Affordable Care Act Review

Affordable Care Act Review

Who Are Your Form 1095-C Employees?

Posted in Affordable Care Act, Employee Leasing, Government Employers, Independent Contractors, Private Employers

Beginning in 2016, Code § 6056 requires large employers to complete, file with IRS and deliver to employees a Form 1095-C for each full-time employee offered minimum essential coverage for each 2015 coverage month.  So, who are your Form 1095-C employees?  Might they include people not on your payroll?

Here’s the relevant IRS rule defining “full-time employee” under Code § 6056:

(6) Full-time employee. The term full-time employee has the same meaning as in section 4980H and § 54.4980H–1(a)(21) of this chapter, as applied to the determination and calculation of liability under section 4980H(a) and (b) with respect to any individual employee, and not as applied to the determination of status as an applicable large employer, if different.

26 CFR § 301.6056-1(b)(6).  And here is the cited sub-section 21 of the § 4980H rules:

(21) Full-time employee—(i) In general. The term full-time employee means, with respect to a calendar month, an employee who is employed an average of at least 30 hours of service per week with an employer. For rules on the determination of whether an employee is a full-time employee, including a description of the look-back measurement method and the monthly measurement method, see § 54.4980H–3. The look-back measurement method for identifying full-time employees is available only for purposes of determining and computing liability under section 4980H and not for the purpose of determining status as an applicable large employer under § 54.4980H–2.

(ii) Monthly equivalency. Except as otherwise provided in paragraph (a)(21)(iii) of this section, 130 hours of service in a calendar month is treated as the monthly equivalent of at least 30 hours of service per week, and this 130 hours of service monthly equivalency applies for both the look-back measurement method and the monthly measurement method for determining full-time employee status.

(iii) Determination of full-time employee status using weekly rule under the monthly measurement method. Under the optional weekly rule set forth in § 54.4980H–3(c)(3), full-time employee status for certain calendar months is based on hours of service over four weekly periods and for certain other calendar months is based on hours of service over five weekly periods. With respect to a month with four weekly periods, an employee with at least 120 hours of service is a full-time employee, and with respect to a month with five weekly periods, an employee with at least 150 hours of service is a full-time employee. For purposes of this rule, the seven continuous calendar days that constitute a week (for example Sunday through Saturday) must be consistently applied for all calendar months of the calendar year.

26 CFR § 54.4980H-1(a)(21).  But that just tells you which “employees” are full-time.  “Employee” is defined in the preceding sub-section 15:

(15) Employee. The term employee means an individual who is an employee under the common-law standard. See § 31.3401(c)–1(b). For purposes of this paragraph (a)(15), a leased employee (as defined in section 414(n)(2)), a sole proprietor, a partner in a partnership, a 2-percent S corporation shareholder, or a worker described in section 3508 is not an employee.

26 CFR § 54.4980H-1(a)(15).  The IRS uses a multi-factor test to identify common-law employees who have been errantly omitted from an employer’s payroll.  Most often, the outcome hinges on the employer’s right to control how, where and when the worker works.  The referenced rule sums it up this way:

(b) Generally the relationship of employer and employee exists when the person for whom services are performed has the right to control and direct the individual who performs the services, not only as to the result to be accomplished by the work but also as to the details and means by which that result is accomplished. That is, an employee is subject to the will and control of the employer not only as to what shall be done but how it shall be done. In this connection, it is not necessary that the employer actually direct or control the manner in which the services are performed; it is sufficient if he has the right to do so. The right to discharge is also an important factor indicating that the person possessing that right is an employer. Other factors characteristic of an employer, but not necessarily present in every case, are the furnishing of tools and the furnishing of a place to work to the individual who performs the services. In general, if an individual is subject to the control or direction of another merely as to the result to be accomplished by the work and not as to the means and methods for accomplishing the result, he is not an employee.

26 CFR § 31.3401-(c)(1)(b).  Sub-section (e) then warns:  “If the relationship of employer and employee exists, the designation or description of the relationship by the parties as anything other than that of employer and employee is immaterial. Thus, if such relationship exists, it is of no consequence that the employee is designated as a partner, coadventurer, agent, independent contractor, or the like.”  Code § 414(n)(2), with our emphasis, reads:

(2) Leased employee

For purposes of paragraph (1), the term “leased employee” means any person who is not an employee of the recipient and who provides services to the recipient if—

(A) such services are provided pursuant to an agreement between the recipient and any other person (in this subsection referred to as the “leasing organization”),

(B) such person has performed such services for the recipient (or for the recipient and related persons) on a substantially full-time basis for a period of at least 1 year, and

(C) such services are performed under primary direction or control by the recipient.

Commonly, workers are leased for less than one year, such as in temp-to-perm staffing arrangements.  Section 3508 relates to real estate agents.

A long slog, we realize, but a necessary one to show you why you may have Form 1095-C reporting obligations with respect to people who are not on your payroll.  But so what? Here’s what.  Code § § 6721 and 6722 state the penalties for failure to file and deliver your Forms 1095-C as required by Code § 6056.  We quote just the main penalty statements from the statute:

(a) Imposition of penalty

(1) In general

In the case of a failure described in paragraph (2) by any person with respect to an information return, such person shall pay a penalty of $100 for each return with respect to which such a failure occurs, but the total amount imposed on such person for all such failures during any calendar year shall not exceed $1,500,000.

(2) Failures subject to penalty

For purposes of paragraph (1), the failures described in this paragraph are—

(A) any failure to file an information return with the Secretary on or before the required filing date, and

(B) any failure to include all of the information required to be shown on the return or the inclusion of incorrect information.

26 U.S.C. § 6721(a).

(a) Imposition of penalty

(1) General rule

In the case of each failure described in paragraph (2) by any person with respect to a payee statement, such person shall pay a penalty of $100 for each statement with respect to which such a failure occurs, but the total amount imposed on such person for all such failures during any calendar year shall not exceed $1,500,000.

(2) Failures subject to penalty

For purposes of paragraph (1), the failures described in this paragraph are—

(A) any failure to furnish a payee statement on or before the date prescribed therefor to the person to whom such statement is required to be furnished, and

(B) any failure to include all of the information required to be shown on a payee statement or the inclusion of incorrect information.

26 U.S.C. § 6722(a).  So, missing one common law employee when you generate your Forms 1095-C in early 2016 could cost as little as $200.  Missing 100 could cost $20,000.  You’d need to miss 15,000 to reach the $3,000,000 annual cap.  But any audit of such errors might also identify payroll taxes that should have been withheld from the wages of people misclassified as independent contractors.  There could be collateral damage under wage and hour laws and benefit plan participation rules.

Are you planning to complete, file and deliver your Forms 1095-C manually?  Does your automated process cover all Form 1095-C employees?  These are questions that large employers should answer in 2015.

CMS Approves Another Hybrid Medicaid Expansion – Indiana

Posted in Affordable Care Act, Coverage Mandates, Exchanges, Providers - For Profit, Providers - Not-for-Profit

In a January 27, 2015 press release, the Centers for Medicare and Medicaid Services (CMS) announced approval of most of an ACA Medicaid expansion proposal called the Healthy Indiana Plan.  Here are highlights of approved elements:

  • Begins February 1, 2015, funded 100% by HHS through 2016, the federal share to decline thereafter;
  • Beneficiary contributions to “POWER” accounts may be used to pay for some health care expenses and if contributions are required, cost sharing will be required only for emergency room services (some subject to an $8 copay for the first ER visit, $25 for the second);
  • Base and enhanced coverages will include all ACA Essential Health Benefits;
  • No essential benefits premium default lock-out for those under 100% of the FPL.

The agreement forbids work requirements, enrollment caps, premium requirements for those under 100% of FPL and premium payments exceeding 2% of income.  The eligible expansion population is estimated to number about 350,000.

Full-Time Substitute Teachers?

Posted in Affordable Care Act, Coverage Mandates, Government Employers, Private Employers, Taxes

An enforcement agency writes a rule to solve a peculiar problem.  Applied as written to other situations, the rule makes less sense.  Will the agency restrict enforcement to those situations clearly referenced in the rule, or will the agency enforce the rule more broadly?  Among ACA watchers, this is a common theme.  Here’s an example.

Do the IRS Employer Shared Responsibility Cost final rules convert substitutes into full-time teachers for employer mandate purposes?  Suppose that the Metropolis School District hires Sarah, a long-time substitute, to sub for Martha during Martha’s six week maternity leave and, during that period, credits Sarah with 280 hours of service.  Martha then returns and Sarah is off work for ten weeks.  At the end of those ten weeks, the  district looks back and measures its part-time and variable hour employees to determine whom it must treat as full-time during the associated stability period.  Sarah averaged just 10.77 weekly hours during the measurement period.  How could she be considered full-time?  Here’s how.

The most recent ten weeks meet the definition of “employment break period” in 26 CFR § 54.4980H-1(a)(17) -

The term employment break period means a period of at least four consecutive weeks (disregarding special unpaid leave), measured in weeks, during which an employee of an educational organization is not credited with hours of service for an applicable large employer.

Ok, ok, but this is talking only about summer breaks, right?  Not so fast.

Because Sarah’s ten weeks off work  fell short of twenty-six consecutive weeks, the district could not treat Sarah as a new hire upon resumption of services in week  eleven. 26 CFR § 54.4980H-3(d)(6)(ii)(A).  So, it calculates her average weekly hours of service during the measurement period.  The hours of service averaging rule for school employees reads this way:

[A]n educational organization employer determines the employee’s average hours of service for a measurement period by computing the average after excluding any special unpaid leave and any employment break period during the measurement period.       Alternatively . . . the employer may choose to treat the employee as credited with hours of service for any periods of special unpaid leave and any employment break period during that measurement period at a rate equal to the average weekly rate at which  the employee was credited with hours of service during the weeks in the measurement period that are not part of the period of special unpaid leave or an employment break period.  Notwithstanding the preceding two sentences, no more than 501 hours of       service during employment break periods in a calendar year are required to be excluded (under the first sentence) or credited (under the second sentence) by an educational organization, provided that this 501-hour limit does not apply to . . . special unpaid leave.

26 CFR § 54.4980H-3(d)(6)(ii)(B).  The same section goes on to explain that if the measurement period is shorter than six months, the calculation may be based on the six months ending on the last day of that measurement period. There follow two, barely relevant examples, addressing the summer break of a regular, full-time teacher.  The only textual reference to substitute teachers is implied, maybe, in the preamble’s note that teacher unions favored the rule because, among other things, it protects them by,  “curbing employer actions to prevent employees from attaining full-time employee status.”  79 Fed. Reg. 8,561 (Feb. 12, 2014).  Maybe that signals IRS intent to force schools to treat genuine substitutes as full-time for this purpose, in order to reduce the incentive to hire more subs and fewer regular teachers.  But whether or not the rules were written with this in mind, it seems that only substitutes needing more than 501 hours of measurement period boost will fall short of full-time status.  Thirty weekly average hours of service over a 26-week measurement period is 780.  Minus 501, a substitute teacher may earn full-time status with only 279 hours of service.  Sarah had 280 hours of service.

We’re not predicting that the IRS will enforce the rule this way in this circumstance.  But we don’t see why it couldn’t.  School districts beware.

Negotiating Employee Leasing Agreements

Posted in Affordable Care Act, Coverage Mandates, Employee Leasing, Private Employers, Taxes

Our clients include employee leasing firms and their employer customers. Sometimes, both ask us to explain their ACA exposures related to proposed lease revisions, which we cannot do. Professional ethics rules generally forbid lawyers to work both sides of the same deal. Maybe that explains why so many lawyers enter politics. But we can explain things for the public good (Latin, pro bono), so here we go.

Staffing firms are offering different solutions to the problems discussed here.  In our opinion, there is no “right” versus “wrong” way to address these issues.  There are only different sets of risks to take.   Our purpose here is to introduce you to those risks, briefly, so that you might choose wisely, based on your circumstances.

The leased employee exclusion from the “employee” definition in §54.4980H-1(a)(15) only covers those leased in full-time status for at least one year – the definition borrowed from Code § 414(n)(2). So, an employer that uses a leased worker full-time for longer than the maximum waiting period but less than one year  may have § 4980H tax exposure if it is the leased worker’s “common law employer.”  The IRS uses a many-factor test that typically turns on the customer employer’s control of leased workers.  Presciently, the employer mandate final rules offer a solution.

Our text is the .pdf version of IRS Employer Shared Responsibility Cost final rules, starting with this passage from the preamble, at page 8,566, middle column:

[I]f certain conditions are met, an offer of coverage to an employee performing services for an employer that is a client of a professional employer organization or other staffing firm (in the typical case in which the professional employer organization or staffing firm is not the common law employer of the individual) (referred to in this section IX.B of the preamble as a ‘‘staffing firm’’) made by the staffing firm on behalf of the client employer under a plan established or maintained by the staffing firm, is treated as an offer of coverage made by the client employer for purposes of section 4980H. For this purpose, an offer of coverage is treated as made on behalf of a client employer only if the fee the client employer would pay to the staffing firm for an employee enrolled in health coverage under the plan is higher than the fee the client employer would pay to the staffing firm for the same employee if the employee did not enroll in health coverage under the plan.

Here is the corresponding text of the actual rule, 26 C.F.R. § 54.4980H-4(b)(2), at Federal Register page 8,598 (left column)

For an offer of coverage to an employee performing services for an employer that is a client of a staffing firm, in cases in which the staffing firm is not the common law employer of the individual and the staffing firm makes an offer of coverage to the employee on behalf of the client employer under a plan established or maintained by the staffing firm, the offer is treated as made by the client employer for purposes of section 4980H only if the fee the client employer would pay to the staffing firm for an employee enrolled in health coverage under the plan is higher than the fee the client employer would pay the staffing firm for the same employee if that employee did not enroll in health coverage under the plan.

This presents a minor dilemma. To get credit for affordable, qualifying coverage offers made by the leasing firm, the customer employer must pay more for each employee who enrolls. How much more is not stated; we guess that the IRS wants the surcharge to reflect the actual cost of coverage. But the customer employer might rather not know who enrolled because, if it knows, it might be charged with retaliation when it ends that worker’s assignment.

We deem this a “minor” dilemma because the relevant ACA anti-retaliation rule protects an employee who, “Objected to, or refused to participate in, any activity, policy, practice, or assigned task that the employee (or other such person) reasonably believed to be in violation of any provision of title I of the Affordable Care Act (or amendment), or any order, rule, regulation, standard, or ban under title I of the Affordable Care Act (or amendment).” DOL has interpreted this to protect an employee objection, “based on a reasonable, but mistaken, belief that a violation of the relevant law has occurred.” 78 Fed. Reg. 13,226 (Feb. 27, 2013, left column). It’s not clear to us that enrollment in an employer’s group health plan fits this definition. Nevertheless, we expect claimants to test the limits of this ACA section and ERISA’s similar provision, which covers, “exercising any right . . . under the provisions of an employee benefit plan [ERISA] . . . or . . . interfering with the attainment of any right to which such participant may become entitled under the plan, [ERISA] . . . .”

A leasing firm might try to solve the dilemma by what we’ll call a straddle solution – i.e., charging just a bit extra for all who receive offers, regardless of who enrolls. That should reduce any retaliation exposure but does it allow the customer employer to claim § 4980H credit for the offers?

With our emphasis, the rule text seems pretty clear; credit is available “only if the fee the client employer would pay to the staffing firm for an employee enrolled in health coverage under the plan is higher than the fee the client employer would pay the staffing firm for the same employee if that employee did not enroll in health coverage under the plan.” The straddle solution charges the customer the same for all offer recipients. True, the customer’s labor costs might be identical, but the arrangement does not comply strictly with the rule as written. Therefore, the customer with a straddle arrangement may gain § 4980H tax exposure protection in order to reduce retaliation claim exposure.

Better solutions that come to mind are rather more cumbersome. For example, without identifying enrolled employees, the leasing firm could surcharge for each one assigned to the customer employer, submitting its records to confidential audit by a third party. But what if, to get §4980H credit, the customer employer must file and deliver a Form 1095-C for each of the leased workers? Though a subject for another day, we think that’s a reasonable conclusion, practically speaking. How might an employer do that without knowing who enrolled in the coverage offered by the leasing firm?

Responsible people on both sides of employee leasing arrangements need to spend time and attention on these issues.

SBC Updates for 2015

Posted in Affordable Care Act, Government Employers, Insurers and Brokers, Private Employers

In the December 30, 2015 Federal Register, DOL, HHS and IRS jointly proposed revised rules regarding Summary of Benefits and Coverage forms to be provided by insurers and group health plans beginning September 1,  2015. Concurrently, the enforcement agencies published a new SBC templateinstructions for its completion, a Glossary of terms and a fact sheet.  The preamble to the proposed rules usefully reminds us of existing obligations before explaining what’s new.  Here are a few items from each category.

Useful Reminders

Though enforced by different agencies with respect to different plan types, penalties for “failure to provide” can reach $1,000 per failure.  Each notice that was not timely provided to each participant or beneficiary may be deemed a separate failure.

If a mid-year plan change, especially a coverage or cost sharing change, will alter something on the most recent SBC, that change probably is a “material modification,” requiring 60 days’ advance notice before implementation.

If an Employee Assistance Plan qualifies as an excepted benefit, no separate SBC is required.  Briefly summarized, it can’t offer significant medical care, can’t be integrated or coordinated with a group health plan, must be free to participants, and can’t impose cost sharing.  If your EAP can’t pass that test, it needs changes or it needs an SBC.

New Items

Though SBC compliance is an ERISA fiduciary responsibility, a plan may delegate SBC compliance to a benefits administration consultant if the plan monitors the consultant’s performance, promptly cures its errors and communicates as needed with participants and beneficiaries.  This is a new safe harbor.

The new template shrinks to 2.5, double-sided pages, in order to make room for customized, helpful information.  Translations to Spanish, Chinese, Navajo and Tagalog will be maintained here.

 

 

. . . Better Not Cry; Better Not Use a Three Month Measurement Period, We’re Tellin’ You Why

Posted in Affordable Care Act, Coverage Mandates, Government Employers, Private Employers, Taxes

A reader recently asked us to comment on a consultant’s warning against a three month look-back measurement period.  We concur.  Here’s why.

The preamble to the IRS Employer Shared Responsibility Cost final rules said, “Under the look-back measurement method for ongoing employees, an applicable large employer member determines each ongoing employee’s full-time employee status by looking back at a standard measurement period of at least three months but not more than 12 months, as determined by the employer.”  79 Fed. Reg. 8,554 (Feb. 12, 2014).  Addressing comments about the three month measurement period, the preamble further said:

In general, under the proposed regulations, the minimum length of a measurement period is three months but the minimum length of a stability period for an employee who is a full-time employee based on hours of service in a measurement period is six months.  Commenters requested that a three month stability period be permitted if the employer uses a three-month measurement period and the employee is determined to be a full-time employee during the measurement period. The Treasury Department and the IRS remain concerned that permitting stability periods as short as three months for employees who are full-time employees based on hours of service in the measurement period could lead to employees moving in and out of employer coverage (and potentially Exchange coverage) multiple times during the year, which would be undesirable from both the employee’s and employer’s perspective, and could also create administrative challenges for the Exchanges. Accordingly, this suggestion is not adopted.

79 Fed. Reg. 8,555.  After giving an example of how a three month measurement period could work with a six month stability period, so as to conjoin stability periods by November 1 of Year 1, the preamble noted:  “For ongoing employees that do not average at least 30 hours of service per week during a measurement period, the length of the stability period cannot exceed the length of the measurement period.”  That sounds to us like an IRS warning to avoid this option.

Discussing the relationship between the initial measurement period and the associated stability period, the preamble then said –

Further, the final regulations also clarify that for a variable hour employee or seasonal employee who does not average at least 30 hours of service per week during the initial measurement period, the maximum length for a stability period associated with the initial measurement period is the end of the first full standard measurement period (plus any associated administrative period) during which the new employee was employed (rather than at the end of the standard measurement period (plus any associated administrative period) in which the initial measurement period ends), which was the rule contained in the proposed regulations.

79 Fed. Reg. 8,560. The related text of the final rules reads –

Except as provided in paragraph (d)(4)(iv) of this section, the stability period for such employees must not be more than one month longer than the initial measurement period and must not exceed the remainder of the first entire standard measurement period (plus any associated administrative period) for which a variable hour employee, seasonal employee, or part-time employee has been employed.

26 CFR § 54.4980H-3(d)(3)(iv).  There follow 16 examples, none of which involves use of a three month measurement period.  Maybe the IRS thought no reader would consider that option at this point. Why?  Because, though a three month measurement period is permissible, it introduces so much complexity as to make violation almost inevitable.

In an answer to a May 2014 set of questions from the American Bar Association, the IRS provided further guidance which shows how the rules about measurement and stability periods can require or forbid something, practically speaking, not stated expressly anywhere in those rules.  Here’s the ABA question, the ABA’s expected IRS response, and the actual IRS response.

26. § 4980H – Length of Initial and Standard Measurement Periods

The final regulations state that an employer may choose an initial measurement period “of no less than three consecutive months and no more than 12 consecutive months.” The term standard measurement period means a period “of at least three but not more than 12 consecutive months that is used by an applicable large employer member as part of the look-back measurement method.” The final regulations do not state that the initial measurement period and the standard measurement period must be the same length, but this seems to be implicit in the operation of the look-back measurement method.  May an employer have different length initial measurement periods and standard measurement periods that apply to same category of employees? For example, could the employer have 6-month initial measurement periods and 12-month standard measurement periods? The idea of having more frequent initial measurement periods would be to give new variable-hour employees more opportunities to qualify for plan coverage, while allowing ongoing employees to lock-in full-time status during a longer stability period.

Proposed Response: The initial measurement period and the standard measurement period must be the same length. The proposed arrangement (6-month initial measurement period and 12-month standard measurement period) is not consistent with the final regulations because it would require new variable hour employees to complete more than one initial measurement period before they completed a standard measurement period. Note that the employer can accomplish the result it wants using a 12-month initial measurement period because the initial measurement period is used only to determine whether an employee is treated as a full-time employee for purposes of Code § 4980H. This determination is separate from the determination of eligibility for the employer’s plan. So, this employer could measure an employee’s hours during the first six month of employment and extend an offer of coverage to employees with full-time status without Code § 4980H implications. See Treas. Reg. § 54.4980H-3(f)(2)(ii), Example 1, for an example of an “early” offer of coverage.

IRS Response: The way the regulation is set up is that it provides that the stability period has to be the same. There is a reason that it is tied to the stability period and it does not say the exact same thing for the measurement period. The reason is that there is a special rule for new employees. Basically, once an employer has the stability periods the same for a new employee and for an ongoing employee, an employer cannot keep someone out if the employee is determined to be part-time during a measurement period. An employer cannot keep an employee out generally for longer than the measurement period. So, once the employer has the stability periods the same, it is generally going to have to have the measurement periods the same for the new variable hour employees and for the ongoing employees in the same category. For example, if an employer applies a look-back measurement for all its hourly employees, it would have to use basically the same measurement period. However, there is a special rule for new employees that allows the measurement period to be a month shorter than the stability period. The Service representative noted that the reason they did this is that when an employer is dealing with new variable hour employees, the employer has to comply with three constraints. First, the measurement period cannot be longer than 12 months. Second, the administrative period cannot be longer than 90 days. The administrative period is the period between when the employer measures and when it gets people into the plan. An employer has to comply with both of those constraints, but the employer also has to comply with an overall constraint that it must get an employee who is full-time during the initial measurement period into the plan by the beginning of the 14th calendar month or potentially face an assessable payment.

In order to give employers who are subject to these constraints a little bit more time for the administrative period, an employer can use an 11-month initial measurement period. That can give an employer two and a half months in effect for its administrative period and then when it brings people into the plan and it can apply a 12-month stability period. So, that is why the regulation is set up in terms of the stability period being the same, rather than stating that the measurement period has to be the same. But, the effect is the measurement period basically has to be the same except for this one month rule.

When reading the ACA or ACA administrative rules, don’t stop when you find something that seems by itself to answer your question.  Read what’s around it and study enough to understand why it’s there.  It might turn out to mean what it seemed to mean when you first read it.  Or not.

Providers May Get Guidance on the 60-Day Rule

Posted in Affordable Care Act, Providers - For Profit, Providers - Not-for-Profit

The ACA turned mistaken overpayments by intermediaries, carriers and Medicaid agencies into potential False Claims Act violations by healthcare providers when it required that an overpayment be reported and refunded within 60 days after it was “identified.”  The ACA does not define what constitutes “identification” of an overpayment, so providers have been left to wonder when the 60-day period begins to run.  CMS issued proposed regulations in February 2012, not finalized.  They say that an overpayment is identified when a person has “actual knowledge of the existence of an overpayment or acts in reckless disregard or deliberate indifference of the overpayment.”  The preamble also says the 60-day period would not begin to run until the healthcare provider had an opportunity to undertake a “reasonable inquiry” into the circumstances of the overpayment.  So what does “reasonable inquiry” mean?  Does it mean the inquiry necessary to give a healthcare provider a sneaking suspicion that an overpayment might have occurred, or does it mean a detailed investigation that positively shows an overpayment, or something in between?

The U.S. District Court for the Southern District of New York may answer that question in a qui tam lawsuit brought against Continuum Health Partners, Inc., which squarely raises the issue of when is the 60-day time period is triggered.  This case marks the DOJ’s first intervention in a qui tam case premised on the 60-day provision.  The whistleblower alleges that Continuum Health Partners either purposefully or recklessly failed to take steps to identify approximately 900 overpayments after being notified of a suspicion that overpayments existed.  He also contends the 60-day time period begins to run when an overpayment is first suspected.  Arguing for dismissal, Continuum Health Partners explained why the 60 days should not begin to run until the conclusion of a thorough investigation that positively identifies an overpayment.  Continuum Health Partners has a lot of money riding on the Court’s answer, with potential exposure to civil penalties of between $5,500 and $11,000 per false claim, plus three times the amount of the damage the government suffers.  Other healthcare providers have a lot riding on it as well, since the answer will also dictate how much time and money they spend examining and analyzing reimbursements to identify potential overpaments.

IRS Penalties for Employer Coverage Offer Reporting Violations

Posted in Affordable Care Act, Government Employers, Private Employers, Taxes

It’s time to bust another ACA myth.  If the employer mandate goes away, ACA requirements to report the mandated coverage offers go away too, right?  Wrong.

The employer mandate of Code § 4980H is enforced by non-deductible taxes assessed under § § 4980H(a) and 4980H(b).  Large employer coverage offer reporting is mandated by Code § 6056, enforced by separate penalties described in Code § § 6721 (filing with the IRS) and 6722 (reporting to the employee).  Here’s an excerpt from each Code section.  When running your potential penalty numbers, note that there must be one Form 1095-C for each full-time employee.

§6721. Failure to file correct information returns

(a) Imposition of penalty

(1) In general

In the case of a failure described in paragraph (2) by any person with respect to an information return, such person shall pay a penalty of $100 for each return with respect to which such a failure occurs, but the total amount imposed on such person for all such failures during any calendar year shall not exceed $1,500,000.

(2) Failures subject to penalty

For purposes of paragraph (1), the failures described in this paragraph are—

(A) any failure to file an information return with the Secretary on or before the required filing date, and

(B) any failure to include all of the information required to be shown on the return or the inclusion of incorrect information.

§6722. Failure to furnish correct payee statements

(a) Imposition of penalty

(1) General rule

In the case of each failure described in paragraph (2) by any person with respect to a payee statement, such person shall pay a penalty of $100 for each statement with respect to which such a failure occurs, but the total amount imposed on such person for all such failures during any calendar year shall not exceed $1,500,000.

(2) Failures subject to penalty

For purposes of paragraph (1), the failures described in this paragraph are—

(A) any failure to furnish a payee statement on or before the date prescribed therefor to the person to whom such statement is required to be furnished, and

(B) any failure to include all of the information required to be shown on a payee statement or the inclusion of incorrect information.

Fortunately, as reported in the March 10, 2014 Federal Register (page 13,246) -

[T]he IRS will not impose penalties under sections 6721 and 6722 on ALE members that can show they make good faith efforts to comply with the information reporting requirements. Specifically, relief from penalties is provided under sections 6721 and 6722 for returns and statements filed and furnished in 2016 to report offers of coverage in 2015, but only for incorrect or incomplete information reported on the return or statement, including social security numbers. No relief is provided in the case of ALE members that do not make a good faith effort to comply with these regulations or that fail to timely file an information return or statement. However, ALE members that fail to timely meet the requirements of these regulations may be eligible for penalty relief if the IRS determines that the standards for reasonable cause under section 6724 are satisfied.

So employers can ignore this until early 2016, and then just do their best, right?  That’s a risky bet.  Some aspects of coverage offer reporting – for example, designating § 4980H(b) affordability safe harbors – are tied to decisions that must or should be made before the start of the 2015 plan year.  An employer might find it hard to get a “good faith effort” pass if it totally ignored such things in 2014.

Deadline Extended For Reinsurance Enrollment Information

Posted in Uncategorized

The Affordable Care Act, among other things, established a reinsurance program, which is a three-year transitional program designed to stabilize premiums in the individual market. Because insurers can no longer charge a higher premium for individuals with a potentially costly pre-existing condition, this reinsurance program was created to lessen the impact of adverse selection in the individual market.   This program will be funded through collections received from health insurance issuers and self-funded group health plans.

Each paying entity must enter its annual enrollment count at www.pay.gov (The form is located here). However, before completing the form, they will need to set up an account by going to www.pay.gov, clicking “Register” at the top right, and entering the necessary information. This is also the website through which the payment will be made. After receiving numerous requests, last week CMS has extended the deadline to enter enrollment information through pay.gov. The deadline for the enrollment count is now December 5, 2014. It is important to note that this extension DID NOT change the date the payments are due.  The first payment is due no later than January 15th.

CMS Extends Deadline For Annual Reinsurance Enrollment

Posted in Uncategorized

The Affordable Care Act, among other things, established a reinsurance program, which is a three-year transitional program designed to stabilize premiums in the individual market. Because insurers can no longer charge a higher premium for individuals with a potentially costly pre-existing condition, this reinsurance program was created to lessen the impact of adverse selection in the individual market.   This program will be funded through collections received from health insurance issuers and self-funded group health plans.

Each paying entity must enter its annual enrollment count at www.pay.gov (The form is located here). However, before completing the form, they will need to set up an account by going to www.pay.gov, clicking “Register” at the top right, and entering the necessary information. This is also the website through which the payment will be made. After receiving numerous requests, last week CMS has extended the deadline to enter enrollment information through pay.gov. The deadline for the enrollment count is now December 5, 2014. It is important to note that this extension DID NOT change the date the payments are due.  The first payment is due no later than January 15th.