Affordable Care Act Review

Affordable Care Act Review

House v. Burwell: Insurer Cost-Sharing Subsidies Unauthorized

Posted in Affordable Care Act, Exchanges, Insurers and Brokers

A U.S. District Judge has ruled that HHS unlawfully has spent billions of dollars to reimburse insurers for cost-sharing reductions granted to individuals who bought health insurance through an ACA Exchange such as U.S. House of Representatives v. Burwell, D.D.C. No. 1:14-cv-01967 (May 12, 2016). The Court stayed its ruling pending review by the D.C. Court of Appeals.

As usual, the winning argument was simple – i.e., ACA § 1401 makes a permanent appropriation for premium subsidies but § 1402 cost-sharing subsidies are left to the annual appropriations process, and Congress has appropriated nothing. The government rehashed its King v. Burwell ambiguity arguments, but with far more difficulty. Among other things, the Administration previously had conceded that cost-sharing subsidies depend on annual Congressional appropriations.

If this decision stands, it’s very bad news for insurers participating in the ACA Exchanges, even if, as the Court suggested, they may be able to sue, under the Tucker Act, 28 U.S.C. § 1491(a)(1), to recover the promised payments from the government. The opinion does not address whether the subsidies already paid are subject to HHS claw-back.

But if this decision stands, and if Congress does not appropriate the missing funds, then may be doomed. Premium increases sufficient to overcome lost cost-sharing subsidies might accelerate an insurance death spiral that some believe already has begun.

In prior years, the forthcoming D.C. Court of Appeals decision would have been seen as a rest stop on the road to ultimate Supreme Court resolution. But with SCOTUS now split 4-4 on so many contentious issues, the D.C. Circuit may have the final word, perhaps late this year.


CMS’ New Initiative Intended to Transform Primary Health Care

Posted in Uncategorized

CMS’ efforts to improve the delivery of primary health care moved into new territory this week when the agency announced a new five-year delivery model, Comprehensive Primary Care Plus (CPC+), which CMS’ chief medical officer described as “the future of health care.” CMC+ will launch in January 2017, and evolves from the Comprehensive Primary Care initiative that CMS began in 2013. The announcement of CMS+ comes on the heels of CMS’ March 2016 announcement that it met, ahead of schedule, its goal of tying 30% of Medicare payments to quality-and-value-based alternative payment models by 2016. CMS’ new goal is to make 50% of Medicare payments via alternative payment models by 2018.

CPC+ is CMS’ largest ever such model, and is expected to be implemented in up to 20 regions accommodating 20,000 physicians and clinicians and the 25 million people they serve. Under CMC+, Medicare will partner with commercial insurance plans and state Medicaid agencies to support delivery of advanced primary care by primary care practices (PCP).

PCPs participating in CPC+ will proceed along one of two tracks. Track 1 PCPs must help patients with serious or chronic diseases meet their health goals, give patients 24-hour access to care and health information, deliver preventive care, involve patients and their families in patient care, and work with other health care partners to deliver coordinated health care. Track 2 PCPs must, in addition to these services, provide patients who have complex medical and behavioral health needs with more comprehensive services, which may include systemic assessment of their psychosocial needs and an inventory of resources and supports to meet these needs.

Track 1 PCPs will receive a monthly care management fee in addition to fee-of-service payments under the Medicaid Physician Fee Schedule. Track 2 participants will receive an on-average higher monthly care management fee and a hybrid of reduced Medicaid fee-for-service payments and up-front comprehensive primary care payments. The hybrid payments are intended to give providers freedom to find ways to deliver health care outside of traditional person-to-person encounters.
CMS is soliciting payer proposals to partner with Medicare in CPC+ through June 1, 2016, after which it will identify regions in which PCP+ will be implemented. The geographic reach of selected providers will be a factor in determining the choice of the CPC+ regions. From July 15 to September 1, 2016, CMS will publish the CPC+ regions and solicit applications from practices in these regions. Practices will apply directly for the preferred track, however applicants for the more remunerative Track 2 must include in their application a letter of support from their Health IT vendor that discusses the vendor’s commitment to support the PCP with advanced Health IT capabilities.

[Sources: CMS launches largest-ever multi-payer initiative to improve primary care in America; Comprehensive Primary Care Plus; and Health Care Payment Learning and Action Network, all from]

So I Made This Little 1095-C Mistake. Big Deal?

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

The 2015 Instructions for Forms 1094-C and 1095-C tell Applicable Large Employers how to furnish and file corrections to incorrectly filed Forms 1095-C. They don’t answer these two questions that arise between the March 31, 2016 deadline for furnishing Forms 1095-C to full-time employees and the May 31 paper filing deadline or the June 30 e-filing deadline.

  • What if I realize after March 31 that I miss-classified someone as a 2015 part-time employee or contractor?
  • What if I properly classified a 2015 full-time employee but gave her a Form 1095-C with incorrect codes on Line 14 or Line 16?

Are you assessable for the $250 penalty provided by 26 U.S.C. § 6722 even if you fix the problem before you file? And how do you fix the problem? Let’s begin with that Code section.

Section 6722 imposes that penalty for failing to furnish the Form 1095-C by March 31 or for including “incorrect information” on a timely Form 1095-C, with these exceptions.

  • The penalty is $50 if either mistake is corrected within 30 days of the March 31 deadline, and $100 if corrected by August 1, 2016.
  • If Form 1095-C was furnished timely but with good faith data mistakes, and if those mistakes are corrected by August 1, then the penalty for the first 10 corrected Forms is waived.

Even these penalties may be waived, as the IRS has said repeatedly in FAQ guidance, such as here:

[Q3] […] Accordingly, the IRS will not impose penalties under sections 6721 and 6722 on ALE members that can show that they have made good faith efforts to comply with the information reporting requirements.

[Q32] Does Notice 2016-04 affect the rules of sections 6721(b) and 6722(b) concerning the reduction of penalty amounts for issuers that make corrections by August 1? Yes. Because the deadlines under sections 6055 and 6056 for furnishing ACA statements to individuals and filing ACA information returns with IRS have been extended as described above in Q&A #18, the August 1, 2016 deadlines for reduction in penalty amounts to correct the failures described in sections 6721(a)(2) and 6722(a)(2) also are extended. For statements furnished to individuals under sections 6055 and 6056, any failures that reporting entities correct by April 30 and October 1, 2016, respectively, will be subject to reduced penalties. For returns filed on paper with the IRS under sections 6055 and 6056, any failures that reporting entities correct by June 30 or November 1, 2016, respectively, will be subject to reduced penalties. For returns filed electronically with the IRS under sections 6055 and 6056, any failures that reporting entities correct by July 30 or November 1, 2016, respectively, will be subject to reduced penalties. These extended dates have no effect on the penalty relief described in Q&A #3, above, for incomplete or incorrect returns filed or statements furnished to employees in 2016 for coverage offered in calendar year 2015.

If you tried hard but goofed a little, and fixed it, the IRS seems to be in an understanding mood, this first reporting year. Beware, however: because the regulations (26 CFR § 301.6722(b)(2)(i)) say that a dollar amount error is “never inconsequential,” Line 15 errors may not receive as much sympathy as Line 14 and Line 16 errors.

So now, how about “how”? Where is the guidance? There’s not much. Piecing together what we can read on related topics, we suppose that the IRS expects the ALE to furnish the correction as it furnished (or should have furnished) the original. But what if the original e-notice to the employee bounced back? Our guess is that the IRS would want you to furnish the correction by mail or in person, unless the employee has provided a new, valid e-mail address.

We are aware of no requirement that the employer explain separately what error was made, why it was made, or how it has been corrected. Furnishing the corrected Form seems sufficient.

We would like to see current, directly applicable IRS guidance on this, because the question is being frequently asked.


Heffalumps, Woozles and Limited Non-Assessment Periods: Very Confusel

Posted in Affordable Care Act, Government Employers, Private Employers

They’re far they’re near they’re gone they’re here.

They’re quick and slick, they’re insincere.

Beware, beware, be a very wary bear.

A Heffalump or Woozle is very confusel.

“Heffalumps and Woozles,” from “The Many Adventures of Winnie the Pooh.”

So, you were a 2015 Applicable Large Employer. You waited too late to outsource your generation, furnishing and filing of 2015 Forms 1095-C. Fortunately, you believe, you are permitted to file on paper, by May 31, 2016, because you will be filing less than 250 Forms 1095-C. You squeezed under 250 by ignoring employees who averaged less than 30 weekly work hours during 2015. Slick, huh? Maybe. We’re hearing variants of this question too often for comfort. We can’t guarantee that the IRS will share our concern, but here it is.

As usual, the best short summary of the applicable ALE reporting rules is found in the 2015 Instructions for Forms 1094-C and 1095-C. Read the “Full-time employee” definition in the right column on page 13. It ends with this tip:

An employer need not file a Form 1095-C for an individual who for each month of a calendar year is either not an employee of the employer or is an employee in a Limited Non-Assessment Period. However, for the months in which the employee was an employee of the employer, such an employee would be included in the total employee count reported on Form 1094-C, Part III, Column (c). Also, if during the Limited Non-Assessment Period the employee enrolled in coverage under a self-insured employer-sponsored plan, the employer must file a Form 1095-C for the employee to report coverage information for the year.

Some advisors have relied on this to recommend that an ALE generate, furnish and file no 1095-C for an employee who was not “full-time” under the look-back measurement method. Be a very wary bear.

First, “hours worked” is a subset of “hours of service.” Full-time status is based on the latter, which includes all hours for which compensation is due. There are rules for calculating hours of service for salaried and commission-paid employees. In borderline cases, counting only hours worked might misclassify full-time employees. But more troublesome is retroactive reliance on a Limited Non-Assessment Period that was not established properly, or at all, during 2015.

Read the definition’s first paragraph again. That’s “monthly measurement method” language. Monthly measurement is the default option. New hires (people who have served less than one full Standard Measurement Period) reasonably expected to work full-time must be measured that way. For them, the look-back measurement method is not an option. Employers had the option to use the look-back measurement method for part-time and variable hour new hires and for ongoing employees. If so, they may take advantage of the tip regarding months that employees are in a Limited Non-Assessment Period, unless the employees enjoy, in the same month, full-time status due to a preceding Standard Measurement Period. So, let’s read that definition, on page 14 of the Instructions.

Limited Non-Assessment Period. A Limited Non-Assessment Period generally refers to a period during which an ALE Member will not be subject to an assessable payment under section 4980H(a), and in certain cases section 4980H(b), for a full-time employee, regardless of whether that employee is offered health coverage during that period.

The first five periods described below are Limited Non-Assessment Periods only if the employee is offered health coverage by the first day of the first month following the end of the period, and are Limited Non-Assessment Periods for section 4980H(b) only if the health coverage that is offered at the end of the period provides minimum value. For more information on Limited Non-Assessment Periods and the application of section 4980H, see Regulations section 54.4980H-1(a)(26).

  • First Year as ALE Period. January through March of the first calendar year in which an employer is an ALE, but only for an employee who was not offered health coverage by the employer at any point during the prior calendar year. For this purpose, 2015 is not the first year an employer is an ALE, if that employer was an ALE in 2014 (notwithstanding that transition relief provides that no employer shared responsibility payments under section 4980H will apply for 2014 for any employer).
  • Waiting Period under the Monthly Measurement Method. If an employer is using the monthly measurement method to determine whether an employee is a full-time employee, the period beginning with the first full calendar month in which the employee is first otherwise (but for completion of the waiting period) eligible for an offer of health coverage and ending no later than two full calendar months after the end of that first calendar month.
  • Waiting Period under the Look-Back Measurement Method. If an employer is using the look-back measurement method to determine whether an employee is a full-time employee and the employee is reasonably expected to be a full-time employee at his or her start date, the period beginning on the employee’s start date and ending not later than the end of the employee’s third full calendar month of employment.
  • Initial Measurement Period and Associated Administrative Period under the Look-Back Measurement Method. If an employer is using the look-back measurement method to determine whether a new employee is a full-time employee, and the employee is a variable hour employee, seasonal employee or part-time employee, the initial measurement period for that employee and the administrative period immediately following the end of that initial measurement period.
  • Period Following Change in Status that Occurs During Initial Measurement Period Under the Look-Back Measurement Method. If an employer is using the look-back measurement method to determine whether a new employee is a full-time employee, and, as of the employee’s start date, the employee is a variable hour employee, seasonal employee or part-time employee, but, during the initial measurement period, the employee has a change in employment status such that, if the employee had begun employment in the new position or status, the employee would have reasonably been expected to be a full-time employee, the period beginning on the date of the employee’s change in employment status and ending not later than the end of the third full calendar month following the change in employment status. If the employee is a full-time employee based on the initial measurement period and the associated stability period starts sooner than the end of the third full calendar month following the change in employment status, this Limited Non-Assessment Period ends on the day before the first day of that associated stability period.
  • First Calendar Month of Employment. If the employee’s first day of employment is a day other than the first day of the calendar month, then the employee’s first calendar month of employment is a Limited Non-Assessment Period.

Ah, there are the catches. The fourth and fifth scenarios are written in present tense, but apparently referencing 2015, not 2016. Was the ALE actually using lawful initial measurement periods and associated administrative periods for 2015 new hires? Did they produce timely coverage offers to those measured as full-time? If so, but only if so, the Instructions suggest that one full-time month during an initial measurement period would not require the ALE to generate, furnish and file a Form 1095-C for an employee who averaged part time hours over the entire period.

How would the IRS know? Let’s skip the broader reasons why, “what the IRS doesn’t know won’t hurt me” is a bad business plan and dive right into the details. Such people, even for months spent in LNAP status, are to be counted as “employees” reported at Lines 23-35, column “c” of Form 1094-C. The IRS already will have their W-2 Forms, of course. If the column “b” count of full-time employees is just under 250 but the column “c” count exceeds 250, and if a Form W-2 employee not reported on Form 1095-C received a subsidy to buy insurance through an ACA Exchange (reported to the IRS), there may be § 4980H tax and § 6056 reporting inquiries. The employer will bear the burden to prove proper employee classification and reporting.

Code § 4980H: The Tax The Beatles Missed

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

If you drive a car, I’ll tax the street.

If you try to sit, I’ll tax your seat.

If you get too cold, I’ll tax the heat.

If you take a walk, I’ll tax your feet.

“Tax Man,” composed by George Harrison, from The Beatles’ 1966 album “Revolver.”

The Tax Man, it turns out, also may assess you for failing to offer substantially all your full-time employees and their dependents affordable, qualifying group health coverage during 2015. We’re swamped with employer reporting questions just now, but the assessment questions are beginning to trickle in. Who is this Tax Man? How will he notify you of this assessment? When? What are your rights if you disagree? How much time will you have to make what decisions? You deserved answers before you prepared your 2016 budget, but the Tax Man has told us almost nothing so far.

On May 20, 2015, the IRS told us this:

  1. How will an employer know that it owes an Employer Shared Responsibility payment?

The IRS will adopt procedures that ensure employers receive certification that one or more employees have received a premium tax credit. The IRS will contact employers to inform them of their potential liability and provide them an opportunity to respond before any liability is assessed or notice and demand for payment is made. The contact for a given calendar year will not occur until after the due date for employees to file individual tax returns for that year claiming premium tax credits and after the due date for applicable large employers to file the information returns identifying their full-time employees and describing the coverage that was offered (if any).

  1. How will an employer make an Employer Shared Responsibility payment?

If it is determined that an employer is liable for an Employer Shared Responsibility payment after the employer has responded to the initial IRS contact, the IRS will send a notice and demand for payment. That notice will instruct the employer on how to make the payment. Employers will not be required to include the Employer Shared Responsibility payment on any tax return that they file. As explained in question 2, no Employer Shared Responsibility payments will be assessed for 2014.

Since electronic Forms 1095-C must be filed by June 30, 2016, we read the paragraphs just quoted as telling employers to expect, sometime after June 2016, some sort of IRS “contact” regarding “potential liability,” followed by some sort of process for evaluating employer responses. After some period, the IRS may “send a notice and demand for payment,” including payment instructions. Must you pay first and contest later? Will the IRS serve “no liability” notices? We wish we could tell you.

We know where to look to read the answers to those questions – 26 CFR § 54.4980H-6, “Administration and procedure.” Go ahead, click the link. Or just trust us. It reads, in relevant part, “(a) In general. [Reserved]”. This end seems ungratefully dead. What follows is abracadabra about what the IRS may be hiding on the dark side of the moon.  Pay close attention. Quiz to follow.

The preamble to the employer mandate final rules said:

Any assessable payment under section 4980H is payable upon notice and demand and is assessed and collected in the same manner as an assessable penalty under subchapter B of chapter 68 of the Code. The IRS will adopt procedures that ensure employers receive certification, pursuant to regulations issued by HHS, that one or more employees have received a premium tax credit or cost-sharing reduction. 45 CFR 155.310(i). The IRS will contact employers to inform them of their potential liability and provide them an opportunity to respond before any liability is assessed or notice and demand for payment is made.

79 Fed. Reg. 8,566 (Feb. 14, 2014). However, § 4980H assessments are not penalties; they are non-deductible excise taxes. 79 Fed. Reg. 8,567. The two enforcement processes are not identical. And, as you have read here, HHS decided not to comply, for at least this year, with its obligation to notify employers of subsidy certifications. Apparently, employers will first learn about employees’ 2015 subsidy certifications when contacted by the IRS regarding associated 2016 tax assessments. Can these contradictions be reconciled?

Section 6671 in Code Chapter 68, subchapter B, tells us that, “penalties and liabilities provided by this subchapter shall be paid upon notice and demand by the Secretary, and shall be assessed and collected in the same manner as taxes.” Section 6672(b) forbids any § 6671 penalty to be assessed until after the Treasury Secretary has notified the taxpayer, in writing by mail. The statute gives IRS the time allowed by § 6501 for mailing this notice, but § 6501 has varying rules for different sorts of taxes, none of them § 4980H assessments. Three years is the general rule. A timely mailed notice opens a sixty-day window for evaluation of taxpayer objections. If none is heard, the Secretary may then serve a “notice and demand.” If objections are made, the Secretary must then make a “final administrative determination with respect to such protest.”

Once a notice and demand is served, we suspect that the IRS may proceed as described in 26 CFR § 601.104:

Under the law an assessment is prima facie correct for all purposes. Generally, the taxpayer bears the burden of disproving the correctness of an assessment. Upon assessment, the district director is required to effect collection of any amounts which remain due and unpaid. Generally, payment within 10 days from the date of the notice and demand for payment is requested; however, payment may be required in a shorter period if collection of the tax is considered to be in jeopardy.

Absent timely payment, the District Director may levy on the taxpayer’s property, after giving a ten-day advance notice.

Adding it all up, IRS may not be bound to assess in 2016 employer mandate taxes that accrued in 2015, despite lots of guidance that it will. Conceivably, it could double-up next year. A proposed assessment probably will arrive in the mail, addressed, we suspect, to the person who signed your 2015 Form 1094-C, at the address shown in Part I of Form 1094-C. You might have 60 days to lodge a protest in some form that we hope will be specified in that mailing. Very probably, you will bear the burden to prove that the proposed assessment is materially incorrect. To do that, you might need ready access to your employee hire and termination dates, hours of service data, your records of group health coverage offered, accepted and declined, your Forms 1094-C and 1095-C, and payroll records. Some employers may need also to prove minimum plan value.

Few employers are ready for this helter skelter. We urge the IRS not to just let it be. We can work it out, can’t we? Fill the hole at 26 CFR § 54.4980H-6. Any time at all.


How many rock and roll song titles are quoted or referenced in this article?

a. 3

b. 5

c. 8

d. 10

How many of those songs did The Beatles record?

a. 2

b. 4

c. 6

d. 8

Self-Funded Plan Discrimination Against Mental Health Treatment: Is Yours Doing This?

Posted in Coverage Mandates

On January 22, 2016, the court in Joseph and Gail F. v. Sinclair Services Company, D. Utah No. 2:14-cv-00505, held that a self-funded plan violated the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 by excluding residential treatment from its mental health coverages. In relevant part, the statute commands that treatment limitations applicable to mental health benefits must be “no more restrictive than the predominant treatment limitations applied to substantially all medical and surgical benefits,” and compels plans to assure that “there are no separate treatment limitations that are applicable only with respect to mental health . . . benefits.” 29 U.S.C. § 1185a(a)(3)(A)(ii). The plan in question defined a residential treatment facility as “[a] child-care institution that provides residential care and treatment for emotionally disturbed children and adolescents.” So, when the plan deleted coverage for residential treatment effective January 1, 2013, it targeted mental health benefits with no corresponding reduction of general medical and surgical benefits. Based on that holding, the court remanded the ERISA appeal to the plan administrator for a redetermination of benefits.

When amending a self-funded plan to manage claim exposure, take care not to eliminate a category of coverage that applies only to mental health treatment unless medical and surgical benefits are subject to substantially the same reduction.

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


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.