As we discussed in our last post, the election is officially behind us and now we begin to look to the future.  Unfortunately, we are back in the position of having more questions than answers.  Over the last couple of months we have received several questions regarding the future of the status of discriminatory benefits for highly compensated individuals (HCIs).  Remember health care reform included provisions to affect nondiscrimination rules for fully-insured group health plans, however, implementation and enforcement of these provisions were delayed  until regulations or other guidance is issued by the Internal Revenue Service (the “IRS”) (IRS Notice 2011-1.)  As a reminder, prior to the ACA, IRS regulations prohibited only self-funded plans from discriminating in favor of highly compensated HCIs with regard to health benefits.  Historically, employers with fully-insured health plans offered more generous benefits to executive employees as part of their total compensation and benefits package. These benefits have included shorter waiting periods and lower employee additional contributions for a select group of managers.  More commonly, employers would offer a separate plan for executives and managers.  While this has not been enforced, we have been advising clients to be planning for a future where such benefits are no longer permissible.

After six years, we still have not seen any regulations that will trigger enforcement and to be honest we no longer expect any. While President-elect Trump has stated that repealing and replacing the ACA will be a top priority, we do not see anything happening with this portion of the law anytime soon.  It is likely that the repeal of the non-discrimination rules would require legislation and that would require 60 votes in the Senate which means both parties would have to agree.  At present we anticipate that the new administration will not act on enforcement of the provisions while they work on its repeal.

 

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Last week, the IRS released draft 2016 instructions for the 1094-B and 1095-B (the “B” Forms).  The release of the draft instructions is just weeks after the IRS released the draft instructions for the 1094-C and 1095-C Forms. (see our blog post)  Notwithstanding a few clarifications and additions, the draft instructions for the B Forms are quite similar to the 2015 instructions.  We have summarized some of the changes below:

  • The draft instructions for the B Forms provide that insurers must report coverage under qualified health plans sold in the individual market through an Exchange on Form 1095-A, but coverage under group policies sold through a Small Business Health Options Program (SHOP) must be reported on Form 1095-B.
  • The draft instructions also encourage insurers to report 2016 coverage under catastrophic health plans on Form 1095-B. Currently under the proposed Code Section 6055 regulations, insurers would be required to report coverage under a catastrophic plan starting with 2017 coverage.
  • The draft instructions emphasize that excepted benefits should not be reported.
  • The draft instructions added an example explaining that providers that were required to file electronically may file corrected forms on paper provided they are correcting fewer than 250 forms.
  • The draft instructions also change the language regarding the “relief from penalties” to state that penalties may be waived “if the failure was due to reasonable cause and not willful neglect.”

 

 

 

 

 

On June 30, the Department of Labor (“DOL”) published an interim final rule to adjust the civil monetary penalties on employer-sponsored plans.  The DOL published the interim final rule in accordance with the Federal Civil Monetary Penalties Inflation Adjustment Improvements Act of 2015, which amended the Inflation Adjustment Act.  While the interim final rule adjusts many penalties (see the full list here), we are listing only those that have an affect on health plans.  They are as follows:

ERISA Penalty Statute Description of ERISA Violations Subject to Penalty Current Penalty Amount New Penalty Amount
ERISA § 502(c)(2) – Failure or refusal to file annual report (Form 5500) required by ERISA § 104; and

– Failure of a multiemployer plan to certify endangered or critical status under ERISA § 305(b)(3)(C) treated as failure to file annual reports.

Up to $1,100 per day Up to $2,063 per day
ERISA § 502(c)(5) Failure of a multiple employer welfare arrangement to file report required by regulations issued under ERISA § 101(g). Up to $1,100 per day Up to $1,502 per day
ERISA § 502(c)(9)(A) Failure by an employer to inform employees of CHIP coverage opportunities under ERISA § 701(f)(3)(B)(i)(I) – each employee a separate violation. Up to $100 per day Up to $110 per day
ERISA § 502(c)(9)(B) Failure by a plan administrator to timely provide to any State the information required to be disclosed under ERISA § 701(f)(3)(B)(ii), regarding coverage coordination—each participant/beneficiary a separate violation. Up to $100 per day Up to $110 per day
ERISA § 502(c)(10)(B)(i) Failure by any plan sponsor of a group health plan, or any health insurance issuer offering health insurance coverage in connection with the plan, to meet the requirements of ERISA §§ 702(a)(1)(F), (b)(3), (c) or (d); or § 701; or § 702(b)(1) with respect to genetic information. $100 per day during non-compliance period $110 per day during non-compliance period
ERISA § 502(c)(10)(C)(i) Minimum penalty for de minimis failures to meet genetic information requirements not corrected prior to notice from Secretary of Labor. $2,500 minimum $2,745 minimum
ERISA § 502(c)(10)(C)(ii) Minimum penalty for failures to meet genetic information requirements which are not corrected prior to notice from Secretary of Labor and are not de minimis. $15,000 minimum $16,473 minimum
ERISA § 502(c)(10)(D)(iii)(II) Cap on unintentional failures to meet genetic information requirements. $500,000 maximum $549,095 maximum
ERISA § 715 Failure to provide Summary of Benefits Coverage under Public Health Services Act section 2715(f), as incorporated into ERISA § 715 and 29 CFR 2590.715-2715(e) Up to $1,000 per failure Up to $1,087 per failure

In addition, the DOL issued a fact sheet and an FAQ further explaining the adjustments.  While these changes increase the penalties on a wide variety of violations, it is worth noting that the maximum penalty is not always imposed for a violation.

Beginning in 2017, future adjustments may be made annually and will have to be made by January 15 of such year.

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.

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.

On October 23, 2015, the Departments of Labor, Health and Human Services and Treasury (the “Agencies”) jointly released FAQs about Affordable Care Act (ACA) Implementation (Part XXIX) and Mental Health Parity Implementation. These FAQs clarify several items.

  1. Clarify that ancillary services to certain preventive services must be covered with no cost-sharing. We will discuss in a few in further detail below.
  • Group health plans must provide participants with a list of in-network lactation counseling providers and such information can be included in other in-network provider directories. If there are no providers within the preferred network, the plan must cover lactation counseling services obtained outside of the network without cost-sharing. Furthermore, the FAQs provide that a plan cannot limit the coverage of breastfeeding equipment with no cost-sharing to a specified time period following birth but rather it must be covered with no cost-sharing for the entire duration of breastfeeding.
  • Colonoscopy has been designated as a preventive care service for certain individuals. The FAQs provide that a consultation prior to a colonoscopy must be covered without cost-sharing if it has been determined to be medically appropriate. The FAQs also indicate that the Agencies consider a pathology exam of a polyp biopsy to be an integral part of a colonoscopy, and thus, must be covered without cost-sharing.
  • The FAQs prohibit plans from imposing general exclusions on weight management services for adult obesity. Screening for adult obesity has been designated as a preventive service. In addition to no cost-sharing screening, plans must cover with no cost-sharing weight management programs for individuals with certain risk factors.
  1. The FAQs clarify that in-kind incentives such as gift cards, sports gear or other items, must also be considered when determining whether the incentive limitation satisfies the incentive limitations imposed by HIPAA.

As provided in its title, the FAQs also provide some guidance on Mental Health Parity implementation. The FAQs provide that upon a participant’s request, a plan must provide medical necessity guidelines related to mental health and substance abuse benefits to the participant. The FAQs provide that a plan may offer participants a summary document describing the criteria in layperson’s terms; however, the summary must be in addition to the detailed criteria that must be made available upon request.

 

 

Tue-++sday the IRS issued proposed regulations that require an employer-sponsored health plan to include substantial coverage of inpatient hospital and physician services in order for the plan be considered as providing minimum value. This is not a surprise as in November 2014, Notice 2014–69 was released advising taxpayers of the intent to propose regulations providing that plans that fail to provide substantial coverage for inpatient hospitalization or physician services do not provide minimum value.

The IRS explained that allowing plans that did not offer substantial coverage of inpatient hospital or physician services to be treated as providing minimum value would adversely affect employees with significant health problems. Furthermore, the IRS explained that those employees may find such coverage insufficient and such employee would not be eligible for a premium credit for the coverage that they were forced to purchase through an exchange. In addition, the employer would avoid the Sec. 4980H employer shared-responsibility penalty.  While adding the new requirement regarding inpatient hospital and physician services, the updated Proposed Regulation 1.36B-6(a) retains the 60% minimum value requirements. Remember, former Proposed Regulation 1.36B-6(a) provided that an eligible employer-sponsored plan provides minimum value only if the plan’s share of the total allowed costs of benefits provided to an employee is at least 60%.    HHS did not think this was an adequate assessment of minimum value as “plans that omit critical benefits used disproportionately by individuals in poor health would likely enroll far fewer of these individuals, effectively driving down employer costs at the expense of those who, because of their individual health status, are discouraged from enrolling.”

While the new rule would apply to plan years beginning after November 3, 2014, a transition rule provides that the new definition of minimum value will not apply before the end of a plan year beginning no later than March 1, 2015, provided that the employer entered into a commitment to adopt the noncompliant plan or had begun enrolling employees in such plan later than November 3, 2014.