Affordable Care Act Review

Affordable Care Act Review

Questionable Retaliation Theory Gets Traction

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

Since our earliest postings, we have warned of a notion, prevalent among employee counsel, that an employer plan sponsor unlawfully retaliates against an employee by reducing her work hours in order to deprive her of ACA “full-time” coverage offer eligibility.  The musings that we have heard and read rarely distinguish claims under ERISA § 510 (29 U.S.C. § 1140) and ACA § 1558 (29 U.S.C. § 218c). Pending review of judicial opinions addressing such claims, we have been skeptical. It seems to us that, if managing work hours to minimize ACA “full-time” exposure violates ERISA or the ACA, then managing weekly work hours of all employees to limit future exposure to FLSA claims once raised by some should violate the FLSA’s anti-retaliation provision, 29 U.S.C. § 215.  But, typically, non-discriminatory management of future exposure is permitted.  In the ACA context, it’s a main theme of the IRS employer mandate rules.

On February 9, 2016, without addressing those points, the court in Marin v. Dave & Buster’s, Inc., S.D. N.Y. No. 1:15-cv-03608 denied a defense motion to dismiss such a claim under ERISA § 510.  The court found sufficient Plaintiff’s evidence that a Times Square store manager and assistant manager had told employees that work hours were cut because the employer forecast that, absent such management, the ACA would impose as much as two million dollars of new expense in 2015.  The store’s number of full-time employees fell from over 100 to about 40.  That evidence was enough, said the court, to satisfy the requirement for proof of a specific intent to interfere with benefits.

This potentially disruptive opinion bears watching.  In the meantime, if you’re looking for a corporate logo, don’t pick a bulls-eye.

Reminder of the ACA Related Deadlines for 2016

Posted in Affordable Care Act, Uncategorized

This post is intended to be a brief reminder of some of the 2016 deadlines. As originally described in our December post the following are the updated dates for Forms 1094 and 1095.

Forms Original IRS Due Date Updated IRS Due Date
Forms 1095-B and 1095-C Feb. 1, 2016 March 31, 2016
Forms 1094-B, 1095-B, 1094-C, and 1095-C on paper by Feb. 29, 2016 May 31, 2016
Forms 1094-B, 1095-B, 1094-C and 1095-C electronically by March 31, 2016 June 30, 2016

The PCORI Fee

Employers and insurers will need to file Internal Revenue Service (IRS) Form 720 and pay the PCORI fee by July 31, 2016. Remember, the PCORI fee is assessed on both issuers of health insurance policies and sponsors of self-insured health plans and are calculated using the average number of lives covered under the policy or plan. The following chart provides fees as indexed for the provided time periods:

PCORI fees Plan Years
$2 per life ending on or after October 1, 2013, and before October 1, 2014
$2.08 per life ending on or after October 1, 2014, and before October 1, 2015
$2.17 per life ending on or after October 1, 2015, and before October 1, 2016

The Transactional Reinsurance Fee

The next filing deadline is the transactional reinsurance fee. In the first year, HHS required a contributing entity to make two separate payments. The first payment was due by January 15 and the second payment was due by November 15. HHS resolved their technical difficulties in time for the 2015 payment. Like the 2015 payment, contributing entities have the option for the 2016 fee ($27 per covered life) as follows:

  1. The entire fee in one payment no later than January 15 (if not a business day, the next applicable business day); or
  2. Two separate payments, with the first due by January 15, (if not a business day, the next applicable business day) in the amount of the first payment of the bifurcated contribution ($21.60 per covered life for 2016); and the remaining payment due by November 15, (if not a business day, the next applicable business day) in the amount of the second payment of the bifurcated contribution ($5.40 per covered life for 2016).

Individual Market Open Enrollment

The open enrollment for individual health insurance plans for 2017 will be considerably earlier than it was for 2016. Currently, the open enrollment period for the 2017 coverage year is October 15, 2016 through December 7, 2016.

As always, stay tuned for changes and future guidance.

ACA Myths That Just Won’t Die

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

Lawyers, politicians, economists, climate scientists, fad diet peddlers . . . we all know that it’s child’s play to persuade people of what they want to believe. Perhaps that explains the persistence of so many questionable beliefs about ACA compliance. Here are three examples.

The Look –[way] back Measurement Method

The ACA commands or allows employers to identify their “full-time” employees in two ways, for different purposes. The “monthly measurement method” simply asks whether an employee averaged at least 30 weekly “hours of service” in a given month. It is used to count the monthly number of full-time employees to which the employer must add the monthly number of full-time equivalent employees to determine the employer’s status, or not, as an “Applicable Large Employer” (ALE) for the following year. Monthly measurement also is the default rule for identifying full-time employees who are due an offer of coverage. Coverage offers (and non-offers) to full-time employees must be reported the following year on Form 1095-C.

The “look-back measurement method” has nothing to do with ALE status determination. It’s an alternative method that employers may use for coverage offer and reporting purposes. New full-time employees must be offered coverage within the maximum “90-day” waiting period (or shorter period stated in the group health plan). But the full-time status, or not, of new variable-hour employees may be determined as much as a year after hiring, under the look-back measurement method, and coverage offers extended thereafter. Ongoing employees – i.e., those employed for at least one standard measurement period – may also have their full-time status determined under the look-back measurement method. With some exceptions, those “measured” as full-time during the measurement period must be treated as full-time for the associated stability period, and those not measuring up need not be treated as full-time during the associated stability period. Again, this applies to coverage offers and to coverage offer reporting.
Many employers have been advised that their Code § 4980H(a) tax exposure may be minimized by retroactive application of the look-back measurement method. We have yet to hear the legal basis for that advice. An ALE that did not offer 2015 minimum essential coverage to at least 70% of its full-time employees and their dependents has § 4980H(a) exposure if at least one full-time employee bought subsidized 2015 insurance through an ACA Exchange. We are aware of no IRS guidance stating or suggesting that an employer in 2016 may retroactively adopt the look-back measurement method in order to minimize the number of full-time employees used in the 2015 monthly assessment calculations. Maybe the IRS will cut you that slack, but don’t count on it.

A Rose by Any Other EIN

For many regulatory purposes for many years, federal agencies have treated nominally separate employers, with separate Employer Identification Numbers, as a single “controlled group” employer, based on common ownership and other indicia of control. Apparently, the IRS command to report 2015 coverage offers EIN-by-EIN (one Form 1094-C “Authoritative Transmittal” for each EIN) has encouraged employers to believe that each EIN will be viewed separately as an ALE, or not. Well, no.

An EIN within a controlled group is called an “Applicable Large Employer Member.” Under penalty of perjury, it must identify the group’s other members on Form 1094-C, Part IV (page 3).   If, in the aggregate, the group averaged at least 50 monthly full-time employees (including FTE equivalents) in 2015, then it’s a 2016 ALE. The IRS will total the employees reported by all group EINs to make that determination.

Plop, Plop, Fizz, Fizz: Under-100 Relief

“Smaller large employers” – i.e., ALEs with less than 100 full-time employees (including equivalents) – may avoid § 4980H assessments that otherwise would be imposed in 2016 by filing their 2015 Form 1095-Cs with a 2015 Form 1094-C, checking Form 1094-C, Line 22, Box C to claim that relief. Many employers have been advised about the relief, but not that it is conditioned on the filing. Thus, many have not planned to file.   We are unaware of any IRS guidance stating or suggesting that this relief will be extended to smaller large employers that fail to file as required. And, by the way, before checking Box C, read pages 15-16 of the Instructions to assure that you understand what you are certifying, under penalty of perjury, by doing so.

Devils, Details

We glossed-over many conditions, qualifications and exceptions to keep this simple, because our least sophisticated readers are most in need.  If you’re among them, get help yesterday.

How (and How Not) to Read This Blog

Posted in Affordable Care Act, Business Organizations, Community Health Needs Assessments, Coverage Mandates, Employee Leasing, Exchanges, Federal Contractors, Government Employers, Grandfathered Status, Independent Contractors, Insurers and Brokers, Private Employers, Providers - For Profit, Providers - Not-for-Profit, Taxes, Uncategorized

Nearly three years ago, having spent hundreds of hours immersed in ACA minutiae, we anticipated that clients would not react well to fees for services that consisted principally of telling them that they had asked the wrong question. So we decided, against tradition and much conventional wisdom, to sink lots of unpaid partner time into this education project. A casual reader of this blog should learn basic ACA terms and concepts, so that he or she can converse effectively with advisors. A regular reader should be able to identify, during such a conversation, a purported ACA expert who’s a poseur. Sadly, they abound. A colleague should find this a thought-provoking reference to ACA rules and guidance documents. Those are our goals.

Substitute nothing you read here for legal or other professional advice about any specific situation. ACA rules and sub-regulatory guidance change frequently and whimsically. Occasionally, the three main enforcement agencies (DOL, HHS, IRS) disagree. Sometimes, they publish a new rule unaware of a related, existing rule. Part of our service to you is to alert you to what we see coming. We usually have guessed right, but we often are guessing. And of course, apparently insignificant factual details can turn out to be determinative. If you regard this blog as cheap – i.e., free – legal advice, you’re rolling the dice at your own risk and the risk might be far bigger than you realize.

Finally, we invite constructive comments, including reasoned criticism, but not rants. We delete hissy-fits and block commenters who seem to be unable to comment otherwise. That goes triple for political hyperbole. Sometimes, we must explain political realities in order to explain a regulatory reality, but we try to be objective. You should, too.

ACA Information Return Deadlines Extended

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

On December 28, 2015, the IRS released its Notice 2016-4, granting much needed time for employers and their filing services to catch up to Affordable Care Act Information Return (AIR) Program developments. Here (nearly verbatim) are the extensions:

  • The deadline for furnishing to individuals the 2015 Form 1095-B, Health Coverage, and the 2015 Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, is pushed from February 1, 2016, to March 31, 2016;
  • The deadline for filing the 2015 Form 1094-B, Transmittal of Health Coverage Information Returns, the 2015 Form 1095-B, Health Coverage, the 2015 Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, and the 2015 Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, is extended from February 29, 2016, to May 31, 2016, if not filing electronically, and from March 31, 2016, to June 30, 2016 if filing electronically.

That’s very welcome news. However, further extensions by request will not be available.  Says the IRS:

In view of these extensions, the provisions regarding automatic and permissive extensions of time for filing information returns and permissive extensions of time for furnishing statements will not apply to the extended due dates. Employers or other coverage providers that do not comply with these extended due dates are subject to penalties under section 6722 or 6721 for failure to timely furnish and file. However, employers and other coverage providers that do not meet the extended due dates are still encouraged to furnish and file, and the Service will take such furnishing and filing into consideration when determining whether to abate penalties for reasonable cause. The Service will also take into account whether an employer or other coverage provider made reasonable efforts to prepare for reporting the required information to the Service and furnishing it to employees and covered individuals, such as gathering and transmitting the necessary data to an agent to prepare the data for submission to the Service, or testing its ability to transmit information to the Service. In addition, the Service will take into account the extent to which the employer or other coverage provider is taking steps to ensure that it is able to comply with the reporting requirements for 2016.

Updated Tax Credit Eligibility Clarification

Posted in Affordable Care Act

Last week the IRS released the final regulation addressing the effect of various items on an individual’s eligibility for premium tax credits.

Generally, premium tax credits are not normally available to individuals who are offered health insurance coverage by their employer. However, an employee may still be eligible for premium tax credits if the employer coverage does not provide minimum value (MV) (i.e., have an actuarial value of at least 60% and cover substantial hospital and physician services) or if such coverage is not “affordable” (i.e., 9.56% of an employee’s modified adjusted gross income).

The final regulation clarifies how wellness incentives, health reimbursement arrangements (HRAs), and other items effect affordability and in the case of HRAs, MV. With regard to wellness incentives, the final regulations provide that affordability and MV should be determined by assuming that employees fail to qualify for the wellness incentive premium or cost-sharing reductions. However, the regulation does provide one exception—if the wellness incentive relates to tobacco use, affordability will be determined based on the assumption that the employee qualifies for the incentive. Furthermore, if an employee uses tobacco and does not join a tobacco cessation program, thus incurring a tobacco surcharge and such surcharge causes the employer’s insurance to be unaffordable, then the employee and the employee’s family are deemed to be ineligible for premium tax credits.

The final regulation provides that amounts that are made available through an integrated HRA are counted toward an employee’s required contribution to determine affordability when the employee may use such amounts to pay premiums. With regard to MV, amounts available to an employee through an integrated HRA that the employee may only use to reduce cost-sharing is counted toward determining MV. If the HRA amounts may be used for either premiums or to reduce cost-sharing, they shall be considered for determining affordability but not MV.

Finally, the final regulation provides that a former employee’s eligibility for continuation coverage required under Federal or State law does not disqualify such former employee or their dependents from a subsidy unless the former employee enrolls in continuation coverage required under Federal or State law. While the regulation provides that if continuation coverage required under Federal or State law is offered to a current employee due to a reduction in hours it will disqualify the employee from a subsidy if such coverage is affordable and offers MV, it is highly unlikely that continuation coverage required under Federal or State law will be affordable for a part-time employee.

The final regulation provided clarification on a number of items. Hopefully this final regulation and the other guidance issued in the past week is an indication of things to come.

Coming Down Your Chimney: Market Reform Guidance, Information Reporting Penalty Relief and Cadillac Tax Delay

Posted in Affordable Care Act, Coverage Mandates, Employee Leasing, Federal Contractors, Government Employers, Independent Contractors, Insurers and Brokers, Private Employers, Taxes

It’s the “silly season” on the Hill and a busy season for ACA regulators. This article gives you brief notes about Notice 2015-87, information reporting relief and the § 4980I delay buried in the omnibus spending bill.

IRS Notice 2015-87 first answers questions on the periphery of earlier guidance effectively killing stand-alone HRAs. Most notably, an HRA or employer payment plan may be used to reimburse (or to pay directly) premiums for individual policies that provide only excepted benefits – e.g., stand-alone dental or vision plans.

Notice 2015-87 also clarifies that plan-integrated employer HRA contributions that may be used to pay premiums or employee cost sharing obligations under the group health plan are counted to reduce the employee’s share of the premium for purposes of affordability determinations under Code § § 4980H and 5000A. The same is true of some, but not all, employer cafeteria plan flex contributions. IRS forecasts future regulations on related treatment of “opt-out” payments made to employees who decline group health plan coverage.

Which brings us to a federal contractor conundrum. The Service Contract Act and Davis-Bacon Act require certain federal contractors to pay prevailing wages and benefits. The benefit obligation may be satisfied either by benefits or by cash in lieu of those benefits. Until this Notice, employers paying cash in lieu of benefits were exposed to double burdens. Here’s the temporary relief offered a p. 16 of Notice 2015-87.

Treasury and IRS continue to consider how the requirements of the SCA, the DBRA, and the employer shared responsibility provisions under § 4980H may be coordinated. However, until the applicability date of any further guidance, and in any event for plan years beginning before January 1, 2017, employer fringe benefit payments (including flex credits or flex contributions) under the SCA or DBRA that are available to employees covered by the SCA or DBRA to pay for coverage under an eligible employer-sponsored plan (even if alternatively available to the employee in other benefits or cash) will be treated as reducing the employee’s required contribution for participation in that eligible employer-sponsored plan for purposes of § 4980H(b), but only to the extent the amount of the payment does not exceed the amount required to satisfy the requirement to provide fringe benefit payments under the SCA or DBRA. In addition, for these same periods an employer may treat these employer fringe benefit payments as reducing the employee’s required contribution for purposes of reporting under § 6056 (Form 1095-C), subject to the same limitations that apply for purposes of § 4980H(b). Employers are, however, encouraged to treat these fringe benefit payments as not reducing the employee’s required contribution for purposes of reporting under § 6056. If an employee’s required contribution is reported without reduction for the amount of the fringe benefit payment and the employer is contacted by the IRS concerning a potential assessable payment under § 4980H(b) relating to the employee’s receipt of a premium tax credit, the employer will have an opportunity to respond and show that it is entitled to the relief described in this Q&A-10 to the extent that the employee would not have been eligible for the premium tax credit if the required employee contribution had been reduced by the amount of the fringe benefit payment or to the extent that the employer would have qualified for an affordability safe harbor under § 54.4980H-(4)(e)(2) if the required employee contribution had been reduced by the amount of the fringe benefit payment. See also Q&A-26 for certain relief with respect to employer information reporting under § 6056.

Finally, we get a plain English answer to what had seemed for years a simple question – i.e., whether the employer mandate affordability safe harbor (9.5% of household income) is inflation-adjusted. The answer (p. 18, Q12) is “yes.” Thus, the 2015 number is 9.56% and the 2016 number will be 9.66%. Information reporting rules under Code section 6056 will be revised accordingly.

Similarly, the annual assessable payment amounts under Code sections 4980H are inflation-adjusted (p. 20, Q13), so that the $2,000 amount for 2015 is $2,080 and the $3,000 amount is $3,120. For 2016, those numbers will rise to $2,160 and $3,240.

IRS will revise its 4980H “hours of service” rules to clarify that employers need not count as “hours of service” payments made under workers’ compensation and disability plans to former employees. However, disability benefit payments, if funded in part by employee contributions, may count as hours of service if the employee is still on the payroll.

Staffing companies providing labor to educational organizations will face revised § 4980H rules that require them to observe the special employment break period rules that apply to the educational organization, unless the employee is offered full year employment. (P. 23, Q15.)

Bad news for state and local government agencies (p. 25, Q19): If you are deemed a separate employer under applicable state law and you are an ALE, you must have a separate EIN and must report separately on Form 1094-C. The rules about reporting through another Designated Government Entity do not change this. One DGE may report for ten ALEs, but it must file ten 1094-Cs.

It’s not new, but its repetition is welcome: IRS does not intend to penalize 2015 ALE reporting errors made in good faith by ALEs that tried to report correctly, timely in 2016. (That’s Q&A-26, p. 30.) Which brings us to §  202 of H.R. 2029, the omnibus spending bill, which directs IRS to treat information returns as completely correct if the errors involve small dollar amounts. It’s not perfectly clear whether this applies to Form 1095-C, line 15 affordability reporting. Let’s hope.

And, to gift-wrap this, § 101 of the omnibus spending bill delays Cadillac tax (Code § 4980I) accrual from 2018 to 2020 and directs the IRS to re-examine the applicable inflation adjustment formula. Merry Christmas; happy holidays; may the Schwarz be with you.

Give Me Just A Little More Time . . .

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

Was the title of a 1970 soul hit for the Chairmen of the Board. Though your love for ACA information reporting is unlikely to grow as a result, you may need a little more time to get it done. This article responds to multiple requests to review this subject again, in more detail.

Unless you apply properly for extensions, Applicable Large Employer Forms 1095-C (one for each 2015 full-time employee) and Form 1094-C (one for each EIN) must be filed with IRS on paper by February 29, 2016 or must be filed electronically by March 31, 2016. If you will be filing 250 or more Form 1095-Cs, you must file electronically. But those 1095-Cs (or permissible equivalents) are to be furnished to those employees by February 1, 2016. That’s 7.5 weeks from today.

Manually inserting the codes on Form 1095-C lines 14 and 16 can consume as little as two minutes or as much as two hours per Form. Employers with high turnover will be particularly challenged.   Managers with resources and foresight outsourced that work months ago to IRS AIR SystemTransmitters.” Few who offer that high-end service are still accepting new clients for 2015 reporting. Transmitters still open for new business this season may offer helpful tools but typically require the employer to determine and to insert the proper line 14 and line 16 codes.

Fortunately, the IRS is making allowances for this squeeze. An extension of each deadline is available if properly requested. Filing Form 8809 at least 45 days before the due date of the return is the proper way to seek an automatic, 30-day extension of the IRS filing deadline – i.e., February 29 or March 31. See page 3 of the 2015 Instructions for Forms 1094-C and 1095-C.

Form 8809 won’t help with the February 1 deadline to furnish Form 1095-C to each employee. Here we quote page 4 of the same Instructions:

Extensions of time to furnish statement to recipients. You may request an 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) a statement that extension request is for providing statements to recipients, (f) reason for delay, and (g) the signature of the filer or authorized agent. Your request must be postmarked by the date on which the statements are due to the 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. For purposes of requesting an extension of time to furnish the statements, the term filer means the ALE Member, or the Designated Government Entity, if applicable.

We have heard this called an automatic extension elsewhere, but the language just quoted does not promise approval or any particular duration of extension if approved. Better ask early, because (again quoting the Instructions, page 4):

  • The penalty for failure to file an information return generally is $250 for each return for which such failure occurs. The total penalty imposed for all failures during a calendar year cannot exceed $3,000,000.
  • The penalty for failure to provide a correct payee statement is $250 for each statement with respect to which such failure occurs, with the total penalty for a calendar year not to exceed $3,000,000.
  • Special rules apply that increase the per-statement and total penalties if there is intentional disregard of the requirement to furnish a payee statement.

However, there’s this glimmer of good news (quoting again, same page):

Relief from penalties. 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. For additional information on penalty relief, see the sections 6055 and 6056 FAQs at www.irs.gov/ Affordable-Care-Act/Affordable-Care-Act-Tax-Provisions- Questions-and-Answers.

If you are working with an AIR System Transmitter, confirm its receipt of a Transmitter Control Code and communicate clearly about requesting and documenting any extension of either deadline.

December 28, 2015 Update:  IRS Notice 2016-4 (just released) extends the February 1, 2016 furnishing deadline to March 31, 2016, extends the February 29, 2016 paper filing deadline to March 31, 2016 and extends the March 31, 2016 electronic filing deadline to June 30, 2016.  See our fuller story for the details.

HHS 2017 Notice of Benefit and Payment Parameters

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

This is the annual hodge-podge of changes to the risk adjustment, reinsurance, and risk corridors programs, cost sharing parameters, cost-sharing reductions, and Healthcare.gov user fees, usually filling hundreds of Federal Register pages. Stuff gets buried deep, scattered among 45 CFR Parts 144, 146, 147, 153, 154, 155, 156 and 158. Yesterday (101 pages) was no exception. ‘Tis the season for over-stuffing.

HHS will change its method of calculating the required contribution percentage, originally 8% of household income (also the subsidy eligibility trigger). For 2017, the number will be 8.16%. The 2017 annual cost sharing limits will be $7,150 (self-only) and $14,300 (family). The IRS uses these HHS calculations to set annual increases in § 4980H assessable payment amounts.

We’re updated, marginally, about HHS efforts to notify employers and to process employer appeals of Healthcare.gov subsidies granted to their employees. Here are the highlights for 2017:

  • No subsidy certification notice will be provided unless the employee actually enrolls in a QHP;
  • Notices needn’t be individual; they may list multiple employees;
  • Notices must be issued, “within a reasonable timeframe following any month an employee was determined eligible for either form of Exchange financial assistance and enrolled in a QHP.”

There is no definition of “reasonable timeframe.” If an employer appeals under 45 CFR § 155.555, Healthcare.gov must give the applicant another chance to prove eligibility, accepting new data for that purpose. Appeal options for rejected applicants also are enhanced.

Until now, there were state-based exchanges and, for states without one, Healthcare.gov. But state-based exchanges are failing. So, HHS will allow them to piggy-back on Healthcare.gov beginning with open enrollment next year – i.e., November 1, 2016 through January 31, 2017. Each will be called a “State-based Exchange on the Federal platform (SBE-FP).” “Although the SBE-FPs are legally distinct from FFEs, this difference will not always be apparent to Healthcare.gov consumers.” So, Healthcare.gov user fees, prescription formularies, network adequacy, meaningful difference and essential community provider standards will apply to issuers selling through such exchanges.

Each insurer offering coverage through Healthcare.gov or an SBE-FP must offer one “standardized option” in each metal level (Bronze – Gold), having identical cost sharing features and just one provider tier. See Table 9 for the details.

HHS will publish minimum network adequacy standards – e.g., required travel to provider locations (county-by-county) and provider/patient ratios – in its annual Letter to Issuers. These will be minimum federal standards below which no state may sink. HHS also will address compensation of non-network physicians who render services at in-network hospitals, and insurer notification to patients of provider network termination. For example, balance billed amounts for EHB must be counted toward the annual cost sharing limit unless the insurer gives an advance written notice. HHS may add wait times to network adequacy determinations and may even contract directly with providers.

Due to recent legislation, “large employer” now will be defined to mean –

An employer who employed an average of at least 51 employees on business days during the preceding calendar year and who employs at least 1 employee on the first day of the plan year, but . . . a State may elect to define large employer by substituting “101employees” for “51 employees.” Conversely, we propose to revise the regulatory definition of small employer to mean, in connection with a group health plan with respect to a calendar year and a plan year, an employer who employed an average of at least 1 but not more than 50 employees on business days during the preceding calendar year and who employs at least 1 employee on the first day of the plan year, but would provide that a State may elect to define small employer by substituting “100 employees” for “50 employees.”

The 2016 reinsurance deal for Healthcare.gov insurers, subject to 7% sequestration, may be as good as 100% coinsurance with a $90,000 attachment point. And –

[I]f the issuer reported a certified estimate of 2014 cost-sharing reductions on its 2014 MLR and Risk Corridors Annual Reporting Form that is lower than the actual cost-sharing reductions provided, HHS would make an adjustment to the issuer’s 2015 risk corridors payment or charge amount in order to address the impact of the inaccurate reporting on the risk corridors and MLR calculations for the 2014 benefit year. We also propose that the issuer must adjust the cost-sharing reduction amounts it reports for the 2015 MLR and risk corridors reporting cycle by any difference between 2014 reported and actual cost-sharing reductions amounts.

Not commenting; just reporting. There are catches. Study them well, issuers.

As to risk corridors –

[I]f the issuer reported a certified estimate of 2014 cost-sharing reductions on its 2014 MLR and Risk Corridors Annual Reporting Form that is lower than the actual cost-sharing reductions provided (as calculated under §156.430(c) for the 2014 benefit year, which will take place in the spring of 2016), HHS would make an adjustment to the amount of the issuer’s 2015 benefit year risk corridors payment or charge measured by the full difference between the certified estimate reported and the actual cost-sharing reductions provided as calculated under §156.430(c) in order to address the impact of the inaccurate reporting on the risk corridors and MLR calculations for the 2014 benefit year.

HHS also will –

require an issuer to adjust the cost-sharing reduction amount it reports on its 2015 risk corridors and MLR forms by the difference (if any) between the reported cost-sharing reduction amount used to adjust allowable costs and incurred claims on the 2014 MLR Annual Reporting Form and the actual cost-sharing reductions provided by the issuer for the 2014 benefit year (as calculated under §156.430(c) for the 2014 benefit year, which will take place in the spring of 2016). Issuers must report the amount as calculated under §156.430(c) when reporting risk corridors and MLR for the applicable benefit year.

And –

require issuers to adjust the claims reported as allowable costs for the 2015 and later benefit years by the amount by which the issuer’s estimate of unpaid claims for the preceding benefit year exceeded (or fell below) the actual payments that the issuer made after the date of the estimate for claims attributable to the preceding benefit year. For example, if in calculating its 2014 allowable costs, an issuer overestimated the amount of claims it incurred in 2014 that were unpaid as of March 31, 2015, then under this proposal, in calculating its 2015 allowable costs, the issuer would be required to subtract the amount by which its March 31, 2015 claims estimate exceeded the actual payments for 2014 claims that the issuer made between March 31, 2015 and June 30, 2016 (the claims reserves and liabilities valuation dates for the 2014 and 2015 benefit years, respectively).

Issuers’ time to appeal adverse payment determinations will drop from 60 to just 30 days.

Perceived and suspected abuses are targeted. For example, a “plan year” under 45 CFR § 144.103 may not exceed twelve months. HHS is considering limits on variance of state-established rating areas and age curves and may ban or limit insurer rejection of small employers that do not meet minimum participation requirements. TPAs that report reinsurance fees for self-insured plans, or that merely host related data, will be subject to audit under 45 CFR § 153.405(i).

“[S]tudent health insurance coverage [will] be subject to the index rate setting methodology of the single risk pool provision in the regulation at [45 CFR] §156.80(d),” but will be exempt from other AV requirements if it meets the 60% standard.

Thirteen individual mandate hardship exemptions are added to 45 CFR § 155.605(d):

  • Homelessness;
  • Eviction or facing eviction or foreclosure;
  • Received a shut-off notice from a utility company;
  • Experienced domestic violence;
  • Experienced the death of a family member;
  • Experienced a fire, flood or other nature or human-caused disaster that caused substantial damage to your property;
  • Filed for bankruptcy;
  • Experienced unexpected increases in necessary expenses due to caring for an ill, disabled or aging family member;
  • Seeking categorical Medicaid eligibility under section 1902(f) of the Social Security Act (the Act) for “209(b)” States (codified at §435.121);
  • Seeking Medicaid coverage provided to medically needy individuals under section 1902(a)(10(C) of the Act that is not included as government-sponsored minimum essential coverage under IRS regulations and not recognized as MEC by the Secretary of HHS in accordance with the CMS State Health Official (SHO) Letter #14-002;
  • Enrolled in Medicaid coverage provided to a pregnant woman that is not included as government-sponsored minimum essential coverage under IRS regulations and not recognized as minimum essential coverage by the Secretary of HHS in accordance with CMS SHO #14-002;
  • Enrolled in CHIP coverage provided to an unborn child that includes comprehensive prenatal care for the pregnant mother; or
  • As a result of an eligibility appeals decision the individual is eligible for enrollment in a qualified health plan through the Exchange, lower costs on the individual’s monthly premiums or CSRs for a time period when the individual was not enrolled in a QHP through the Exchange.

There is a three year time limit for claiming a hardship. Additional, previously recognized exemptions also are formalized, including residence in a state that did not expand Medicaid.

HHS may expand the list of entities from which issuers must accept third-party premium and cost sharing payments under 45 CFR § 156.1250 to add non-profit charities.

Quality and related reporting standards continue to be tightened.

[A] QHP issuer that contracts with a hospital with greater than 50 beds must verify that the hospital uses a patient safety evaluation system as defined in 42 CFR 3.20. The patient safety evaluation system is defined in the PHS Act as the collection, management, or analysis of information for reporting to or by a Patient Safety Organization. We propose in §156.1110(a)(2)(i)(B) to require that a QHP issuer that contracts with a hospital with greater than 50 beds must ensure that the hospital implemented a comprehensive person-centered discharge program to improve care coordination and health care quality for each patient.

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We expect that QHP issuer contracted hospitals with more than 50 beds will contract with a PSO and implement a comprehensive person-centered discharge program to improve care coordination and health care quality for each patient. HHS will continue to monitor the status of the PSO program and other patient safety initiatives and will develop additional requirements or guidance, if needed, to support effective patient safety strategies and harmonization of evidence-based standards and requirements under §156.1110.

In addition, HHS strongly supports hospital tracking of patient safety events using the Agency for Healthcare Research and Quality Common Formats, which are a useful tool for a hospital regardless of what patient safety interventions are implemented for ongoing, data-driven quality assessment.

Our round-up concludes with a warning from the HHS Office of Civil Rights that it will enforce ACA § 1557 non-discrimination standards against Exchange issuers.  Among other things, this may mean that OCR will target exclusion of dependent pregnancy coverage.