Affordable Care Act Review

Affordable Care Act Review

Top Ten Healthcare.gov Subsidy Counties in Each SEC State

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

Why should you care? Subsidy certification of even one applicant claiming to be a full-time employee not offered affordable, qualifying 2015 coverage can cause the IRS to assess a non-deductible tax against the applicant’s alleged employer. Employers with low wage employees in a county with a high subsidy rate are most at risk. According to an HHS analysis of Healthcare.gov subsidized enrollments through July 1, 2015, here are the top ten subsidy counties in each SEC (it’s the season) state.

State/County No. of Subsidized 2015 Enrollments
Alabama
Jefferson 20,801
Mobile 16,074
Madison 11,682
Baldwin 8,553
Shelby 6,243
Tuscaloosa 4,720
Lee 4,289
Morgan 3,896
Etowah 3,708
Houston 3,397
Arkansas
Pulaski 7,295
Benton 5,082
White 4,926
Garland 2,633
Faulkner 2,378
Sebastian 2,136
Saline 2,053
Craighead 1,869
Jefferson 1,084
Baxter 1,081
Florida
Miami-Dade 377,191
Broward 203,354
Palm Beach 125,973
Orange 100,474
Hillsborough 69,676
Pinellas 53,018
Duval 49,505
Lee 38,813
Polk 32,627
Volusia 31,515
Georgia
Gwinnett 69,209
Fulton 49,715
Dekalb 45,227
Cobb 38,638
Clayton 20,422
Chatham 16,820
Henry 11,682
Cherokee 10,700
Richmond 9,584
Forsyth 8,279
Louisiana
Jefferson 21,818
East Baton Rouge 20,545
Orleans 17,513
St. Tammany 9,943
Caddo 8,461
Lafayette 7,388
Ouachita 6,196
Calcasieu 5,146
Tangipahoa 4,405
Livingston 4,369
Mississippi
Hinds 18,730
Desoto 5,748
Rankin 5,507
Madison 5,339
Harrison 4,144
Jackson 3,166
Forrest 2,230
Lauderdale 1,915
Lee 1,892
Jones 1,788
Missouri
St. Louis 41,114
Jackson 23,952
St. Louis City 14,844
Grundy 13,346
St. Charles 11,584
Jefferson 8,219
Clay 7,128
Boone 5,070
Christian 4,199
Franklin 3,803
South Carolina
Greenville 21,483
Horry 16,946
Charleston 16,486
Richland 14,439
York 9,858
Lexington 9,643
Anderson 7,405
Beaufort 6,503
Berkeley 6,418
Aiken 5,223
Tennessee
Shelby 25,465
Davidson 24,125
Knox 13,093
Hamilton 11,083
Rutherford 6,946
Williamson 5,172
Sullivan 4,813
Sumner 4,325
Blount 3,599
Montgomery 3,209
Texas
Harris 193,096
Dallas 112,114
Tarrant 82,989
Bexar 82,264
Travis 50,112
El Paso 50,486
Collin 38,088
Fort Bend 35,051
Hidalgo 30,891
Denton 28,549

2015 Form 1095-C Reporting: IT Vendor Survey

Posted in Affordable Care Act, Government Employers, Private Employers

On August 18, 2014, we posted our, “First Look at ACA Employer Compliance Software.” It’s time for an update. We invited less than a dozen vendors to answer these twenty-two questions.

With respect to each 2015 ALE coverage offer reporting service described below, what are your deadlines for –

Delivering an executed, written contract?

Completing all required system configurations?

Loading all required data (to date)?

Testing?

Have you completed all IRS AIR system requirements to provide the promised services?

Do you offer full-time employee status tracking?  Do you offer the IT tool only as part of consulting services or do you offer it off-the-shelf?

Do you offer auto-generation of Forms 1094-B, 1094-C, 1095-B and 1095-C?

Do you offer electronic delivery of Forms 1095-C to employees?

Do you offer to upload to the IRS, through the AIR system, Forms 1094-B, 1094-C, 1095-B and 1095-C?

Is your IT tool Oracle Solaris-based? Has it some other commercially available backbone? Or is it entirely proprietary?  Is there any commonly-used payroll or HRIS system from which your IT tool cannot currently import needed data?

What is your web page URL?

Do you offer online, live system demonstrations?  What is the contact information for arranging a live system demonstration?

Do you offer benefit plan consulting or brokerage services?  If so, are your ACA IT tools and assistance offered without your consulting and brokerage services?  Do you offer open group health plan enrollment assistance?

Do you offer payroll processing services?  If so, are your ACA IT tools and assistance offered without your payroll processing services?

We gave publication priority to Balch clients but promised coverage neutrality to all. We do not recommend any covered vendor over any other covered vendor, nor do we suggest that omitted vendors offer inferior tools, services, or value. We simply report selected vendors’ responses to our questions. We selected (in alpha order): ACA-GPS, Acuity Group, Alliance Payroll, Arc Technologies, and Five Points ICT. First, we publish each vendor’s entire set of responses, with most questions and some answers abbreviated. Then, a concluding table compares all “Yes” and “No” responses.

One more prefatory note: We asked two disqualifier questions. All five covered vendors are still taking new customers – a big plus; ask around.  And, all admit that they are still working toward full compliance with IRS AIR system registration, training and testing requirements. No fully-informed, fully honest vendor can say more. Form 4423, “Application for Filing Affordable Care Act (ACA) Information Returns,” was released after our vendor response deadline.

ACA-GPS

All deadlines: We anticipate price increases but have no deadline for new subscriptions.

IRS AIR system requirement completion: All applications have been completed and we have received our TCC number as both a software developer and transmitter. We have completed preparation of all required test transmissions and are currently testing.

Full-time employee status tracking?  Yes. IT tool only as part of consulting services or off-the-shelf? We sell the ACA Management Tool® as a web-based software subscription. We do not offer consulting services.

Auto-generation of Forms 1094-B, 1094-C, 1095-B and 1095-C? Yes.

Electronic delivery of Forms 1095-C to employees? Yes.

Do you upload to the IRS? Yes.

Is your IT backbone commercially available or proprietary?  It is built on an open-source framework. The code built on top of the open-source framework is proprietary. Is there any commonly-used payroll or HRIS system from which your IT tool cannot currently import needed data? We can import data from any system providing that it allows the subscriber to export the data into a xls, xlsx, or csv format.

Web page: www.acagps.com

Contact information for live system demonstration: We offer 3 options for viewing demonstrations of the ACA Management Tool®. A six minute demonstration video is available for viewing at: http://acagps.com/aca-management-tool-demo/. Live webinars are scheduled 3 times per week (all times Eastern): 10 am Tues.; 1 pm Wed.; 4 pm Thurs. Webinar registration link: https://attendee.gotowebinar.com/rt/6761762682530632706. For one-on-One Demonstration, contact Trish Moynihan, Director of Sales & Marketing, via email: trish.moynihan@acagps.com.

Benefit plan consulting or brokerage services?  Enrollment assistance? No.

Payroll processing services? No.

Acuity Group

Deadline for delivering an executed, written contract: October 1, 2015.

Deadline for completing all required system configurations: November 15, 2015.

Deadline for loading all required data (to date): To be determined.

Deadline for testing: To be determined.

IRS AIR system requirement completion: All required to date.

Full-time employee status tracking?  Yes. IT tool only as part of consulting services or off-the-shelf? Packaged with services.

Auto-generation of Forms 1094-B, 1094-C, 1095-B and 1095-C? Yes.

Electronic delivery of Forms 1095-C to employees? Yes, but still developing the employee election process.

Do you upload to the IRS? Yes, through our partner, Navigate HR.

Is your IT backbone commercially available or proprietary?  Proprietary. Is there any commonly-used payroll or HRIS system from which your IT tool cannot currently import needed data? We have not encountered a payroll or HRIS system from which we cannot import data.

Web page:  www.acuity-grp.com

Contact information for live system demonstration: jstarling@acuity-grp.com

Benefit plan consulting or brokerage services?  Yes. Enrollment assistance? Yes.

Payroll processing services? No.

Alliance Payroll

Deadline for delivering an executed, written contract: No written contract required.

Deadline for completing all required system configurations: November 1, 2015

Deadline for loading all required data (to date): November 1, 2015

Deadline for testing: November 1, 2015

IRS AIR system requirement completion: In progress.

Full-time employee status tracking?  Yes. IT tool only as part of consulting services or off-the-shelf?  No benefit plan consulting services offered. We offer our ACA tools only with our payroll processing services.

Auto-generation of Forms 1094-B, 1094-C, 1095-B and 1095-C? Forms 1094-C and 1095-C only.

Electronic delivery of Forms 1095-C to employees? Yes.

Do you upload to the IRS? Only Forms 1094-C and 1095-C.

Is your IT backbone commercially available or proprietary?  Proprietary. Is there any commonly-used payroll or HRIS system from which your IT tool cannot currently import needed data? None that we are aware of.

Web page: WWW.HRALLIANCE.NET

Contact information for live system demonstration: SALES@ALLIANCEPAYROLL.COM

Benefit plan consulting or brokerage services?  Enrollment assistance? No.

Payroll processing services? Yes.

Arc Technologies

Deadline for delivering an executed, written contract: September 15, 2015

Deadline for completing all required system configurations:  October 1, 2015

Deadline for loading all required data (to date):  October 15, 2015

Deadline for testing:  October 1, part of the system configuration.

IRS AIR system requirement completion:  No, currently finishing up and testing process.  We will have it completed by October 1, 2015 for our customers January, 2016 submission deadline.

Full-time employee status tracking?  Yes. IT tool only as part of consulting services or off-the-shelf?  We offer full-time employee status tracking, as part of our overall HRIS platform, Eight, that is provided as a SaaS.  Our ACA tracking and reporting capabilities are part of our overall on-boarding, employee compliance platform; and not a stand-alone solution.  It is not an off-the-shelf solution.

Auto-generation of Forms 1094-B, 1094-C, 1095-B and 1095-C? Yes.

Electronic delivery of Forms 1095-C to employees? Yes.

Do you upload to the IRS? No, we provide the file, but require our customers to upload/deliver the file to the IRS themselves.

Is your IT backbone commercially available or proprietary?  Is there any commonly-used payroll or HRIS system from which your IT tool cannot currently import needed data?  We utilize a SQL database.  Eight is a proprietary solution that utilizes the Internet for access.  We have yet to come across a payroll system that cannot provide us the data required to be imported into our platform.

Web page:  EightHR.com

Contact information for live system demonstration: We offer online demonstration.  Contact us by calling 601.991.1160, or emailing us at contact@afullcirclesolution.com.

Benefit plan consulting or brokerage services?  Enrollment assistance? No.

Payroll processing services?  No.

Five Points

Deadline for delivering an executed, written contract: November 1, 2015 (status tracking), December 1, 2015 (coverage offer reporting and electronic notice delivery).

Deadline for completing all required system configurations: November 30, 2015 (status tracking), December 15, 2105 (coverage offer reporting), December 31, 2015 (electronic notice delivery).

Deadline for loading all required data (to date):  Customer responsibility promptly after configuration.

Deadline for testing: Customer responsibility promptly after data loading.

IRS AIR system requirement completion: In progress and up to date.

Full-time employee status tracking? Yes. IT tool only as part of consulting services or off-the-shelf?  May be purchased with or without consulting services.

Auto-generation of Forms 1094-B, 1094-C, 1095-B and 1095-C? We allow employers to track all information needed to complete Forms 1094-C and 1095-C and transmit these forms to the IRS.  Once the final instructions and Forms 1094-C and 1095-C for the 2015 Tax Year are released we plan to add functionality to help automate completion of employee counts on Form 1094-C and Lines 14 through 16 of Form 1095-C.

Electronic delivery of Forms 1095-C to employees? Yes, the application will capture and store each individual’s consent to receive electronic delivery, electronically deliver Form 1095-C to those who have consented, and allow administrators to track hand-delivery or mail-delivery to individuals who did not consent to electronic delivery.  The system will allow for the generation of a batch file for the employer to print Forms 1095-C for any individuals that did not consent to electronic delivery.  We also plan to offer a printing service, where the employer can notify us that they are ready to print their Forms 1095-C and we will print them for delivery to individuals. 

Do you upload to the IRS? We currently offer transmittal of Forms 1094-C and 1095-C to the IRS via the AIR system for the 2015 Tax Year.  We are also evaluating the possibility of offering transmittal of Forms 1094-B and 1095-B in the future.

Is your IT backbone commercially available or proprietary?  Is there any commonly-used payroll or HRIS system from which your IT tool cannot currently import needed data? Our completely proprietary system uses data imported from third party systems (e.g., payroll, HRIS, carrier data, etc.) into our apps using our .CSV file formats.

Web page: www.fivepointsict.com

Contact information for live system demonstration: Please email info@fivepointsict.com.

Benefit plan consulting or brokerage services?  Enrollment assistance? Yes, with or without our IT tools.

Payroll processing services? No.

Table of Y/N Responses

Question Vendor Yes No
IRS AIR System testing completed? ACA-GPS N
Acuity Group N
Alliance Payroll N
Arc Technologies N
Five Points ICT N
Full-time employee tracking? ACA-GPS Y
Acuity Group Y
Alliance Payroll Y
Arc Technologies Y
Five Points ICT Y
Auto-generation of Forms? ACA-GPS Y
Acuity Group Y
             Only “C” Forms Alliance Payroll Y
Arc Technologies Y
             Only “C” Forms Five Points ICT Y
Electronic delivery to employees? ACA-GPS Y
Acuity Group Y
             Only 1095-C Alliance Payroll Y
Arc Technologies Y
             Only 1095-C Five Points ICT Y
Upload to IRS? ACA-GPS Y
           through Navigate HR Acuity Group Y
             Only “C” Forms Alliance Payroll Y
Arc Technologies N
             Only “C” Forms Five Points ICT Y
Benefit plan consulting? ACA-GPS N
Acuity Group Y
Alliance Payroll N
Arc Technologies N
Five Points ICT Y
Payroll processing? ACA-GPS N
Acuity Group N
Alliance Payroll Y
Arc Technologies N
Five Points ICT N

 

Draft 2015 Forms and Instructions for ACA Coverage Offer Information Reporting: Forms 1094-B, 1095-B, 1094-C, 1095-C and 8809

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

At about the same time as last year, the IRS has released draft ACA coverage information reporting Forms and Instructions to be used early next year. There are many small differences and one HUGE difference. The IRS decided not to enforce the 2014 reporting requirements, essentially giving covered employers a practice year, if they wanted to take it. Few did. With penalties more than doubled by Congress this summer, the IRS will enforce 2015 reporting rules beginning in early 2016.  You are encouraged, by offered penalty relief, to do your best, but to do it timely.

For 2015 reporting, the IRS will not impose penalties on a filer for reporting incorrect or incomplete information if the filer can show that it made good faith efforts to comply with the information reporting requirements for 2015. No relief is provided in the case of reporting entities that cannot show a good faith effort to comply with the information reporting requirements or that fail to timely file an information return or furnish a statement. However, consistent with the existing information reporting rules, reporting entities that fail to timely meet the requirements still may be eligible for penalty relief if the IRS determines that the standards for reasonable cause under section 6724 are satisfied.

To refresh, only small (under 50 full-time employees in an average 2014 month, on a controlled-group basis) employers are exempt, and only if they offered no group health plan or only a fully-insured group health plan in 2015. Small self-insured employers must report as insurers, on Forms 1094-B and 1095-B. “Applicable Large Employers” report on Forms 1094-C and 1095-C, regardless of 2015 coverage offerings. Every person who was an ALE’s full-time employee in any 2015 month must be furnished a Form 1095-C by February 1, 2016 (January 31 being a Sunday).  The deadline for filing all such Forms, along with a Form 1094-C transmittal, is February 29 (if in paper) or by March 31 (if electronic).

We expect few to be able to get this right without IT tools and support services that have been developed and brought to market in the last eighteen months. It’s already late in the game to be shopping for those tools and services.

Now, we turn to the changes that lept off the page at us.  Space here only allows us to hit the highest of the highlights.  If you want to see the Forms and Instructions before reading our analysis – yeah, we’re that way, too – here are the links.

http://www.irs.gov/pub/irs-dft/i109495b–dft.pdf

http://www.irs.gov/pub/irs-dft/i109495c–dft.pdf

http://www.irs.gov/pub/irs-dft/f1095b–dft.pdf

http://www.irs.gov/pub/irs-dft/f1095c–dft.pdf

http://www.irs.gov/pub/irs-dft/f8809–dft.pdf

Form 8809?

You have not read previously about Form 8809 here.  Form 8809 is filed to request automatic 30-day extensions of time for certain kinds of information reporting – Forms W-2 and 1099, for example.  As amended (again, these are draft Forms), 8809 also may be used to request extension of the Form 1095-B or Form 1095-C filing deadline.  So what about the earlier deadline to furnish the same Forms to employees?  Says Form 8809: “The automatic extension of time to file and any approved requests for additional time will only extend the due date for filing the information returns with the IRS. It does not extend the due date for furnishing statements to recipients.”

However, the 2015 Form 1095-C Instructions say this:

Extensions of time to furnish statement to recipients.  You may request and extension of time to furnish the statements to recipients by sending a letter to Internal Revenue Service, Information Returns Branch, Attn: Extension of Time Coordinator, 240 Murall Drive, Mail Stop 4360, Kearneysville, WV 25430. The letter must include (a) filer name, (b) filer TIN, (c) filer address, (d) type of return, (e) statement that extension request is for providing statements to recipients, (f) reason for delay, (g) the signature of the filer or authorized agent. Your request must be postmarked by the date on which the statements are due to recipients. If your request for an extension is approved, generally you will be granted a maximum of 30 extra days to furnish the recipient statements.

That does not sound to us like an automatic, guaranteed, extension.  Best make your request early and persuasively.

Multiemployer Plan Relief . . . Finally . . . Probably

Knock and the door will be opened.  Actually, bang, hard, and keep it up until they realize you’re not going away.  We and others have asked for many months for IRS guidance about how an ALE Member should report, and thus claim § 4980H credit for, coverage offers made to leased workers by their leasing firm employers.  More specifically, we have asked for confirmation that employers must enter Code 2E on Line 16 of Form 1095-C.  We take these additions to the 2015 Form 1095-C Instructions as our answer.

Regarding Line 14:

For reporting offers of coverage for 2015, an employer relying on the multiemployer arrangement interim guidance should enter code 1H on line 14 for any month for which the employer enters code 2E on line 16 (indicating that the employer was required to contribute to a multiemployer plan on behalf of the employee for that month and therefore is eligible for multiemployer interim rule relief). For reporting for 2015, Code 1H may be entered without regard to whether the employee was eligible to enroll in coverage under the multiemployer plan. For 2016 and future years, reporting for offers of coverage made through a multiemployer plan may be reported in a different manner.

And regarding Line 16:

Codes 2F through 2H: Although employers may use the section 4980H affordability safe harbors to determine affordability for purposes of the multiemployer interim guidance, an employer eligible for the relief provided in the multiemployer interim guidance for a month for an employee should enter code 2E (multiemployer interim rule relief), and not a code for the section 4980H affordability safe harbors (codes 2F, 2G, or 2H).

Technically speaking, those are directions for choosing which of multiple “correct” codes should be entered on a line for a particular month.  However, we read them in context of this carried-over comment from the 2014 Instructions:

An employer offers health coverage to an employee if it, or another employer in the Aggregated ALE Group, or a third party such as a multiemployer or single employer Taft-Hartley plan, a multiple employer welfare arrangement (MEWA), or, in certain cases, a staffing firm, offers health coverage on behalf of the employer.

Emphasis ours.  Read together, they seem to us to support our view that an ALE Member claims §4980H credit for a staffing firm’s coverage offer by entering Code 1H on Line 14, and Code 2E on Line 16 of Form 1095-C for that month.  That may change next year.  Again, these are draft Forms and Instructions for 2015 only.

Full-Time Employee Tracking – How ’bout “No”?

An employer gets streamlined reporting requirements if it qualifies for and uses the “98% Offer Method.” Ok, but that forces you to make a “98% Offer” certification, under penalty of perjury.  You must know your total number of ACA “employees” – i.e., all who are, in each month, your “common law employees,” even if not on your W-2 payroll.  Come up short on that count and you may make a false certification.  Also, the 2014 Instructions were not entirely clear about how the employer should count employees in a Limited Non-Assessment Period for a particular month.  On the LNAP, we got better guidance, plus an example, as part of the Form 1094-C Instructions.

To be eligible to use the 98% Offer Method, an employer must certify that taking into account all months during which the individuals were employees of the employer and were not in a Limited Non-Assessment Period, the employer offered, affordable health coverage providing minimum value to at least 98% of its employees for whom it is filing a Form 1095-C employee statement, and offered minimum essential coverage to those employees’ dependents. The employer is not required to identify which of the employees for whom it is filing were full-time employees, but the employer is still required, under the general reporting rules, to file Forms 1095-C on behalf of all its full-time employees who were full-time employees for one or more months of the calendar year. To ensure compliance with the general reporting rules, an employer should confirm for any employee for whom it fails to file a Form 1095-C that the employee was not a full-time employee for any month of the calendar year. (For this purpose, the health coverage is affordable if the employer meets one of the section 4980H affordability safe harbors.)

Example. Employer has 325 employees. Of those 325 employees, Employer identifies 25 employees as not possibly being full-time employees because they are scheduled to work 10 hours per week and are not eligible for additional hours. Of the remaining 300 employees, 295 are offered affordable minimum value coverage for all periods during which they are employed other than any applicable waiting period (which qualifies as a Limited Non-Assessment Period). Employer files a Form 1095-C for each of the 300 employees (excluding the 25 employees that it identified as not possibly being full-time employees). Employer may use the 98% Offer Method because it makes an affordable offer of coverage that provides minimum value to at least 98% of the employees for whom Employer files a Form 1095-C. Using this method, Employer does not identify whether each of the 300 employees is a full-time employee. However, Employer must still file a Form 1095-C for all of its full-time employees. Employer chooses to file a Form 1095-C on behalf of all 300 employees, including the five employees to whom it did not offer coverage, because if one or more of those employees was, in fact, a full-time employee for one or more months of the calendar year, Employer would be required to have filed a Form 1095-C on behalf of those employees.

Note. If an employer uses this method, it is not required to complete the “Full-Time Employee Count” in Part III, column (b).

COBRA Clarification

We also got clearer instructions about how to report offers of COBRA coverage.

An offer of COBRA continuation coverage that is made to a former employee upon termination of employment is reported as an offer of coverage using the appropriate indicator code on line 14 only if the former employee enrolls in the coverage. If the former employee does not enroll in the coverage (even if a spouse or dependent of the former employee independently enrolls in the coverage), code 1H (No offer of coverage) should be entered for any month for which the offer of COBRA continuation coverage applies.

An offer of COBRA continuation coverage that is made to an active employee (for instance, an offer of COBRA continuation coverage that is made due to a reduction in the employee’s hours that resulted in the employee no longer being eligible for coverage under a plan) is reported in the same manner and using the same code as an offer of that type of coverage to any other active employee.

“And, In Conclusion . . .”

When you hear that, you know it’s gone on too long already, as this has.  This is our first, once-over review.  As we spot more items of interest, we’ll circle back.

When is an overpayment “identified?”  THE ANSWER IS IN

Posted in Affordable Care Act

In a highly anticipated ruling in Kane ex rel United States, et al. v. Health First, Inc., et al., a New York federal judge has issued the first judicial interpretation of the sixty-day overpayment return provision in the Affordable Care Act.  In 2009, the FERA created a “reverse false claim” for failing to report and refund an overpayment, even if the recipient was faultless in receiving the overpayment, on pain of liability under the FCA.  The ACA added a requirement that an overpayment be refunded within sixty days of its “identification,” but left unanswered when an overpayment is “identified” so as to trigger the sixty day clock.  The answer is in and it is not good for healthcare providers.

The case arose from a software glitch suffered by HealthFirst, Inc., a non-profit Medicaid managed care insurer, which caused three of its participating hospitals operated by Continuum Health Partners (“Continuum”) to submit improper claims for reimbursement under Medicaid.

After the software glitch was identified and brought to its attention, Continuum assigned its employee, Kane, to review Continuum’s billing data to identify all claims potentially affected by the software glitch.  Five months later, Kane sent an email to Continuum’s management attaching a spreadsheet of 900 claims totaling over $1,000,000 that he thought might be erroneous but would need further analysis to confirm.  Four days after pushing the “Send” button on his computer, Kane was fired.  Continuum slowly began to reimburse improperly billed claims in April 2011 and did not finish that process until 2013, relying on Medicaid to discover and assert claims before paying.  As it turned out, only half of the claims identified by Kane were erroneous.

Meanwhile, Kane became a Relator and filed a qui tam action alleging that Continuum fraudulently delayed repayments for up to two years with knowledge of the overpayments.  The Department of Justice intervened in the case and Judge Edgardo Ramos of the Southern District of New York rendered his interpretation in ruling on the defendants’ motion to dismiss.  Predictably, the government took the position that the email notifying management of potential overpayments triggered the sixty day period.  Just as predictably, the defendants argued that notice of a potential overpayment did not trigger the sixty day period; rather that the sixty day period should begin when the provider had conclusive knowledge of the overpayment.  Judge Ramos sided with the government.  He believed the defendants’ interpretation produced the absurd, untenable and congressionally unintended result of leaving it to the recipient exclusively to decide when, if ever, the sixty day clock started. Judge Ramos acknowledged the government’s interpretation might impose a difficult and potentially unworkable burden to determine the existence of actual overpayments and repay them all within sixty days of receiving notice of a potential overpayment like Kane’s email.  He trusted that prosecutorial discretion would militate against filing enforcement actions against defendants who had worked diligently to identify overpayments, even if they were repaid untimely.

The upshot of the case for providers is that once they are on notice of potential overpayments, they should act diligently to identify all of the overpayments and repay them within the sixty day deadline and, if that is not possible, to document continuous good faith efforts to do so within a reasonable time.

 

Employer Mandate Amended In A Highway Funding Bill

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

This seems to be a trend. ACA amendments with some bipartisan support can get done if they are buried in unrelated legislation.

When the President signed H.R. 3236, the ACA employer mandate was amended to promote small employer hiring of armed forces members, retroactive to January 1, 2014. Here’s how, quoting the statute.

SEC. 4007. AMENDMENTS TO INTERNAL REVENUE CODE WITH RESPECT TO HEALTH COVERAGE OF VETERANS.

(a) EXEMPTION IN DETERMINATION OF EMPLOYER HEALTH INSURANCE MANDATE.—

(1) IN GENERAL.—Section 4980H(c)(2) of the Internal Revenue Code of 1986 is amended by adding at the end the following:

‘‘(F) EXEMPTION FOR HEALTH COVERAGE UNDER TRICARE OR THE VETERANS ADMINISTRATION.—Solely for purposes of determining whether an employer is an applicable large employer under this paragraph for any month, an individual shall not be taken into account as an employee for such month if such individual has medical coverage for such month under—

‘‘(i) chapter 55 of title 10, United States Code, including coverage under the TRICARE program, or

‘‘(ii) under a health care program under chapter 17 or 18 of title 38, United States Code, as determined by the Secretary of Veterans Affairs, in coordination with the Secretary of Health and Human Services and the Secretary.’’

This seems to say that an employer just barely an Applicable Large Employer, based on 2014 employment, may subtract those with the military coverage described here, so as to avoid the 2015 employer mandate. That raises three questions.

  1. Does the employer also get relief from Code § 6056 Applicable Large Employer coverage offer reporting? Section 6056 takes its ALE definition from §4980H. Or, is this relief good only for § 4980H taxation purposes?
  2. If this does not free the employer from § 6056 reporting requirements, then it’s not really relief, because by doing the reporting, the employer could have qualified for the 2015 employer mandate transition relief for employers of 50 to 99 full-time employees.
  3. Does this also mean that an employer just a bit too large for the 2015 transitional relief for employers of 50 to 99 full-time employees may subtract those with the military coverage described here, so as to qualify for that transition relief?

Realizing that we might not like getting what we wish for, we would like to see IRS guidance on these questions.

 

More Cadillac Plan Tax Guidance from IRS

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

Even minimum value plans might be “Cadillacs,” the IRS acknowledged in Notice 2015-52. See footnote 8, page 17. That’s our main take-away from the second IRS statement of its regulatory intentions.

Code § 4980I (a/k/a/ the “Cadillac Plan tax”) was added by the ACA so that taxpayers with average group health plans would not subsidize, by tax preference, rich plans benefitting chiefly the rich. Section 4980I imposes a 40%, non-deductible, excise tax on a group health plan’s “excess benefit” beginning in 2018. The IRS has not proposed enforcement rules but has released two statements of its intentions – Notice 2015-16 early this year and Notice 2015-52 last week. Here are highlights.

The taxable “excess benefit” must be calculated employee-by-employee, month by month.

The tax will be paid annually, by the “coverage provider,” when filing Form 720, as is done with PCORI fees. The insurer of a fully-insured group health plan is a coverage provider, as is the third party administrator of a self-insured group health plan. The employer is an HSA coverage provider. For other coverage types, the coverage provider is the “person that administers the plan benefits.” IRS expects this to be an entity, usually, not an individual. The entity that processes and pays claims might be the “person that administers the plan benefits.” Or, the IRS may impose that obligation on the entity that has final authority over the decision to pay claims.

The coverage provider will rely on employer calculations, to be reported to the coverage provider and to the IRS on Forms to be developed by the IRS. Employer calculation of the cost of applicable coverage will follow rules like those for determining COBRA premiums. Although employers currently may subtract from the Form W-2 cost of coverage the amount of benefits deemed taxable to highly-compensated individuals, such amounts will be included in the § 4980I cost of coverage. IRS realizes that employers will need time after the end of the calculation period to do this work and that different sorts of coverages might justify different amounts of time. Again, comments are requested.

The IRS realizes that employer aggregation rules in this context raise issues not addressed in its employer mandate rules. IRS is requesting related comments.

Employers should monitor their plans’ proximity to Cadillac taxation so that measures may be taken to hold short.

Will § 4980H Require Judicial Amendment Too?

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

Occasionally, a deep dive into a real world scenario opens our eyes to a plausible, alternate understanding of an important ACA term or rule.  Here’s one.  We’re embarrasssed to admit that our hours of study were provoked by what at first seemed to be a proverbial “stupid question.” Maybe there really aren’t any.

Absent applicable transitional relief, most of which vanishes after 2015, an ACA Applicable Large Employer that fails to offer Minimum Essential Coverage to at least 70% of its 2015 full-time employees and their dependents (95% in 2016) accrues 26 U.S.C. § 4980H(a) taxes monthly, at the rate of the number of its full-time employees for that month, less its allocable share of 80 (30 in 2016), multiplied by an “applicable payment amount.” Section 4980H(c)(1) sets that “applicable payment amount” at “1/12 of 2,000” – i.e., $166.67. As the TV pitch guys say, “But wait! There’s more!”

Section 4980H(b) imposes another employer mandate tax on ALEs that meet the MEC offer standard of § 4980H(a) but that overlook a few full-time employees, or offer coverage that is unaffordable or that provides sub-minimum value. Section 4980H(b)(1) tells us to calculate that tax monthly by multiplying the number of such employees with subsidized Exchange coverage by “1/12 of $3,000” – i.e., $250.  Here’s where the fun begins.

Section 4980H(c)(5) reads:

(5) Inflation adjustment

(A) In general

In the case of any calendar year after 2014, each of the dollar amounts in subsection (b) and paragraph (1) shall be increased by an amount equal to the product of—

(i) such dollar amount, and

(ii) the premium adjustment percentage (as defined in section 1302(c)(4) of the Patient Protection and Affordable Care Act) for the calendar year.

(B) Rounding

If the amount of any increase under subparagraph (A) is not a multiple of $10, such increase shall be rounded to the next lowest multiple of $10.

Section 1302(c)(4), a/k/a 42 U.S.C. § 18022(c)(4), tells us that the HHS Secretary will publish the “premium adjustment percentage” annually.

IRS FAQ No. 26 (2014) and all commenters (us, too) assumed that the premium adjustment percentage raises both the § 4980H(a) and the § 4980H(b) taxes. Consequently (shortcutting the analysis a bit), $2,000 has been understood to mean $2,084 under § 4980H(a) for 2015 and $3,000 has been understood to mean $3,126 under § 4980H(b) for 2015. However, we have wondered why IRS has not followed-up on the HHS premium adjustment percentage publication by updating its § 4980H guidance. See the current, relevant IRS web pages here and here.

A “stupid question” put us on the trail of a plausible explanation.  We had understood “subsection (b)” in § 4980H(c)(5)(A) as referring back, in shorthand fashion, to § 4980H(b), where we see the $3,000 amount, and had taken “paragraph (1)” as a reference to § 4980H(c)(1), where we read the $2,000 amount. But maybe, by “subsection (b) and paragraph (1),” Congress referenced only § 4980H(b)(1), which is, more precisely stated, where we find the $3,000 amount.  If so, only the $3,000 amount would be subject to annual adjustment. Congress would have to amend § 4980H to provide for annual inflation adjustment of the $2,000 amount or the IRS would have to do so by administrative action, hoping for helpful judicial interpretation.

Why might Congress have done that? If § 4980H(a) taxes were cheaper than compliant group health plans, and progressively moreso, an increasing number of small employers should be expected to pay the “(a)” taxes in lieu of offering coverage, leading to rising Exchange enrollments.  Soon, there might be little or no small group market outside the ACA Exchanges, with Healthcare.gov dominating the Exchange business.

Maybe that’s what the IRS has been pondering in silence for months.  Whichever way it wanted to go, maybe the IRS was hoping to receive extreme judicial deference in the King v. Burwell opinion before acting on this.  If so, it wasn’t worth the wait. Justice Roberts’ (6-3) majority opinion began by expressly disregarding the IRS rule on subsidy eligibility, at least in part because HHS, not IRS, was tasked with issuing such rules.

We have seen no evidence, beyond the textual ambiguity, indicating that Congress consciously intended to freeze the § 4980H(a) formula while adjusting the § 4980H(b) formula annually.  When two readings are equally plausible, courts normally defer to the enforcement agency’s interpretation. The IRS is the employer mandate enforcement agency, not HHS.  So, we would appreciate IRS guidance squarely addressing this ambiguity.

Simple ACA Rules for Simple (But Not Small) Employers

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

You’re an ACA “Applicable Large Employer,” but not by much. You have three executives, none of whom has any HR or benefit plan expertise. You rely on a local payroll service and your insurance agent. You hope they are on top of things, but you worry. You should worry. Generalizing greatly for simplicity’s sake, here are some icebreakers you might use to open conversations with your advisers.

50 to 100 Employee Transition Relief

If you had at least 50 but less than 100 full-time employees (on an aggregated basis, including full-time equivalents) in an average month in 2014, then you are an ACA “Applicable Large Employer” with ALE reporting obligations (Code § § 6055, 6056) and employer mandate tax exposure (Code § 4980H). However, if you properly file your Forms 1095-C and 1094-C by February 29, 2016, and check Box C on Form 1094-C, you may be granted “transitional relief” from the employer mandate taxes that accrued in 2015 if you failed to offer affordable, qualifying coverage to all your full-time employees and their dependents.

If your 2014 average month’s full-time employee number was 100 or more, you are not eligible for this relief and it’s too late to get small.

2015 Coverage Offer Reporting

The only employers exempt from this are small employers with no group health plans and small employers with only fully-insured group health plans. Small, self-insured employers report under Code § 6055. All Applicable Large Employers report under § 6056 and, if self-insured, also have obligations under Code § 6055.

By February 1, 2016, you must furnish a Form 1095-C to each person who was your ACA full-time employee in any 2015 month. By February 29, 2016, you must file all those Forms 1095-C with IRS (March 31 if filing electronically), along with a Form 1094-C cover sheet. You’re unlikely to be able to do this without IT tools that have been developed by TPAs and benefit plan consultants over the past year. Some of them are requiring that system installation, configuration, data loading and testing be completed by October 15, 2015. If you haven’t engaged one of them yet, prioritize this project. You will not appreciate how much work must be done until you start doing it.

The 2015 Forms and Instructions will be published, we hope, in September 2015. Here are the 2014 links:

Form 1094-C ;

Form 1095-C ;

Instructions.

State and Local Government Employers and Plans

The most thoroughly busted ACA myth may be the rumored exemption of state and local government employers and their group health plans. There are important ERISA exemptions for such plans but ACA employer mandate taxes and coverage offer reporting requirements are fully applicable. They are enforced independently and may be financially significant. Want to get some attention from your higher-ups? Ask from what accounts the accruing taxes and penalties are to be paid beginning in mid-2016.

Final Regulations Issued Concerning ACA’s Preventive Services Mandate

Posted in Affordable Care Act

Last week the Agencies (DOL, HHS and IRS) issued final regulations concerning ACA’s preventive services mandate. This mandate requires non-grandfathered plans to cover specific preventive services, such as immunizations, mammograms, and autism screening, without cost-sharing when dispensed by an in-network provider. While numerous preventive services were covered under this mandate, it was contraceptives for women that got the most attention because of the Hobby Lobby decision. The proposed regulations after this decision expanded the exception that was originally intended for nonprofits to closely held for-profit employers allowing certain qualifying employers with religious objections to be exempt from the contraceptive mandate or engage in an accommodation process relieving them of the obligation.

Last week’s regulations which are applicable for plan years beginning on or after September 14, 2015, finalize the proposed regulations with a few modifications. Additionally, the final regulations incorporate FAQ guidance and make minor changes to the 2010 interim final regulations.

  • The regulations expanded on the definition of closely held for-profit entity making it more flexible than tax law generally allows. In order to be considered a closely held for-profit entity, thus qualifying it for the exemption, an employer
    • must be for profit,
    • must not be publicly traded,
    • must have 50% of value of ownership interest owned by five or fewer individuals (or a substantially similar structure), and
    • object to providing contraceptive coverage because of owners’ religious beliefs.
  • The final regulations formalize the FAQ guidance which provided that a plan must cover out-of-network preventive services without cost-sharing if the plan does not have an in-network provider who can provide a required preventive service.
  • The final regulations also clarified that any service that constitutes a recommended preventive service on the first day of a plan year must be provided through the end of the plan year even if the recommendation changes. The final regulations do provide a few exceptions to this rule. Therefore a plan may drop the coverage prior to the end of the year:
    • for any service that is downgraded to a “D” rating by the appropriate entity,
    • is subject to a safety recall, or
    • is otherwise deemed by the applicable federal agency to pose a significant safety concern.

Form 1095-C Penalties More Than Doubled . . . In A Trade Bill?

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

Penalties for employer failure to file and furnish 2015 Forms 1094-C and 1095-C just went up. Section 806 of Public Law 114-27 (H.R. 1295, the “Trade Preferences Extension Act of 2015,” June 29, 2015) amended Code sections 6721 and 6722 to raise those penalties substantially. We have warned that each missing Form 1095-C could cost you $100 for non-filing and another $100 for non-delivery, subject to an annual maximum of $1,500,000 for each type of failure. As amended, $100 becomes $250 and $1,500,000 becomes $3,000,000 beginning January 1, 2016.  Your Forms are due to be furnished to employees by February 1, 2016 (January 31 being a Sunday).   The 2015 filing deadlines are February 29, 2016 (if paper) and March 31, 2016 (if electronic).

Subject to review after the GPO posts the official, amended Code sections, here’s how we think they now should read.

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 $250 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 $3,000,000.

(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.

(b) Reduction where correction in specified period

(1) Correction within 30 days

If any failure described in subsection (a)(2) is corrected on or before the day 30 days after the required filing date—

(A) the penalty imposed by subsection (a) shall be $50 in lieu of $250, and

(B) the total amount imposed on the person for all such failures during any calendar year which are so corrected shall not exceed $500,000.

(2) Failures corrected on or before August 1

If any failure described in subsection (a)(2) is corrected after the 30th day referred to in paragraph (1) but on or before August 1 of the calendar year in which the required filing date occurs—

(A) the penalty imposed by subsection (a) shall be $100 in lieu of $250, and

(B) the total amount imposed on the person for all such failures during the calendar year which are so corrected shall not exceed $1,500,000.

(c) Exception for de minimis failures to include all required information

(1) In general

If—

(A) an information return is filed with the Secretary,

(B) there is a failure described in subsection (a)(2)(B) (determined after the application of section 6724(a)) with respect to such return, and

(C) such failure is corrected on or before August 1 of the calendar year in which the required filing date occurs,

for purposes of this section, such return shall be treated as having been filed with all of the correct required information.

2) Limitation

The number of information returns to which paragraph (1) applies for any calendar year shall not exceed the greater of—

(A) 10, or

(B) one-half of 1 percent of the total number of information returns required to be filed by the person during the calendar year.

(d) Lower limitations for such return shall be treated as having been filed with all of the correct required information.

(1) In general

If any person meets the gross receipts test of paragraph (2) with respect to any calendar year, with respect to failures during such calendar year—

(A) subsection (a)(1) shall be applied by substituting “$1,000,000” for “$3,000,000”,

(B) subsection (b)(1)(B) shall be applied by substituting “$175,000” for “$500,000”, and

(C) subsection (b)(2)(B) shall be applied by substituting “$500,000” for “$1,500,000”.

(2) Gross receipts test

(A) In general

A person meets the gross receipts test of this paragraph for any calendar year if the average annual gross receipts of such person for the most recent 3 taxable years ending before such calendar year do not exceed $5,000,000.

(B) Certain rules made applicable

For purposes of subparagraph (A), the rules of paragraphs (2) and (3) of section 448(c) shall apply.

(e) Penalty in case of intentional disregard

If 1 or more failures described in subsection (a)(2) are due to intentional disregard of the filing requirement (or the correct information reporting requirement), then, with respect to each such failure—

(1) subsections (b), (c), and (d) shall not apply,

(2) the penalty imposed under subsection (a) shall be $500, or, if greater—

(A) in the case of a return other than a return required under section 6045(a), 6041A(b), 6050H, 6050I, 6050J, 6050K, or 6050L, 10 percent of the aggregate amount of the items required to be reported correctly,

(B) in the case of a return required to be filed by section 6045(a), 6050K, or 6050L, 5 percent of the aggregate amount of the items required to be reported correctly,

(C) in the case of a return required to be filed under section 6050I(a) with respect to any transaction (or related transactions), the greater of—

(i) $25,000, or

(ii) the amount of cash (within the meaning of section 6050I(d)) received in such transaction (or related transactions) to the extent the amount of such cash does not exceed $100,000, or

(D) in the case of a return required to be filed under section 6050V, 10 percent of the value of the benefit of any contract with respect to which information is required to be included on the return, and

(3) in the case of any penalty determined under paragraph (2)—

(A) the $3,000,000 limitation under subsection (a) shall not apply, and

(B) such penalty shall not be taken into account in applying such limitation (or any similar limitation under subsection (b)) to penalties not determined under paragraph (2).

(f) Adjustment for inflation

(1) In general

For each fifth calendar year beginning after 2012, each of the dollar amounts under subsections (a), (b), (d) (other than paragraph (2)(A) thereof), and (e) shall be increased by such dollar amount multiplied by the cost-of-living adjustment determined under section 1(f)(3) determined by substituting “calendar year 2011” for “calendar year 1992” in subparagraph (B) thereof.

(2) Rounding

If any amount adjusted under paragraph (1)—

(A) is not less than $75,000 and is not a multiple of $500, such amount shall be rounded to the next lowest multiple of $500, and

(B) is not described in subparagraph (A) and is not a multiple of $10, such amount shall be rounded to the next lowest multiple of $10.

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 $250 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 $3,000,000.

(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.

(b) Reduction where correction in specified period

(1) Correction within 30 days

If any failure described in subsection (a)(2) is corrected on or before the day 30 days after the required filing date—

(A) the penalty imposed by subsection (a) shall be $50 in lieu of $250, and

(B) the total amount imposed on the person for all such failures during any calendar year which are so corrected shall not exceed $500,000.

(2) Failures corrected on or before August 1

If any failure described in subsection (a)(2) is corrected after the 30th day referred to in paragraph (1) but on or before August 1 of the calendar year in which the required filing date occurs—

(A) the penalty imposed by subsection (a) shall be $100 in lieu of $250, and

(B) the total amount imposed on the person for all such failures during the calendar year which are so corrected shall not exceed $1,500,000.

(c) Exception for de minimis failures

(1) In general

If—

(A) a payee statement is furnished to the person to whom such statement is required to be furnished,

(B) there is a failure described in subsection (a)(2)(B) (determined after the application of section 6724(a)) with respect to such statement, and

(C) such failure is corrected on or before August 1 of the calendar year in which the required filing date occurs,

for purposes of this section, such statement shall be treated as having been furnished with all of the correct required information.

(2) Limitation

The number of payee statements to which paragraph (1) applies for any calendar year shall not exceed the greater of—

(A) 10, or

(B) one-half of 1 percent of the total number of payee statements required to be filed by the person during the calendar year.

(d) Lower limitations for persons with gross receipts of not more than $5,000,000

(1) In general

If any person meets the gross receipts test of paragraph (2) with respect to any calendar year, with respect to failures during such calendar year—

(A) subsection (a)(1) shall be applied by substituting “$1,000,000” for “$3,000,000”,

(B) subsection (b)(1)(B) shall be applied by substituting “$175,000” for “$500,000”, and

(C) subsection (b)(2)(B) shall be applied by substituting “$500,000” for “$1,500,000”.

(2) Gross receipts test

A person meets the gross receipts test of this paragraph if such person meets the gross receipts test of section 6721(d)(2).

(e) Penalty in case of intentional disregard

If 1 or more failures to which subsection (a) applies are due to intentional disregard of the requirement to furnish a payee statement (or the correct information reporting requirement), then, with respect to each such failure—

(1) subsections (b), (c), and (d) shall not apply,

(2) the penalty imposed under subsection (a)(1) shall be $500, or, if greater—

(A) in the case of a payee statement other than a statement required under section 6045(b), 6041A(e) (in respect of a return required under section 6041A(b)), 6050H(d), 6050J(e), 6050K(b), or 6050L(c), 10 percent of the aggregate amount of the items required to be reported correctly, or

(B) in the case of a payee statement required under section 6045(b), 6050K(b), or 6050L(c), 5 percent of the aggregate amount of the items required to be reported correctly, and

(3) in the case of any penalty determined under paragraph (2)—

(A) the $3,000,000 limitation under subsection (a) shall not apply, and

(B) such penalty shall not be taken into account in applying such limitation to penalties not determined under paragraph (2).

(f) Adjustment for inflation

(1) In general

For each fifth calendar year beginning after 2012, each of the dollar amounts under subsections (a), (b), (d)(1), and (e) shall be increased by such dollar amount multiplied by the cost-of-living adjustment determined under section 1(f)(3) determined by substituting “calendar year 2011” for “calendar year 1992” in subparagraph (B) thereof.

(2) Rounding

If any amount adjusted under paragraph (1)—

(A) is not less than $75,000 and is not a multiple of $500, such amount shall be rounded to the next lowest multiple of $500, and

(B) is not described in subparagraph (A) and is not a multiple of $10, such amount shall be rounded to the next lowest multiple of $10.