes.  The comments and resolution to this issue will be important for those employers providing flex credits through Section 125 Cafeteria Plans that employees are not allowed to cash out.  The NPRM also confirms that the only wellness incentives that are presumed to be earned for affordability purposes are those related to tobacco.  All other incentives earned through a wellness program, whether for participation or for meeting another health standard such as BMI, are disregarded in determining affordability.

Finally, the Agencies clarified that individual mandate penalties are assessed on a monthly basis.  The penalty for each month will be 1/12 of a flat dollar amount ($95 in 2014) or a percentage (1% of household income in 2014).  A public hearing will be held on May 21, 2014.  For a copy of these proposed regulations, click here.

 

 

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