The post HHS Specifies End of PCIP Coverage as “Exceptional Circumstance” For Exchange Special Enrollment appeared first on The North Carolina Healthcare Reform Digest.
]]>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.
The post HHS Specifies End of PCIP Coverage as “Exceptional Circumstance” For Exchange Special Enrollment appeared first on The North Carolina Healthcare Reform Digest.
The post To Be, or Not To Be (Compatible With an HSA When Enrolled in a Health FSA), That Is The Question appeared first on The North Carolina Healthcare Reform Digest.
]]>HDHPs 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:
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].
The post To Be, or Not To Be (Compatible With an HSA When Enrolled in a Health FSA), That Is The Question appeared first on The North Carolina Healthcare Reform Digest.
The post PPACA’s Employer Mandate: Top 6 Play or Pay Traps to Avoid appeared first on The North Carolina Healthcare Reform Digest.
]]>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.
The post PPACA’s Employer Mandate: Top 6 Play or Pay Traps to Avoid appeared first on The North Carolina Healthcare Reform Digest.
The post MLR Rebate Checks May be a Little Smaller in the Summer 2015 appeared first on The North Carolina Healthcare Reform Digest.
]]>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.
The post MLR Rebate Checks May be a Little Smaller in the Summer 2015 appeared first on The North Carolina Healthcare Reform Digest.
The post Obama Administration Extends “Keep Your Plan” Health Insurance Transition Policy for Two More Years appeared first on The North Carolina Healthcare Reform Digest.
]]>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.
The post Obama Administration Extends “Keep Your Plan” Health Insurance Transition Policy for Two More Years appeared first on The North Carolina Healthcare Reform Digest.
The post Employer Mandate Delay – Webinar Recording appeared first on The North Carolina Healthcare Reform Digest.
]]>The post Employer Mandate Delay – Webinar Recording appeared first on The North Carolina Healthcare Reform Digest.
The post Let’s dig in: Join us tomorrow for a webinar on the Employer Mandate final regulations! appeared first on The North Carolina Healthcare Reform Digest.
]]>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.
The post Let’s dig in: Join us tomorrow for a webinar on the Employer Mandate final regulations! appeared first on The North Carolina Healthcare Reform Digest.
The post The Other Shoe has (Finally) Dropped: Treasury Issues Final Regulations, Announces Another Delay of PPACA’s Employer Mandate appeared first on The North Carolina Healthcare Reform Digest.
]]>Other important changes and clarifications include the following:
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 here. Politico 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.
The post The Other Shoe has (Finally) Dropped: Treasury Issues Final Regulations, Announces Another Delay of PPACA’s Employer Mandate appeared first on The North Carolina Healthcare Reform Digest.
The post Attention Employers! DOL Publishes Notice of Coverage Options with Updated Expiration Date appeared first on The North Carolina Healthcare Reform Digest.
]]>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.
The post Attention Employers! DOL Publishes Notice of Coverage Options with Updated Expiration Date appeared first on The North Carolina Healthcare Reform Digest.
The post IRS Publishes New Proposed Regulations on the Individual Mandate and Minimum Essential Coverage appeared first on The North Carolina Healthcare Reform Digest.
]]>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.
The post IRS Publishes New Proposed Regulations on the Individual Mandate and Minimum Essential Coverage appeared first on The North Carolina Healthcare Reform Digest.