Affordable Care Act Review

Affordable Care Act Review

EEOC Wellness Incentive Rules: Damned If You Do, Maybe

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

Almost two years ago, the ACA enforcement agencies jointly published a set of lengthy, detailed, final rules applying the ACA’s enhanced health status discrimination prohibition to employer-administered wellness incentives. On April 16, 2015, the EEOC declared those rules insufficient to satisfy the Americans with Disabilities Act, proposing enhanced ADA rules to be codified at 29 CFR § 1630.14. Though much of the lingo is the same, the EEOC rules expose employers to ADA liability for administering wellness incentives that comply with the final ACA rules. We’ll hit just a few highlights here.

The regulatory amendments fill just three of the publication’s forty-four pages, bookended by a thirty-page preamble and a ten-page guidance appendix.  It’s always important to study the preamble before reading the rules and we have, but our space and your time is limited, and much of the preamble reappears in the appendix, so we’ll quote the new rule text, then cut to the guidance.

1630.14 Medical examinations and inquiries specifically permitted.

* * * * *

(d) * * *

(1) Employee health program. An employee health program, including any disability-related inquiries or medical examinations that are part of such program, must be reasonably designed to promote health or prevent disease. A program satisfies this standard if it has a reasonable chance of improving the health of, or preventing disease in, participating employees, and it is not overly burdensome, is not a subterfuge for violating the ADA or other laws prohibiting employment discrimination, and is not highly suspect in the method chosen to promote health or prevent disease.

(2) Voluntary. An employee health program that includes disability-related inquiries or medical examinations (including disability-related inquiries or medical examinations that are part of a health risk assessment) is voluntary as long as a covered entity:

(i) Does not require employees to participate;

(ii) Does not deny coverage under any of its group health plans or particular benefits packages within a group health plan for non-participation, or limit the extent of benefits (except as allowed under paragraph (d)(3) of this section) for employees who do not participate;

(iii) Does not take any adverse employment action or retaliate against, interfere with, coerce, intimidate, or threaten employees within the meaning of Section 503 of the ADA, at 42 U.S.C. 12203; and

(iv) Where a health program is a wellness program that is part of a group health plan, provides employees with a notice that:

(A) Is written so that the employee from whom medical information is being obtained is reasonably likely to understand it;

(B) Describes the type of medical information that will be obtained and the specific purposes for which the medical information will be used; and

(C) Describes the restrictions on the disclosure of the employee’s medical information, the employer representatives or other parties with whom the information will be shared, and the methods that the covered entity will use to ensure that medical information is not improperly disclosed (including whether it complies with the measures set forth in the HIPAA regulations codified at 45 CFR parts 160 and 164).

(3) Incentives offered for employee wellness programs that are part of a group health plan. The use of incentives (financial or in-kind) in an employee wellness program, whether in the form of a reward or penalty, together with the reward for any other wellness program that is offered as part of a group health plan (as defined in 29 USC 1191b(a)), will not render the program involuntary if the maximum allowable incentive available under the program (whether the program is a participatory program or a health-contingent program, or some combination of the two, as those terms are defined in regulations at 26 CFR 54.9802-1(f)(1)(ii) and (iii), 29 CFR 2590.702(f)(1)(ii) and (iii), and 45 CFR 146.121(f)(1)(ii) and (iii), respectively) does not exceed 30 percent of the total cost of employee-only coverage.

* *

Guidance begins by warning that calling something an “employee health program” won’t make it so. For example –

Conducting a HRA and/or a biometric screening of employees for the purpose of alerting them to health risks of which they may have been unaware would meet this standard, as would the use of aggregate information from employee HRAs by an employer to design and offer health programs aimed at specific conditions that are prevalent in the workplace. An employer might conclude from aggregate information, for example, that a significant number of its employees have diabetes or high blood pressure and might design specific programs that would enable employees to treat or manage these conditions. On the other hand, collecting medical information on a health questionnaire without providing employees follow-up information or advice, such as providing feedback about risk factors or using aggregate information to design programs or treat any specific conditions, would not be reasonably designed to promote health. Additionally, a program is not reasonably designed to promote health or prevent disease if it imposes, as a condition to obtaining a reward, an overly burdensome amount of time for participation, requires unreasonably intrusive procedures, or places significant costs related to medical examinations on employees. A program also is not reasonably designed if it exists mainly to shift costs from the covered entity to targeted employees based on their health.

EEOC then does the math on the 30% limitation. If the all-in, annual premium for employee-only coverage is $5,000, then the 30% limit is $1,500. So, offering $250 for completing a health assessment and $1,500 for satisfying a health-contingent standard would be unlawful, even though each type of incentive complied with the rules for that type of incentive.

Smoking cessation incentives get more deference, as under the ACA rules. Excluding them from the “disability-related inquiries or medical examinations” targeted by the ADA, the EEOC frees employers to “offer incentives as high as 50 percent of the cost of employee coverage for that smoking cessation program, pursuant to the regulations implementing HIPAA, as amended by the Affordable Care Act, without implicating the disability-related inquiries or medical examinations provision of the ADA.”

The guidance also warns that ADA accommodation obligations may exceed employer ACA obligations to offer alternatives to employees who cannot satisfy health-contingent award standards and may require, “a reasonable accommodation for a participatory program even though HIPAA and the Affordable Care Act do not require such programs to offer a reasonable alternative standard.”

The guidance also cautions against making, “individuals who handle medical information that is part of an employee health program . . . responsible for making decisions related to employment, such as hiring, termination, or discipline.” EEOC recommends using a third party to reduce, “the risk that medical information will be disclosed to individuals who make employment decisions, particularly for employers whose organizational structure makes it difficult to provide adequate safeguards.” Alternatively, “Employers that administer their own wellness programs need adequate firewalls in place to prevent unintended disclosure.”

 

12 ACA Compliance Boxes You Should Have Checked Already

Posted in Uncategorized

For employers who have delayed ACA compliance this long, you have delayed too long. Even if things go your way this June in King v. Burwell, you’ll be unprepared for EBSA compliance audits and for IRS coverage offer reporting that is independent of that case. And there’s more than you think riding on the bet that things will go your way. There are 12 ACA compliance boxes that large employers should have checked already

The ACA Review’s R. Pepper Crutcher, Jr. authored an article published in Bloomberg BNA’s Health Insurance Report on April 8, 2015. The article detailed actionable items for employers to ensure are completed leading up to the full enforcement of the Affordable Care Act. Mr. Crutcher provided insight on measurement periods, status tracking and coverage offer reporting among other compliance requirements.

To read the Bloomberg BNA article, click here.

Is Every State Agency and Instrumentality An Applicable Large Employer Member?

Posted in Affordable Care Act, Government Employers, Taxes

Your board, commission or other state-created entity has ten employees and a budget that’s a Medicaid rounding error to four decimal places.   How could you possibly be an ACA “Applicable Large Employer”? Here’s how, and here’s what it means.

Writing its employer mandate rules under 26 U.S.C. § 4980H and its coverage offer reporting rules under 26 U.S.C. § 6056 last year, the IRS borrowed prior rules that treat small, nominally independent corporations as a single employer, based on common ownership and financial control. Though government employers also are covered by sections 4980H and 6056, the IRS had no such government employer aggregation rules to borrow. Here’s part of what the IRS said, consequently, about the applicable aggregation standard for government employers in each set of rules.

The final regulations continue to reserve on the application of the employer aggregation rules under section 414(b), (c), (m) and (o) to government entities, as well as to churches or conventions or associations of churches (as defined in § 1.170A–9(b)). Until further guidance is issued, those entities may apply a reasonable, good faith interpretation of section 414(b), (c), (m) and (o) in determining their status as an applicable large employer.

79 Fed. Reg. 8,548 (preamble to the employer mandate rules). For this purpose, a “government entity” is, “any state or political subdivision thereof . . . or any instrumentality of any of the foregoing.” 26 CFR § 54.4980H-1(a)(23). “Instrumentality” is not defined in the rules. Code § 414(b) and § 414(c) reference the controlled group rules for corporations and partnerships. Code § 414(m) states “affiliated service group” rules for corporate aggregation. Code § 414(o) directs the IRS to issue related rules.

The coverage offer reporting rules incorporate the “Applicable Large Employer” definition of the employer mandate rules and, similarly, define, “agency or instrumentality of a government unit” as, “[Reserved.]” 26 CFR § 301.6-56-1. Footnote 3 in the preamble explains that –

Until further guidance is issued, government entities, churches, and a convention or association of churches may apply a reasonable, good faith interpretation of section 414(b), (c), (m), and (o) in determining whether a person or group of persons is an applicable large employer and whether a particular entity is an applicable large employer member. See section V.D. of the preamble to the final section 4980H regulations (TD 9655).

79 Fed. Reg. 13,234.

Now, back to your predicament. A ten-employee office wholly owned and controlled by an Applicable Large Employer corporation is a ”member” of that employer, with the same employer mandate and coverage offer reporting responsibilities. Among other things, it should know by now who within the organization will generate, file with IRS and deliver a Form 1095-C to each full-time employee in early 2016, detailing that employee’s coverage offer status for each 2015 coverage month. A small state or county agency or instrumentality has the same obligation, except that the IRS has promised to forgive your “reasonable, good faith” misunderstanding of how the IRS would apply corporate aggregation rules to your government entity. But you must actually have made the effort to understand and apply those rules.  If so, you should be able to prove that effort, by contemporaneous documents. An exculpatory interpretation crafted next year in response to an IRS assessment may not do the trick. Here’s what you need to know, soon:

  • Are we an agency or instrumentality of the state? The county?
  • If so, is our office independently responsible for 2015 coverage offer reporting?
  • If not, who in the large organization is doing this for us?
  • If we are a state or county agency or instrumentality, and if we are found to be non-compliant, from what accounts are IRS employer mandate taxes and reporting penalties to be paid in 2016?

 

 

SBC FAQ

Posted in Affordable Care Act, Uncategorized

Yesterday, the Departments of Labor, Health & Human Services, and the Treasury (collectively, the “Departments”) issued a new FAQ. As with prior FAQ’s, this FAQ is intended to answer a question in order to help people understand the Affordable Care Act and its implementation. The question this FAQ addresses is in regard to the proposed changes to the summary of benefits and coverage (“SBC”). The question was posed as follows:

In the December 2014 notice of proposed rulemaking, the Departments proposed changes to the SBC regulations, as well as a new SBC template and associated documents. Changes to the SBC regulations, template, and associated documents were proposed to apply beginning September 1, 2015. When do the Departments intend to finalize changes to the regulations, SBC template, and associated documents?

Based on the FAQ, it appears that the revised SBC regulations will be issued in time for coverage beginning or renewing on January 1, 2016. With that being said, the FAQ also provided that the Departments anticipate the new template and associated documents will be finalized by January 2016 and will be required to be used for 2017 coverage.

The Departments intend to offer an opportunity for the public, including the National Association of Insurance Commissioners, to provide further input before finalizing revisions to the SBC template and associated documents. As stated above, the Departments anticipate the new template and associated documents will be finalized by January 2016 and will apply to coverage that would renew or begin on or after January 1, 2017 (open enrollment periods in the Fall of 2016). While the Departments indicate that they are “fully committed to updating the template and associated documents (including the uniform glossary) to better meet consumers’ needs as quickly as possible,” they intend to offer an opportunity for the public, including the National Association of Insurance Commissioners, to provide further input before finalizing revisions to the SBC template and associated documents.

“CBO Says . . .”

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

It’s a Capitol Hill game. Anything that has any significant budgetary consequence may be lauded or condemned based on the Congressional Budget Office forecast of that consequence. So what has the CBO said about ACA subsidy payments, individual mandate and employer mandate penalties? We compared the CBO’s April 2014 Baseline with its January 2015 Baseline and its March 2015 Baseline for fiscal years 2015, 2016 and 2017, looking at just three of the ACA’s budgetary consequences.

Exchanges subsidies by fiscal year (in billions of dollars)

April 2014 Baseline:               17 – 36 – 77

January 2015 Baseline:          32 – 66 – 87

March 2015 Baseline:            28 – 53 – 72

Individual mandate penalties paid by fiscal year (in billions of dollars)

April 2014 Baseline:               0 – 2 – 4

January 2015 Baseline:          2 – 4 – 4

March 2015 Baseline:            2 – 3 – 4

Employer penalties paid by fiscal year (in billions of dollars)

April 2014 Baseline:               0 – 0 – 8

January 2015 Baseline:          0 – 7 – 11

March 2015 Baseline:            0 – 9 – 13

We don’t question the quality of the CBO’s work; rather, we assume that these are the best available estimates. Nevertheless, note the 65% increase in forecast 2015 subsidy outlays. What will be will be, but we’re not likely to know until it is what it is.

HDHP Family Coverage Cost Sharing Limit Put Simply

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

The HHS 2016 Notice of Benefit and Payment Parameters was the usual grab bag of regulatory minutiae, but some things were more easily grabbed than others. So, HHS has published a good, simple explanation of how the annual cost sharing limit applies to high deductible health plan coverage of a family. We quote it here, in full.

The final 2016 Notice of Benefit and Payment Parameters (2016 Payment Notice) (80 FR 10750) clarified that the self-only annual limitation on cost sharing applies to each individual regardless of whether the individual is enrolled in a self-only or other than self-only plan. As a result, how can issuers offer a family high deductible health plan (HDHP) with a $10,000 family deductible?

In the 2016 Payment Notice, CMS established that starting in the 2016 plan year, the self-only annual limitation on cost sharing applies to each individual, regardless of whether the individual is enrolled in other than self-only coverage, including in a family HDHP. Under the requirements for an HDHP, except for preventive care, a plan may not provide benefits for any year until the deductible for that year has been met.  As discussed in IRS Notice 2004-2 (http://www.irs.gov/irb/2004-02_IRB/ar09.html), in the case of family coverage, a plan is an HDHP only if, under the terms of the plan and without regard to which family member or members incur expenses, no amounts are payable from the HDHP until the family has incurred annual covered medical expenses in excess of the minimum annual deductible for family coverage.

For example, an HDHP plan that has a $10,000 family deductible may provide payment for covered medical expenses for a member of the family if that member has incurred covered medical expenses during the year of at least $2,600 (the minimum deductible for a 2015 family HDHP). Under the policy finalized in the 2016 Payment Notice, this plan must also apply the annual limitation on cost sharing for self only coverage ($6,600 in 2015) to each individual in the plan, even if this amount is below the $10,000 family deductible limit.

As stated in the 2016 Payment Notice, while cost sharing incurred towards the deductible must count towards the annual limitation on cost sharing for essential health benefits (EHB), the deductible limit is not treated in the same manner as the annual limitation on cost sharing under 45 CFR §156.130. Therefore, family HDHPs that count the family’s cost sharing to the deductible limit can continue to be offered under this policy, as long as the self-only annual limitation on cost sharing is applied to each individual in the plan.

King v. Burwell Oral Argument – First Read of the Omens

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

Apologizing to our readers for having advertised live audio that wasn’t, you really can find the Wall Street Journal’s live blog entries here.    The Court’s official audio and transcript may be available as early as March 6, according to some early estimations.  Based on accounts of observers who are commenting immediately, here are our first impressions of likely positions when we read the opinion, probably in late June.

Justice Ginsburg dug in early, questioning whether the people bringing the case have legal “standing” to sue. As expected, their counsel had reasonable answers.

Justice Kennedy, later joined by Justice Sotomayor, suggested that, if the subsidy language were read as the plaintiffs propose, it might exceed the power of Congress to coerce states by means of federal spending.  A similar concern won a 7-2 majority back in 2012 in the individual mandate case, NFIB v. Sebelius.

Justices Breyer and Kagan suggested that the government’s reading of the subsidy language – availability through all ACA Exchanges, no matter whether state or federal – is the only practical reading. Justice Alito turned one such comment around in amusing fashion.

Counsel were given longer than the usual time, but it wasn’t enough. The argument went into the Supreme Court equivalent of double overtime, with Chief Justice Roberts trying to keep just one person talking at a time during the spirited debate.

Update March 4 (pm):  To hear an excellent, in-depth, same day discussion of the King v. Burwell oral argument by Prof. Jonathan Adler, click here.  Professor Adler agrees with us that, if the Government wins, federalism concerns voiced by Justice Kennedy will motivate the likely majority.  And, if the Government loses, the Court might delay its mandate, perhaps for the remainder of 2015.  Still, too close to call.

Update March 9 (am):  The oral argument audio has been posted here.  The transcript is here.

Final HHS Notice of Benefit and Payment Parameters for 2016

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

This is an annual regulatory publication that covers many Exchange and market reform initiatives. The early release that we read for this article was 474 pages long. You can read the more compact (129-page) Federal Register version here. These are our top ten take-aways.

10.  The 2016 annual cost sharing limits will be $6,850 for self-only coverage and $13,700 for other than self-only coverage.

9.  The 2016 reinsurance contribution rate will be $27 per enrollee, and may be paid entirely in January, rather than split between January and the following November.

8.  The 2016 Exchange annual open enrollment period will run from November 1, 2015 through January 31, 2016.

7.  Certain plan terms will be suspected of unlawful discrimination – e.g., restricting broadly needed services to certain age groups or placing drugs needed to treat a particular condition on a higher cost sharing tier.

6.  Plans no longer may require all drugs to be mail-ordered. If a health plan denies a drug on a standard (72 hour turnaround) or expedited (24 hour) basis, it must make available an external review process.

5.  HHS will require 2016 QHP issuers to add a pharmacy and therapeutic (P&T) committee process to their prescription drug formulary development and to keep their online listings updated and machine readable, to facilitate download and automated comparison by reviewers.

4.  QHP issuers must offer Essential Community Providers contracts on the same terms as other providers and must offer a contract to at least one ECP in each category in each county of the service area.

3.  Quality Improvement Strategy (QIS) reporting will begin to be phased-in for QHP issuers that participated in an Exchange in 2014 and 2015. Each such QHP issuer insurer will have to explain what it has done in at least one QIS area listed in ACA section 1311(g).

2.  Network provider directories must meet tighter adequacy standards, including currency and accessibility. For example, the directory must be offered in a machine readable format to facilitate download and comparative use by reviewers.

1.  Plans without “substantial” hospitalization and physician coverage will be deemed to offer less than “minimum value,” regardless of whether EHB rules apply and no matter how they pushed through the 2015 AV Calculator.  MEC they might be, but not MAV.

IRS Floats Cadillac Tax Enforcement Balloons

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

Beginning in 2018, relatively generous group health plans will begin accruing non-deductible excise tax liabilities equal to 40% of the “excess benefit” provided to beneficiaries. Codified at 26 U.S.C. § 4980I, it’s better known as the “Cadillac plan” tax. Widespread disapproval may explain why it was delayed eight years after the ACA’s passage. Nevertheless, get ready, here it comes. So says IRS Notice 2015-16, which also gives us the first practical hints about how the tax will be calculated.

Notice 2015-16 is not a set of rules. It is the first step in a rulemaking process that will have at least four steps – (1) Notice 2015-16, soliciting comments by May 15, 2015; (2) another Notice, based on those comments; (3) publication of proposed rules, after consideration of the further comments; (4) final rule publication, reflecting any adjustments due to comments on the proposed rules. In this first phase, the IRS identifies matters apparently left to its discretion and describes the options under consideration, in some cases telling us which option seems preferable. The Notice covers 24, single-spaced pages – far too long for comprehensive coverage here.   Here are some highlights.

The “cost of coverage” used to calculate the excess benefit may differ from the cost of coverage that employers currently must report annually on Form W-2. “However, Treasury and IRS anticipate that to the extent guidance under § 4980I provides improved methods for determining the cost of applicable coverage, consistent rules may be issued for purposes of § 6051(a)(14),” – i.e., W-2 reporting. In other words, if IRS writes different rules for the Cadillac tax, the W-2 rules might be revised accordingly.

The “cost of coverage” used to calculate the excess benefit probably will include –

  • executive physical programs;
  • Health Reimbursement Arrangements (HRAs);
  • Employer pre-tax contributions to Health Savings Accounts (“HSAs”) and Archer MSAs;
  • Expenses for on-site medical clinics that offer more than de minimis medical care; and, maybe,
  • Employee Assistance Programs that do not qualify as “excepted benefits” under 26 CFR § 54.9831-1(c)(3)(vi).

Further as to cost of coverage, and quoting (with omissions) from the Notice –

[F]or any specific type of applicable coverage, the cost of that applicable coverage for an employee will be based on the average cost of that type of applicable coverage for that employee and all similarly situated employees. Under the potential approach that Treasury and IRS are considering, each group of similarly situated employees would be determined by starting with all employees covered by a particular benefit package provided by the employer, then subdividing that group based on mandatory disaggregation rules, and allowing further subdivision of the group based on permissive disaggregation rules. [ . . . ] The employees enrolled in each different benefit package would be grouped separately. Benefit packages would be considered different based upon differences in health plan coverage; there may be more than one benefit package provided under a group health plan. Employees would be grouped by the benefit packages in which they are enrolled, rather than the benefit packages they are offered. Thus, for example, if employees are provided a choice between a standard and a high option (such as an option with lower deductibles and copays), employees covered under the high option would be grouped separately from those covered under the standard option. [ . . . ] After aggregating all employees covered by a particular benefit package, under this potential approach, the employer would then be required to disaggregate the employees within the group covered by the benefit package based on whether an employee had enrolled in self-only coverage or other-than-self-only coverage. For example, in a benefit package allowing employees to choose between self-only and family coverage, employees receiving self-only coverage would be grouped separately from those receiving family coverage. [ . . . ] [And] Treasury and IRS are considering whether disaggregation should be permitted based on (a) a broad standard (such as limiting permissive disaggregation to bona fide employment-related criteria, including, for example, nature of compensation, specified job categories, collective bargaining status, etc.) while prohibiting the use of any criterion related to an individual’s health), or (b) a more specific standard (such as a specified list of limited specific categories for which permissive disaggregation is allowed). A more specific standard, for example, could permit groups of similarly situated employees enrolled in a single benefit package to be disaggregated only into current and former employees and/or to be disaggregated based on bona fide geographic distinctions, such as an employee’s residence in or a business’s location in different states or metropolitan areas and/or, for an employee receiving other-than-self-only coverage, based on the number of individuals covered in addition to the employee (that is, different rating units).

The Notice cautions us not to assume that the COBRA and Cadillac tax aggregation / disaggregation rules will match.

The Notice merely references the statute when commenting briefly on the “health cost adjustment percentage” and other adjustments to the 2018 annual dollar limits of $10,200 for self-only coverage and $27,500 for other coverage. We’ll have to wait for guidance on those important points.

Want to submit your comments? Here’s how:

Public comments should be submitted no later than May 15, 2015. Comments should include a reference to Notice 2015-16. Send submissions to CC:PA:LPD:PR (Notice 2015-16), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (Notice 2015-16), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, DC 20044, or sent electronically, via the following e-mail address: Notice.comments@irscounsel.treas.gov. Please include “Notice 2015-16” in the subject line of any electronic communication. All material submitted will be available for public inspection and copying.

 

 

 

 

 

The Stand-Alone HRA Is Undead!

Posted in Affordable Care Act, Business Organizations, Coverage Mandates, Private Employers, Taxes

Sort of, temporarily, for some of you.  It’s complicated.  You’ll want to read this to the end.

The enforcement agencies (DOL, HHS, IRS) have warned, repeatedly and consistently, that employer pre-tax reimbursement of individual employee health insurance premiums, standing alone, will violate ACA market reforms added to the Public Health Service (“PHS”) Act. That is, until this week, when several “transitional relief” exceptions were announced in IRS Notice 2015-17, along with a new threat to wage bump offsets.

Normally, a group health plan that fails to comply with an applicable PHS Act mandate is subject to the excise tax imposed by 26 U.S.C. § 4980D(b)(1) – “$100 for each day in the noncompliance period with respect to each individual to whom such failure relates.” Ouch. Notice 2015-17 –

provides that the excise tax under Code § 4980D will not be asserted for any failure to satisfy the market reforms by employer payment plans that pay, or reimburse employees for individual health policy premiums or Medicare part B or Part D premiums (1) for 2014 for employers that are not ALEs for 2014, and (2) for January 1 through June 30, 2015 for employers that are not ALEs for 2015. After June 30, 2015, such employers may be liable for the Code § 4980D excise tax.

And –

For determining whether an entity was an ALE for 2014 and for 2015, an employer may determine its status as an applicable large employer by reference to a period of at least six consecutive calendar months, as chosen by the employer, during the 2013 calendar year for determining ALE status for 2014 and during the 2014 calendar year for determining ALE status for 2015, as applicable (rather than by reference to the entire 2013 calendar year and the entire 2014 calendar year, as applicable).

And –

Employers eligible for the relief described in this Q&A-1 that have employer payment plans are not required to file IRS Form 8928 (regarding failures to satisfy requirements for group health plans under chapter 100 of the Code, including the market reforms) solely as a result of having such arrangements for the period for which the employer is eligible for the relief.

But, “This relief does not extend to stand-alone HRAs or other arrangements to reimburse employees for medical expenses other than insurance premiums.”

Similarly, the agencies are reconsidering how the PHS Act amendments should apply to employer pre-tax reimbursement of owners’ health insurance premiums. So –

Until such guidance is issued, and in any event through the end of 2015, the excise tax under Code § 4980D will not be asserted for any failure to satisfy the market reforms by a 2-percent shareholder-employee healthcare arrangement. Further, unless and until additional guidance provides otherwise, an S corporation with a 2-percent shareholder-employee healthcare arrangement will not be required to file IRS Form 8928 (regarding failures to satisfy requirements for group health plans under chapter 100 of the Code, including the market reforms) solely as a result of having a 2-percent shareholder-employee healthcare arrangement.

The tax treatment of such arrangements remains subject to Notice 2008-1 until further notice.

What if the employee’s health insurance is Medicare or TRICARE? Under prior guidance, reimbursing the employee’s premiums with pre-tax money would violate the PHS Act because those programs are not treated as related, employer-sponsored group health plans. Here’s the limited relief now offered regarding Medicare premiums:

[A]n employer payment plan that pays for or reimburses Medicare Part B or Part D premiums is integrated with another group health plan offered by the employer for purposes of the annual dollar limit prohibition and the preventive services requirements if (1) the employer offers a group health plan (other than the employer payment plan) to the employee that does not consist solely of excepted benefits and offers coverage providing minimum value; (2) the employee participating in the employer payment plan is actually enrolled in Medicare Parts A and B; (3) the employer payment plan is available only to employees who are enrolled in Medicare Part A and Part B or Part D; and (4) the employer payment plan is limited to reimbursement of Medicare Part B or Part D premiums and excepted benefits, including Medigap premiums. Note that to the extent such an arrangement is available to active employees, it may be subject to restrictions under other laws such as the Medicare secondary payer provisions.

And here’s the relief offered for TRICARE:

[A]n HRA that pays for or reimburses medical expenses for employees covered by TRICARE is integrated with another group health plan offered by the employer for purposes of the annual dollar limit prohibition and the preventive services requirements if (1) the employer offers a group health plan (other than the HRA) to the employee that does not consist solely of excepted benefits and offers coverage providing minimum value; (2) the employee participating in the HRA is actually enrolled in TRICARE; (3) the HRA is available only to employees who are enrolled in TRICARE; and (4) the HRA is limited to reimbursement of cost sharing and excepted benefits, including TRICARE supplemental premiums. Note that to the extent such an arrangement is available to active employees, employers should be aware of laws that prohibit offering financial or other incentives for TRICARE-eligible employees to decline employer-provided group health plan coverage, similar to the Medicare secondary payer rules.

So far, so good, but the IRS saved the worst for last. Prior guidance appeared to allow an employer to raise an employee’s taxable wages to offset the cost of buying individual health insurance – for example, if the employer decided to drop its group health plan. Notice 2015-17 narrows that opening, thusly:

[A]n arrangement under which an employer provides reimbursements or payments that are dedicated to providing medical care, such as cash reimbursements for the purchase of an individual market policy, is itself a group health plan. Accordingly, the arrangement is subject to the market reform provisions of the Affordable Care Act applicable to group health plans without regard to whether the employer treats the money as pre-tax or post-tax to the employee. Such employer health care arrangements cannot be integrated with individual market policies to satisfy the market reforms and, therefore, will fail to satisfy PHS Act §§ 2711 (annual limit prohibition) and 2713 (requirement to provide cost-free preventive services) among other provisions.

Notice 2015-17 may send many small employers back to the ACA compliance drawing board.

The End.