The hero has disappeared in a cloud of suspicion and is presumed dead, so much so that supposed friends are found to be celebrating his passing.  This is just as it should be at the end of Act II.  Remember when Republicans rejoiced over the apparent abandonment of H.R. 3200 in October 2009?  It furnished the foundation for H.R. 3590, which became Public Law 111-148 (one of the two statutes that comprise the ACA) in March 2010.  Capitol Hill is short on many things, but there are plenty of plot devices available to move this story forward before the elections in November 2018.  Passing the 2015 partial repeal bill again soon probably is a long shot.  But ACA subsidies may seem less sacrosanct after ACA taxes really begin to bite in early 2018, and ACA architects may rue their decision to give the HHS Secretary such wide discretion to grant § 1332 waivers.

When lawyers talk about “waivers,” we normally have in mind contracts to surrender certain legal rights in exchange for something else deemed more desirable.  Section 1332 waivers are something entirely different.  Codified as 42 U.S.C. § 18052, this ACA text empowers the Secretary to approve state plans to alter, and perhaps dispense with, these ACA provisions, for up to five years:

  • ACA § 1301-1304 (including “essential health benefits” and “qualified health plan” definitions);
  • ACA § 1311-1313 (state-operated ACA Exchanges);
  • ACA § 1402 (cost-sharing subsidies); and
  • Code § § 36B (premium subsidies), 4980H (employer mandate) and 5000A (individual mandate).

The Secretary may grant a state’s waiver request only after finding that it would achieve at least equivalent coverage and cost-sharing protections without increasing the federal deficit.  But the ACA also required the former Administration to do things that it didn’t do, and to enforce things it didn’t enforce.  Employer mandate taxes were to accrue beginning in 2014.  There was no “transition relief.”  The ACA killed so-called “grandmothered plans” outright.  Those and many other politically problematic dictates were delayed, ignored or amended administratively, sometimes very informally. We won’t be surprised if this Administration uses § 1332 waivers to allow states to “fix” perceived ACA problems that can’t or won’t be fixed by Congress.

Of course, facile findings made to facilitate waivers would provoke years of litigation ending with Supreme Court pronouncements… after November 2018 …maybe after November 2020.  So maybe we should discount that possibility.  [Insert your preferred emoji here.]

Update:  Well, that accelerated quickly.  The Senate Budget Committee web site now features a link to an 18-page draft bill called The Obamacare Repeal Reconciliation Act of 2017.  Here are highlights of what seems clear on first reading.  The bill appears to –

  • Uncap the recapture of excess premium tax credit payments;
  • Terminate at the end of 2019 the ACA’s small business tax credits, premium tax credits and cost sharing payments, while expressly authoring cost-sharing payments to be made through 2019;
  • Set the individual mandate and employer mandate taxes at $0, retroactive to January 1, 2016;
  • Defund Planned Parenthood for one year, offset by boosting Community Health Center funding by $422M;
  • Phase-out Medicaid expansion;
  • Repeal DSH payment reductions;
  • Suspend Cadillac plan taxes until 2026;
  • Repeal taxes on over-the-counter medications, repeal the prescription medicine tax, repeal the medical device tax, the tanning tax and the health insurance tax beginning January 1, 2018;
  • Repeal the net investment tax retroactive to January 1, 2017;
  • Repeal FSA contribution limits beginning January 1, 2018;
  • Authorize $1.5B of new anti-addiction spending in FY2018-19.

This is the simplest, skinniest health care “repeal” bill you are likely to read, so you should.

 

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.

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.

Recently, we have received requests to re-post prior articles on the 90-day waiting period, the employer mandate final rules (supplemented here, here, here and here), and our pop quiz for ACA consultants.  As we approach our 100th article, some readers apparently find the scroll-down browsing process tedious.  So do we.  Here are two other ways to find the articles that most interest you.

You may search by “Tags” or by search terms.  We have attached all our present “Tags” to this article, appearing just under the author’s name, so that you may see your options.  Click any Tag and the server will show you a list of all articles similarly tagged.  Or, enter your search term(s) in the “Search” box, in the green bar above and to the right of the article, just above “ABOUT THIS BLOG.”  The server then will show you a list of articles that contain your search term(s).

We genuinely seek to help employers, providers, insurers and brokers understand ACA compliance issues, but please remember that the articles posted on this site are not legal advice and should not be substituted for legal advice.  They are offered as educational introductions to the subjects addressed.  ACA legal advice should be obtained confidentially from a lawyer who knows the ACA and who knows all your relevant facts.

We have been concerned for many months that some of our clients and friends are getting unreliable ACA compliance advice.  This is not a knock on insurance agents, or brokers, or TPA’s or any other class of advisors.  We work with some who are as helpful to our mutual clients as we are to them.  But too many (lawyers included) plainly do not know the subject. 

We have wondered how, unless they have mastered the ACA, executives can distinguish good advice from bad, trustworthy advisors from . . . not so much.  So, we created a pop quiz (below) that any reliable ACA advisor should ace, but that many others will bomb.  Whether you use it, and how, is up to you.  But now you have a tool that you did not have yesterday. 

If you like, we will grade your advisor’s paper, e-mailed to us – acareview@balch.com – without charge, assuming that we have no ethical conflict with that evaluation, and limited to the first 100 requests that we receive. We won’t contact your advisor without your advance, written permission and we won’t shame him or her, on this site or elsewhere; our aim is to help you, not to hurt others.

ACA Employer/Plan Compliance Pop Quiz

Read all questions, then answer each question completely and legibly, in writing.

  1. Do you personally study the ACA and the implementing regulations and guidance documents, or do you rely on someone else to do that and keep you current?  To the extent that you rely on someone else, provide his or her name and contact information.
  2. Provide the URL of a web site where we may read your published writings on ACA compliance.
  3. List the principal ACA federal enforcement agencies and the primary enforcement sub-agencies of each.
  4. What risks does an employer run if it funds an HRA for each employee to use to purchase an individual health insurance policy, through a private exchange or otherwise?
  5. Identify the Fair Labor Standards Act section, added by the ACA, for which no implementing rule has yet been proposed.
  6. State the effective date of the new ACA rules forbidding non-grandfathered, fully insured group health plans to discriminate in favor of the highly compensated.
  7. In a leased employee arrangement, what determines whether the leasing firm or its customer bears the Employer Shared Responsibility Cost obligation to offer coverage to full time employees and their dependents?
  8. Explain how a group health plan may recover its grandfathered status if it has been lost due to a minor error such as a clerical mistake.
  9. What is an employer’s potential exposure for permitting a health care provider to pay group health plan premiums for an employee?
  10. Is each following statement True (T) or False (F)? (Circle one).
A grandfathered group health plan need not comply with the coverage and cost-sharing mandates that the ACA added to the Public Health Service Act.

T

F

A group health plan is grandfathered if it has made no coverage or cost-sharing changes adverse to employees since March 23, 2010.

T

F

The ACA’s Employer Shared Responsibility Cost rules do not apply to state or local government employers.

T

F

An Applicable Large Employer that offers minimum essential coverage to at least 70% of its full time employees and their dependents in 2015 will be exempt from assessments under Code § 4980H for 2015 coverage months.

T

F

To determine whether an employer is an Applicable Large Employer subject to the Employer Shared Responsibility Cost rules beginning in January 2015, the employer should count its number of full time employees in each month of 2015 and determine whether it employed, on average, at least 50 full time employees per month.

T

F

For purposes of the preceding statement, a full time employee is one who works at least 130 hours per month (equivalent to 30 per week).

T

F

Self-funded group health plans are not required to pay annual PCORI fees unless they are required to file an annual Form 5500.

T

F

Self-funded group health plans are not required to remit annual reinsurance fees to HHS.

T

F

An employer that receives an erroneous employee subsidy certification notice from the Federally Facilitated Exchange will have 60 days to appeal the error.

T

F

The penalty for a fully-insured group health plan’s discrimination in favor of the highly compensated is taxability of plan benefits to the highly compensated employee.

T

F

Group health plan changes that an employer makes in order to comply with the ACA are not mandatory subjects of bargaining with the affected employees’ union representatives.

T

F

Because employees who have lost their jobs are eligible for immediate Exchange enrollment, employers no longer need to provide COBRA notices.

T

F

Employees who believe that they have suffered employer retaliation for their exercise of an ACA right may file an EEOC Charge to obtain relief.

T

F

 

Federal service contractors who also are subject to the Affordable Care Act have an unusual problem coming up.  As part of their contract duties, they promise to pay their contract employees at least the compensation set in an Area Wage Determination (“AWD”) issued by the Department of Labor.  The AWD specifies the prevailing hourly wage and, separately, the prevailing value of benefits.  The contractor may pay that benefit equivalent amount or provide benefits that cost at least that sum per hour.   Paying cash in lieu of providing benefits is administratively simpler, but more costly, since the wage equivalent is fully taxable. Many employers nonetheless pay cash in lieu of benefits because doing so helps them attract and keep highly skilled employees – for example, military retirees – who don’t need insurance and who prefer the cash.  So far, so good.

But the “Play or Pay” provisions of the Affordable Care Act, 26 U.S.C. § 4980H, make no exception for Service Contract Act contractors who pay the cash equivalent of the cost of health insurance instead of providing the insurance.  As a result, unless they make changes in 2013, such employers may find themselves, starting in 2014, paying more than the actual cost of health insurance in extra wages and withholding taxes and also paying $2,000 per full time employee (in excess of the first 30), the non-deductible ACA “Play or Pay” tax assessed under 26 U.S.C. § 4980H(a).

Making changes may not be easy.  Many Service Contract Act employees are union-represented.  Unions will want to negotiate the decision and the effect on employees of offering ACA-compliant insurance instead of paying the cash equivalent.  Refusing to negotiate may provoke NLRB charges, investigations and litigation.  But negotiating may take months.  For employers in this predicament, now would be a good time to get started.