Affordable Care Act Review

Affordable Care Act Review

. . . 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.

 

 

 

HHS Notice of Benefit and Payment Parameters for 2016

Posted in Affordable Care Act, Coverage Mandates, Exchanges, Government Employers, Insurers and Brokers, Private Employers, Providers - For Profit, Providers - Not-for-Profit

Running 324 pages, plus a six-page summary in its pre-release (easy to read) version this massive annual update will be published officially in the November 26, 2014 Federal Register.  Based on something like March Madness bracketology, we narrowed the large, attention-worthy field to these final four.

No. 1:

As previously threatened, HHS will amend 45 CFR § 156.145 to deny “minimum value” status to plans that don’t cover hospital care.  Here’s the explanation from the proposed rule’s preamble:

Plans that omit critical benefits used disproportionately by individuals in poor health will enroll far fewer of these individuals, effectively driving down employer costs at the expense of those who because of their individual health status are discouraged from enrolling.

That the MV standard may be interpreted to require that employer-sponsored plans cover critical benefits is evident in the structure of the Affordable Care Act, the context in which the grant of the authority to the Secretary to prescribe regulations under section 1302 was enacted, and the policy underlying the legislation. Section 1302(b) authorizes the Secretary of HHS to define the EHB to be offered by individual market and small group health insurance plans, provided that this definition “include at least” 10 specified categories of benefits, and that the benefits be “equal to the scope of benefits provided under a typical employer plan.”  To “inform this determination” as to the scope of a typical employer plan, section 1302(b)(2)(A) provides that “the Secretary of Labor shall conduct a survey of employer sponsored coverage to determine the benefits typically covered by employers, including multiemployer plans, and provide a report on such survey to the Secretary [of HHS].”48 (Emphasis added.)  These provisions suggest that, while detailed requirements for EHB in the individual and small group health insurance markets were deemed necessary, the benefits covered by typical employer plans providing primary coverage at the time the Affordable Care Act was enacted were seen as sufficient to satisfy the Act’s objectives with respect to the breadth of benefits needed for health plan coverage and, in fact, to serve as the basis for determining EHB. They also suggest that any meaningful standard of minimum coverage may require providing certain critical benefits.

Employer-sponsored plans in the large group market and self-insured employers continue to have flexibility in designing their plans. They are not required to cover all EHB. Providing flexibility, however, does not mean that these plans should not be subject to minimum requirements. A plan that excludes substantial coverage for inpatient hospital and physician services is not a health plan in any meaningful sense and is contrary to the purpose of the MV requirement to ensure that an employer-sponsored plan, while not required to cover all EHB, nonetheless must offer coverage with minimum value at least roughly comparable to that of a bronze plan offered on an Exchange.

For these reasons, the Secretary has concluded that the provisions of section 1302(d)(2) of the Affordable Care Act – requiring that the regulations for determining the percentage of the total allowed costs of benefits that apply to plans that must cover all EHB also be applied as a basis for determining minimum value – reflect a statutory design to provide basic minimum standards for health benefits coverage through the MV requirement, without requiring large group market plans and self-insured plans to meet all EHB standards.

[ . . . ]

Accordingly, we propose to amend §156.145 to require that, in order to provide minimum value, an employer-sponsored plan not only must meet the quantitative standard of the actuarial value of benefits, but also must provide a benefit package that meets a minimum standard of benefits. Specifically, we propose to revise §156.145 to provide that, in order to satisfy MV, an employer plan must provide substantial coverage of both inpatient hospital services and physician services.

Legal authority to augment ACA-defined “minimum value” by adding an EHB element is questionable, but there’s no doubt that HHS intends to do it.

No. 2:

The network adequacy standard of 45 CFR § 156.230 will require each QHP issuer to:

publish an up-to-date, accurate, and complete provider directory, including information on which providers are accepting new patients, the provider’s location, contact information, specialty, medical group, and any institutional affiliations, in a manner that is easily accessible to plan enrollees, prospective enrollees, the State, the Exchange, HHS and OPM. As part of this requirement, we propose that a QHP issuer must update the directory information at least once a month, and that a provider directory will be considered easily accessible when the general public is able to view all of the current providers for a plan on the plan’s public website through a clearly identifiable link or tab without having to create or access an account or enter a policy number.

No. 3:

The 2016 maximum annual cost sharing limits (45 CFR § 156.130) will be $6,850 for self-only coverage and $13,700 for family coverage.

No. 4:

Medicare or Medicare-like quality improvement standards (“QIS”) will be imposed on private insurers under 45 CFR § 156.1130, so that, among other things –

[B]eginning in 2016, a QHP issuer participating in the FFE for at least 2 years would submit a QIS implementation plan to HHS and the applicable Exchange for each QHP offered in the Exchange, followed by annual progress updates. We anticipate that the implementation plan for a QHP issuer’s proposed QIS will reflect a payment structure that provides increased reimbursement or other market-based incentives for addressing at least one of the topics specified in section 1311(g)(1) of the Affordable Care Act.

“FFE,” of course, refers to www.healthcare.gov.  Insurers who sold policies through that federal Exchange in 2014 and 2015 should expect HHS in 2016 to be, “requesting information  . . . regarding the percentage of payments to providers that is adjusted based on quality and cost of health care services.”  HHS also expects that, “one year after submitting the QIS implementation plan, the QHP issuer would submit information including, an annual update including a description of progress of QIS implementation activities, analysis of progress using proposed measures and targets, and any modifications to the QIS.”

House Sues President Over ACA Administration

Posted in Affordable Care Act, Coverage Mandates, Insurers and Brokers, Taxes

The U.S. House of Representatives filed its threatened lawsuit on Friday, November 21, in the D.C. federal district court.  Defendants are the HHS Secretary, HHS, the Treasury Secretary and the Treasury Department.  The House challenges the President’s authority, acting through them, to make payments to insurance companies without Congressional funding authorization and to delay and reduce the employer mandate taxes imposed by Congress.

The spending dispute concerns the “Section 1402 Offset Program.”  Here’s how it’s explained in Complaint paragraphs 26 – 29, 35 and 36:

26. ACA Cost-Sharing Reductions are required by law and are not contingent upon the receipt by Insurers of any offsetting payments from the government. Rather, Insurers – who benefit enormously by participating in the ACA – are statutorily required to provide Cost-Sharing Reductions to Beneficiaries as a condition of being permitted to offer insurance policies through an ACA health insurance marketplace exchange.

27. The ACA also establishes a program by which the government is authorized to make direct payments to Insurers to offset costs that Insurers incur in providing Cost-Sharing Reductions to Beneficiaries (referred to herein as the “Section 1402 Offset Program”).

28. Congress has not, and never has, appropriated any funds (whether through temporary appropriations or permanent appropriations) to make any Section 1402 Offset Program payments to Insurers.

29. In contrast, Congress has appropriated funds for section 1401 of the ACA. That provision authorizes refundable tax credits to be paid for qualified individuals to reduce the cost of their health insurance premiums (referred to herein as the “Section 1401 Refundable Tax Credit Program”) through the standing permanent appropriation for refunds due under the Internal Revenue Code (“IRC”), 31 U.S.C. § 1324. The Section 1402 Offset Program, on the other hand, is not funded through this or any other appropriation.

35.       Notwithstanding the lack of any congressional appropriation for Section 1402 Offset Program payments, defendants Lew and the Treasury Department, at the direction of defendants Burwell and HHS, began making Section 1402 Offset Program payments to Insurers in January 2014, and, upon information and belief, continues to make such payments.10   The Office of Management and Budget (“OMB”) has reported that Section 1402 Offset Program payments to Insurers for Fiscal Year 2014 were estimated to be $3.978 billion.

36. In its Fiscal Year 2015 budget submission, submitted to Congress in March 2014, the Administration dramatically and conspicuously changed course. The Administration’s request for a temporary appropriation to CMS to enable it to make Section 1402 Offset Program payments to Insurers disappeared, and was replaced with a single line item in the Internal Revenue Service (“IRS”) section of the budget, lumping together Section 1401 Refundable Tax Credit Program payments – funding for which is permanently appropriated through the IRC – with Section 1402 Offset Program payments which are not funded through the IRC.

The employer mandate tax dispute is simply that the President refused to assess employer mandate taxes that accrued during 2014 and that he exempted certain employers exposed to such taxes in 2015.

The Complaint asks the court to invalidate and enjoin these two initiatives as unconstitutional abuses of Presidential power.  The Complaint is signed by George Washington University Law Professor Jonathan Turley, whose February 2014 House testimony made basically the same points.  We expect defense counsel to move to dismiss the suit because the House of Representatives is not a proper party to make the arguments advanced in the Complaint.

 

ACA Employer Compliance Post-Subsidy

Posted in Affordable Care Act, Coverage Mandates, Exchanges, Taxes

Granting a petition to review the availability of subsidies for insurance purchased through www.healthcare.gov, the Supreme Court on November 7, 2014 put the question this way:

Section 36B of the Internal Revenue Code, which was enacted as part of the Patient Protection and Affordable Care Act (“ACA”), authorizes federal tax-credit subsidies for health insurance coverage that is purchased through an “Exchange established by the State under section 1311″ of the ACA.

The question presented is whether the Internal Revenue Service (“IRS”) may permissibly promulgate regulations to extend tax-credit subsidies to coverage purchased through Exchanges established by the federal government under section 1321 of the ACA.

Petitioners’ counsel could not have written it more favorably for their argument.  Winners in the big ACA case of 2012, the Feds may lose this one. But so what?  Here’s what.

Non-deductible taxes to be assessed starting in 2016 under 26 U.S.C. § 4980H enforce large employers’ ACA obligation to offer qualifying, affordable coverage to full-time employees and their dependents.  Those assessments will be triggered by Exchange certifications that such employees are eligible for premium and cost-sharing subsidies because of employer failure to offer qualifying, affordable coverage.  In other words, there is no employer mandate trigger in states where the ACA Exchange lacks authority to certify subsidy eligibility.  The case now before the Supreme Court argues that only an Exchange “established by the State” has such authority.  If so, there is no employer mandate trigger in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi or Texas, among other states served only by www.healthcare.gov.    And because the ACA’s anti-retaliation provision (FLSA §18A) principally protects subsidy recipients, subsidy unavailability would minimize employer exposure to such claims in those states.  Most observers expect a Supreme Court opinion by late June, 2015.

Any relief should be welcomed, but don’t let this give you employer mandate myopia.  Three to six months of employer mandate taxes will have accrued before we have a Supreme Court opinion and the outcome can’t be predicted reliably.  If the Supreme Court agrees with the Petitioners, freeing you from the duty to offer affordable coverage to your full-time employees and their dependents, any group health plan you offer still must comply with all applicable ACA coverage and cost sharing mandates, or you’ll be exposed to audit and severe civil money penalties.  What are those mandates?  Summarized tersely, here they are:

Basic ACA Coverage and Cost Sharing Mandates (by PHS Act section number) NGI NGSI GI GSI
No discriminatory premiums (rating criteria for individual and small group markets) (§ 2701) X      
Guaranteed issue  (§ 2702) X      
Guaranteed renewal (§ 2703) X      
No pre-existing condition exclusion (§ 2704) X X X X
No discrimination based on health status (§ 2705) X X    
No discrimination against licensed providers (§ 2706) X X    
EHB (individual and small group markets) (§ 2707(a)) X      
Cost-sharing caps (§ 2707(b))2 X X    
Maximum waiting period (§ 2708) (not the same as §4980H) X X X X
Clinical trial coverage (§ 2709) X X    
No lifetime or annual limits (§ 2711) X X X X
No rescission except for fraud (§ 2712) X X X X
Preventive services without cost sharing (§ 2713) X X    
Adult child coverage to age 26 (§ 2714) X X X X
Summary of benefits and coverage (§ 2715) X X X X
No discrimination in favor of the highly compensated (§ 2716) X3 3   3
[NA: Study and reporting on wellness programs (§ 2717)] NA NA NA NA
Minimum medical loss ratio and rebates (§ 2718) X   X  
Internal appeals and external reviews of claim denials (§ 2719) X X    

NGI = “Non-Grandfathered, Insured.”  GI = “Grandfathered, Insured.” NGSI = “Non-Grandfathered, Self-Insured.”  GSI = “Grandfathered, Self-Insured.”  

And then, there’s the Cadillac Plan Tax, beginning in 2018.  But that’s a topic for another day.

 

Supreme Court to Hear Case ACA Subsidies

Posted in Uncategorized

As a follow up to our Blog dated 10/21/14 (blog), earlier today, the U.S. Supreme Court agreed to consider a challenge to the premium tax credits (subsidies) that are a key component of the ACA.  King v. Burwell challenges whether the tax credits apply only to consumer marketplaces established by a state or if they are applicable to federally operated sites as well.  It is anticipated that the case will heard in early March 2015.

Minimum Value Plans, Automatic Enrollment and IRS Notice 2014-69

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

Yes, there’s a connection.  An employer’s 2015 offer of “minimum essential coverage” (MEC) to at least 70% of its full-time employees and their dependents avoids the employer mandate tax imposed by 26 U.S.C. § 4980H(a).  If that coverage is “affordable,” if it provides “minimum value,” and if all full-time employees are included in the offer, the employer also avoids the employer mandate tax imposed by § 4980H(b), while also making the employees ineligible for www.healthcare.gov premium subsidies, whether or not they accept the employer’s offer.

But, as we’ve explained in prior posts, MEC can be very minimal, excluding hospitalization, for example.  And, if other coverages are enriched sufficiently, a no-hospitalization MEC plan can satisfy (by .3%, in our experience) the 60% value test of the government’s online MV Calculator.  So, a penny-wise employer might avoid employer mandate taxes by automatically enrolling all full-time employees in that sort of plan.  Some have.  Fears of contagion partly explain this year’s failed Senate effort to repeal the ACA’s dormant automatic enrollment mandate.

As you might expect, HHS and IRS are not amused.  On November 4, 2014 (election day), they published Notice 2014-69, warning of forthcoming amended HHS regulations (45 CFR § 156.145), saying:

  • “[U]nder the [new] regulations, an employer will not be permitted to use the MV Calculator (or any actuarial certification or valuation) to demonstrate that a Non-Hospital/Non-Physician Services Plan provides minimum value.”
  • “An employer that has entered into a binding written commitment to adopt, or has begun enrolling employees in [such a plan] prior to November 4, 2014 based on the employer’s reliance on the results of use of the MV Calculator” gets a one-time pass “if that plan year begins no later than March 1, 2015.”
  • No-hospitalization minimum value plans that don’t get that pass will become subject to the new rules when they are published, with no grace period.

Even if the employer gets a pass, employees offered the minimum value plan will remain subsidy eligible, and their employer must communicate that to them.  Here’s how Notice 2014-69 described that obligation.

An employer that offers a Non-Hospital/Non-Physician Services Plan (including a Pre-November 4, 2014 Non-Hospital/Non-Physician Services Plan) to an employee (1) must not state or imply in any disclosure that the offer of coverage under the Non-Hospital/Non-Physician Services Plan precludes an employee from obtaining a premium tax credit, if otherwise eligible, and (2) must timely correct any prior disclosures that stated or implied that the offer of the Non-Hospital/Non-Physician Services Plan would preclude an otherwise tax-credit-eligible employee from obtaining a premium tax credit. Without such a corrective disclosure, a statement (for example, in a summary of benefits and coverage) that a Non-Hospital/Non-Physician Services Plan provides minimum value will be considered to imply that the offer of such a plan precludes employees from obtaining a premium tax credit. However, an employer that also offers an employee another plan that is not a Non-Hospital/Non/-Physician Services Plan and that is affordable and provides MV is permitted to advise the employee that the offer of this other plan will or may preclude the employee from obtaining a premium tax credit.

Bottom line:  if you haven’t enrolled employees in your 2015 minimum value plan, you have seven weeks to devise and implement another ACA compliance option.  Employer be nimble, employer be quick.