IRS Increases Health FSA Contribution Limit for 2017, Adjusts Other Benefit Limits

November 22nd, 2016 § 0 comments § permalink

On October 25, 2016, the Internal Revenue Service (IRS) released Revenue Procedure 2016-55, which raised the health Flexible Spending Account (FSA) salary reduction contribution limit to $2,600 for plan years beginning in 2017. The Revenue Procedure also released the cost-of-living (COLA) adjustments that apply to dollar limitations in certain sections of the Internal Revenue Code (Code).  The following summarizes other adjustments relevant to individuals and employer sponsors of welfare and fringe benefit plans.

Refundable Credit for Coverage Under a Qualified Health Plan

For taxable years beginning in 2017, the limit on repayment of excess advance premium credits is determined using the following table:

If the household income (expressed as a percent of the federal poverty line) is: The limitation amount for unmarried individuals (other than surviving spouses and heads of household) is: The limitation amount for all other taxpayers is:
Less than 100% $0 (no repayment) $0 (no repayment)
At least 100% but less than 200% $300 $600
At least 200% but less than 300% $750 $1,500
At least 300% but less than 400% $1,275 $2,550
Over 400% of the federal poverty line No cap (full amount repaid) No cap (full amount repaid)

In other words, individuals who were ultimately ineligible for the premium credits they received will have their repayment capped based on the table above.

Qualified Commuter Parking and Mass Transit Pass Monthly Limit Increase

For tax year 2017, the monthly limitation for the qualified transportation fringe benefit is $255, as is the monthly limitation for qualified parking. The Consolidated Appropriations Act of 2016 permanently restored the parity to the tax exclusion for parking and mass transit. The prior discrepancy between parking and mass transit had become regularly addressed by last minute, short-term fixes by congress.

Small Employer Health Insurance Tax Credit Average Annual Wage Limit Increase 

For taxable years beginning in 2017, the maximum average annual wages of employees used for determining who is an eligible small employer for purposes of the credit is $52,400.

Adoption Assistance Tax Credit Increase

For taxable years beginning in 2017, the amount that can be excluded from an employee’s gross income for the adoption of a child with special needs is $13,570. The maximum amount that can be excluded from an employee’s gross income for the amounts paid or expenses incurred by an employer for qualified adoption expenses furnished pursuant to an adoption assistance program for other adoptions by the employee is $13,570. The amount excludable from an employee’s gross income begins to phase out for taxpayers with modified adjusted gross income in excess of $203,540 and is completely phased out for taxpayers with modified adjusted gross income of $243,540 or more.

Reminder: HSA Self-Only Coverage Contribution Limit Increases to $3,400

Earlier this year, the IRS announced the inflation adjusted amounts for 2017 HSA contributions in Revenue Procedure 2016-28.  For individuals in self-only coverage, the 2017 contribution limit will increase to $3,400 (up from $3,350).  The family coverage contribution limit remains at $6,750 again in 2017.  All other limits remain unchanged from 2016.  The following table summarizes the limits relevant to HSAs and high deductible health plans (HDHPs).

2017 (single/family) 2016 (single/family)
Annual HSA Contribution Limit $3,400 / $6,750 $3,350 / $6,750
Minimum Annual HDHP Deductible $1,300 / $2,600 $1,300 / $2,600
Maximum Out-of-Pocket for HDHP $6,550 / $13,100 $6,550 / $13,100

Lastly, the ACA’s out-of-pocket limits for in-network essential health benefits have increased for 2017.  Don’t forget that starting with 2016 plan years, all non-grandfathered group health plans must contain an embedded individual out-of-pocket limit within family coverage, if the family out-of-pocket limit is above $6,850 (2016 plan years) or $7,150 (2017 plan years).  Exceptions to the embedded out-of-pocket limit rule also apply for certain small group plans eligible for transition relief.

2017 (single/family) 2016 (single/family)
ACA Maximum Out-of-Pocket $7,150 / $14,300 $6,850 / $13,700

 

About The Authors. This alert was prepared for Benico, Ltd. by Stacy Barrow and Mitchell Geiger. Mr. Barrow and Mr. Geiger are nationally recognized experts on the Affordable Care Act.  Their firm, Marathas Barrow & Weatherhead LLP, is a premier employee benefits, executive compensation and employment law firm.  They can be reached at  sbarrow@marbarlaw.com or mgeiger@marbarlaw.com.

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IRS Provides a 30-Day Extension for Furnishing Forms 1095 and Extends Good Faith Transition Relief

November 21st, 2016 § 0 comments § permalink

The Internal Revenue Service (IRS) has released Notice 2016-7000, which extends the deadline for furnishing Forms 1095-B and 1095-C to individuals from January 31, 2017 to March 2, 2017.  The Notice did not delay the due date for filing the forms with the IRS, which remains February 28 if filing by paper, or March 31 if filing electronically.

The instructions to Forms 1094-C and 1095-C00 provide that employers can request a 30-day extension to furnish statements to individuals by sending a letter to the IRS that includes the reason for delay.  However, because the Notice’s extension of time to furnish the forms is more generous than the 30-day extension contained in the instructions, the IRS will not formally respond to requests for an extension of time to furnish 2016 Forms 1095-B or 1095-C to individuals.

Employers may still obtain an automatic 30-day extension for filing with the IRS by filing Form 880900 on or before the forms’ due date.  An additional 30-day extension is available under certain hardship conditions.

The Notice encourages employers who cannot meet the extended due dates to furnish and file as soon as possible.  The IRS will consider whether employers have made reasonable attempts to comply with the requirements and the steps that have been taken to prepare for next year’s (2017) reporting when determining whether to abate penalties for reasonable cause.

Like last year, taxpayers can file their personal income tax return without having to attach the relevant Form 1095 to their tax returns.  Taxpayers should keep these forms in their personal records.

The Notice also extends last year’s good-faith transition relief from penalties for incorrect or incomplete information on the forms. These penalties can be waived for employers who can show that they made good-faith efforts to comply.  The good-faith relief applies only to furnishing and filing incorrect or incomplete returns, and not timeliness failures.  However, if an employer is late filing a return, it may be possible to get penalty abatement for failures that are due to reasonable cause and not willful neglect.

Employers should note that the IRS does not anticipate extending transition relief – either with respect to the due dates or with respect to good faith relief from penalties – to reporting for 2017.

About The Authors. This alert was prepared for Benico, Ltd. by Stacy Barrow and Mitchell Geiger. Mr. Barrow and Mr. Geiger are nationally recognized experts on the Affordable Care Act.  Their firm, Marathas Barrow & Weatherhead LLP, is a premier employee benefits, executive compensation and employment law firm.  They can be reached at  sbarrow@marbarlaw.com or mgeiger@marbarlaw.com.

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Transitional Reinsurance Enrollment Counts Due 11/15

September 21st, 2016 § 0 comments § permalink

Employers with self-insured major medical plans are reminded to report their membership count to the U.S. Department of Health and Human Services (“HHS”) via the pay.gov website by November 15, 2016, as part of the Affordable Care Act’s (“ACA”) transitional reinsurance fee (the “Fee”).

The Fee is assessed on both insured and self-insured group health plans, and applies on a calendar year basis from 2014-2016.  Carriers offering group health insurance and sponsors of self-insured medical plans are required to pay the Fee to support payments to carriers in the individual market that cover high-cost claimants.  Carriers pay the fee on behalf of fully insured plans; employers are responsible for paying the fee for a self-insured plan.  Below is a brief summary of key dates and information for employers:

  • October 3, 2016:  2016 ACA Transitional Reinsurance Program Annual Enrollment and Contributions Submission Form should be available on www.Pay.gov.
    • When the Form becomes available, a notice will be sent to REGTAP registrants.
    • Employers may visit https://www.REGTAP.info to register.
  • November 15, 2016:  Deadline for employers with self-insured plans to report their annual enrollment of covered lives to HHS via the pay.gov website.
  • January 17, 2017:  Payment deadline if making a single payment ($27 per covered life).
    •  $21.60 per covered life if making a two-part payment.
  • November 15, 2017:  Payment deadline for second payment for employers making a two-part payment ($5.40 per covered life). 

KEY INFORMATION FOR EMPLOYERS

  • The Fee applies to major medical coverage.
    • It does not apply to stand-alone dental and vision plans, prescription drug-only plans, HRAs, HSAs, FSAs, employee assistance programs (EAPs) and wellness plans that do not provide major medical coverage, post-65 retiree medical coverage, and plans that do not provide coverage that is “minimum value”.
    • For 2015 and 2016, plans that are both self-insured and self-administered are exempt from the fee (i.e., the plan cannot use a third party administrator (TPA) in connection with claims processing or adjudication, including managing appeals, or for plan enrollment).
    • TPAs may, but are not required to, complete the reinsurance contribution process, including payment, on behalf of a self-insured plan.
  • Various counting methodologies are available.
  • When paying the Fee, employers may need to contact their bank to add Agency Location Code (ALC+2 value) 7505008016 to its list of approved companies for ACH automatic debits.
    • The fee is $27 per covered life in 2016, down from $44 per covered life in 2015.>
  • When a plan changes from fully insured to self-insured (or vice-versa) during the calendar year, the carrier is responsible for paying the Fee for the portion of the calendar year during which the plan is fully insured, and the employer is responsible for paying the Fee for the portion of the year during which the plan is self-insured.

Take-Away

Employers sponsoring self-insured plans should work closely with their benefits broker to select the most advantageous counting methodology.  The counting methods can be complex and results may vary significantly based on the chosen method.  Once the enrollment form has been submitted and the Fee paid, an employer cannot later amend that filing if it is discovered that another counting method would have been more advantageous.  2016 is the last year for which the Fee will be assessed.

About The Authors. This alert was prepared for Benico, Ltd. by Stacy Barrow and Mitchell Geiger. Mr. Barrow and Mr. Geiger are nationally recognized experts on the Affordable Care Act.  Their firm, Marathas Barrow & Weatherhead LLP, is a premier employee benefits, executive compensation and employment law firm.  They can be reached at  sbarrow@marbarlaw.com or mgeiger@marbarlaw.com.

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Transitional Reinsurance Enrollment Counts Due 11/15

September 21st, 2016 § 0 comments § permalink

Employers with self-insured major medical plans are reminded to report their membership count to the U.S. Department of Health and Human Services (“HHS”) via the pay.gov website by November 15, 2016, as part of the Affordable Care Act’s (“ACA”) transitional reinsurance fee (the “Fee”).

The Fee is assessed on both insured and self-insured group health plans, and applies on a calendar year basis from 2014-2016.  Carriers offering group health insurance and sponsors of self-insured medical plans are required to pay the Fee to support payments to carriers in the individual market that cover high-cost claimants.  Carriers pay the fee on behalf of fully insured plans; employers are responsible for paying the fee for a self-insured plan.  Below is a brief summary of key dates and information for employers:

  • October 3, 2016:  2016 ACA Transitional Reinsurance Program Annual Enrollment and Contributions Submission Form should be available on www.Pay.gov.
    • When the Form becomes available, a notice will be sent to REGTAP registrants.
    • Employers may visit https://www.REGTAP.info to register.
  • November 15, 2016:  Deadline for employers with self-insured plans to report their annual enrollment of covered lives to HHS via the pay.gov website.
  • January 17, 2017:  Payment deadline if making a single payment ($27 per covered life).
    •  $21.60 per covered life if making a two-part payment.
  • November 15, 2017:  Payment deadline for second payment for employers making a two-part payment ($5.40 per covered life). 

KEY INFORMATION FOR EMPLOYERS

  • The Fee applies to major medical coverage.
    • It does not apply to stand-alone dental and vision plans, prescription drug-only plans, HRAs, HSAs, FSAs, employee assistance programs (EAPs) and wellness plans that do not provide major medical coverage, post-65 retiree medical coverage, and plans that do not provide coverage that is “minimum value”.
    • For 2015 and 2016, plans that are both self-insured and self-administered are exempt from the fee (i.e., the plan cannot use a third party administrator (TPA) in connection with claims processing or adjudication, including managing appeals, or for plan enrollment).
    • TPAs may, but are not required to, complete the reinsurance contribution process, including payment, on behalf of a self-insured plan.
  • Various counting methodologies are available.
  • When paying the Fee, employers may need to contact their bank to add Agency Location Code (ALC+2 value) 7505008016 to its list of approved companies for ACH automatic debits.
    • The fee is $27 per covered life in 2016, down from $44 per covered life in 2015.>
  • When a plan changes from fully insured to self-insured (or vice-versa) during the calendar year, the carrier is responsible for paying the Fee for the portion of the calendar year during which the plan is fully insured, and the employer is responsible for paying the Fee for the portion of the year during which the plan is self-insured.

Take-Away

Employers sponsoring self-insured plans should work closely with their benefits broker to select the most advantageous counting methodology.  The counting methods can be complex and results may vary significantly based on the chosen method.  Once the enrollment form has been submitted and the Fee paid, an employer cannot later amend that filing if it is discovered that another counting method would have been more advantageous.  2016 is the last year for which the Fee will be assessed.

About The Authors. This alert was prepared for Benico, Ltd. by Stacy Barrow and Mitchell Geiger. Mr. Barrow and Mr. Geiger are nationally recognized experts on the Affordable Care Act.  Their firm, Marathas Barrow & Weatherhead LLP, is a premier employee benefits, executive compensation and employment law firm.  They can be reached at  sbarrow@marbarlaw.com or mgeiger@marbarlaw.com.

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ACA Reporting Update: AIR System Still Up

July 12th, 2016 § 0 comments § permalink

ACA Information Returns (AIR) System Will Remain Up and Running After June 30th Deadline

While the deadline to electronically file Affordable Care Act (ACA) information returns with the IRS passed on June 30, 2016, the ACA Information Returns (AIR) system used to electronically file those returns will remain up and running.

On June 30th, the IRS noted the following on its AIR system home page:

  • The AIR system will continue to accept information returns filed after June 30, 2016.  In addition, employers can still complete required system testing after June 30, 2016.
  • When a filing is “accepted with errors,” the employer has 60 days to submit a replacement before penalties accrue any further.  For example, employers who filed their 1094-C by June 30th and who submit a replacement within 60 days of June 30th will have the submission treated as timely filed.
  • Employers that were unable to submit their returns by June 30th should still file their returns after the deadline. Filers that missed the June 30, 2016 deadline will generally not be assessed late filing penalties if the employer made legitimate efforts to register with the AIR system and to file its information returns, and it continues to make such efforts and completes the process as soon as possible.

Additionally, while there is no specific relief provided in the case of employers that fail to file returns by the deadline, relief may be available if the IRS determines that there was reasonable cause for the delay.

Employers that did not file electronically and that missed the May 31, 2016, paper filing deadline should also complete the filing of their paper returns as soon as possible.

This alert was prepared for Benico, Ltd. by Stacy Barrow and Mitchell Geiger. Mr. Barrow and Mr. Geiger are nationally recognized experts on the Affordable Care Act.  Their firm, Marathas Barrow & Weatherhead LLP, is a premier employee benefits, executive compensation and employment law firm.  They can be reached at  sbarrow@marbarlaw.com or mgeiger@marbarlaw.com.

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Reminder: PCORI Fees Due by August 1, 2016

June 9th, 2016 § 0 comments § permalink

Employers that sponsor self-insured group health plans, including health reimbursement arrangements (HRAs) should keep in mind the upcoming August 1, 2016 deadline for paying fees that fund the Patient-Centered Outcomes Research Institute (PCORI).  As background, PCORI was established as part of health care reform to conduct research to evaluate the effectiveness of medical treatments, procedures and strategies that treat, manage, diagnose or prevent illness or injury.  PCORI fees were first due in July 2013 for plan years that ended on or after October 1, 2012.  Under health care reform, most employer sponsors and insurers will be required to pay PCORI fees until 2019.

The amount of PCORI fees due by employer sponsors and insurers is based upon the number of covered lives under each “applicable self-insured health plan” and “specified health insurance policy” (as defined by regulations) and the plan or policy year end date.

  • For plan years that ended between January 1, 2015 and September 30, 2015, the fee is $2.08 per covered life and is due by August 1, 2016.
  • For plan years that ended between October 1, 2015 and December 31, 2015, the fee is $2.17 per covered life and is due by August 1, 2016.
  • The fee is payable by August 1, 2016 for any plan years ending in 2015.

NOTE: The insurance carrier is responsible for paying the PCORI fee on behalf of a fully insured plan.  The employer is responsible for paying the fee on behalf of a self-insured plan, including an HRA.  In general, health FSAs are not subject to the PCORI fee.

Employers that sponsor self-insured group health plans must report and pay PCORI fees using
IRS Form 720, Quarterly Federal Excise Tax Return.

Note that because the PCORI fee is assessed on the plan sponsor of a self-insured plan, it should not be included in the premium equivalent rate that is developed for self-insured plans if the plan includes employee contributions.  However, an employer’s payment of PCORI fees is tax deductible as an ordinary and necessary business expense.

Historical Information for Prior Years

  • For plan years that ended between January 1, 2014 and September 30, 2014, the fee was $2 per covered life and was due by July 31, 2015.
  • For plan years that ended between October 1, 2013 and December 31, 2013, the fee was $2 per covered life and was due by July 31, 2014.
  • For plan years that ended between January 1, 2013 and September 30, 2013, the fee was $1 per covered life and was due by July 31, 2014.
  • For plan years that ended between October 1, 2012 and December 31, 2012, the fee was $1 per covered life and was due by July 31, 2013.

Counting Methods for Self-Insured Plans

Plan sponsors may choose from three methods when determining the average number of lives covered by their plans.

Actual Count Method.  Plan sponsors may calculate the sum of the lives covered for each day in the plan year and then divide that sum by the number of days in the year.

Snapshot Method.  Plan sponsors may calculate the sum of the lives covered on one date in each quarter of the year (or an equal number of dates in each quarter) and then divide that number by the number of days on which a count was made. The number of lives covered on any one day may be determined by counting the actual number of lives covered on that day or by treating those with self-only coverage as one life and those with coverage other than self-only as 2.35 lives (the “Snapshot Factor method”).

Form 5500 Method.  Sponsors of plans offering self-only coverage may add the number of employees covered at the beginning of the plan year to the number of employees covered at the end of the plan year, in each case as reported on Form 5500, and divide by 2.  For plans that offer more than self-only coverage, sponsors may simply add the number of employees covered at the beginning of the plan year to the number of employees covered at the end of the plan year, as reported on Form 5500.

Special Rules for HRAs. The plan sponsor of an HRA may treat each participant’s HRA as covering a single covered life for counting purposes, and therefore, the plan sponsor is not required to count any spouse, dependent or other beneficiary of the participant. If the plan sponsor maintains another self-insured health plan with the same plan year, participants in the HRA who also participate in the other self-insured health plan only need to be counted once for purposes of determining the fees applicable to the self-insured plans.
About The Authors. This alert was prepared for Benico, Ltd. by Stacy Barrow and Mitchell Geiger. Mr. Barrow and Mr. Geiger are nationally recognized experts on the Affordable Care Act.  Their firm, Marathas Barrow & Weatherhead LLP, is a premier employee benefits, executive compensation and employment law firm.  They can be reached at  sbarrow@marbarlaw.com or mgeiger@marbarlaw.com

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Beware of FICA-Reduction Arrangements using Wellness Programs

May 31st, 2016 § 0 comments § permalink

It has come to our attention that certain arrangements are being marketed to employers that are intended to reduce an employer’s FICA obligation by significantly increasing employees’ pre-tax salary reductions.  We want to caution employers against entering into these types of arrangements before having a conversation with an employee benefits attorney who understands them.  This alert provides some background on these schemes and our concerns with them.

Background

Over the last 15 years, we have seen certain arrangements that reappear from time to time.  They come with various bells and whistles but they all have a common feature: They purport to have found a new way to save employer’s money on their FICA contributions at no cost to the employer or employees.  Promotional materials from the vendor show employees receiving the same take home pay they received prior to the employer adopting the program, with perhaps even a little extra to spend on voluntary products.

The earliest versions were known as “double-dip” arrangements, where employees were reimbursed for premiums that had already been paid on a pre-tax basis.  Once those were prohibited (Rev. Rul. 2002-3), variations surfaced.  Under one, employees were reimbursed in advance for potential future medical expenses.  Under another, employees received “loans” that were either offset by unreimbursed medical expenses or forgiven.  In response, the IRS issued guidance (Rev. Rul. 2002-80) prohibiting those two variations.  A more recent twist on the loan program involves the use of credit life insurance to secure the loan rather than it being forgiven, although it would also appear to be prohibited under Rev. Rul. 2002-80, as it is understood that the employee will never become obligated to repay any of the purported “loan.”   A loan that is forgiven, or never intended to be repaid, results in taxable income.

These arrangements were all variations on a theme:

  • They’re marketed as being no cost to the employer;
  • They’re marketed as being no cost to employees;
  • The vendor is paid with part of the savings (more on this later);
  • They’ve only recently become available due to changes in the law, which is why your attorney or broker hasn’t heard of it yet;
  • The vendor has a legal opinion but won’t share it unless you sign a confidentiality agreement; and
  • They accomplish something by using multiple steps that you’re pretty sure would be illegal if done directly.

We have described these arrangements in case there are any similarities to one you may have been pitched recently.

The Wellness Approach

The latest iteration of these schemes involves a wellness program.  From what we can gather, the process works something like this:

  • Employees make a significant pre-tax contribution (around half of their gross wages) into a self-insured group health plan that is basically a wellness program
  • The wellness program requires employees to engage in some activities, such as completing a health questionnaire, taking a phone call from a nurse or watching a video on a health-related topic, in order to qualify for a “reward”
  • The “reward” is coverage under a health reimbursement program (HRP) which is also a self-insured group health plan
  • Employees can use funds in the HRP to reimburse themselves on a non-taxable basis for their premiums paid to the wellness program
    • This is the crux of the arrangement right here
    • This is how employees get all of their pre-tax money back
    • If the reimbursements from the HRP are not excludable from employees’ income, then the employer and employees are back at square one

As discussed below, an employee’s reimbursement from the HRP is not excludable from income if it is reimbursing contributions the employee made to the wellness program on a pre-tax basis.

We understand that the IRS released guidance a few years ago (Notice 2013-54) that described how a health reimbursement arrangement (HRA) could be integrated with the group health plan of a spouse’s employer and be used to reimburse premiums paid under the spouse’s plan.  However, in October 2015, the IRS’s Office of Chief Counsel released memorandum Number 201547006, which clarifies that an HRA (or HRP, for that matter) can only reimburse group health plan premiums that were paid on an after-tax basis and not through salary reduction under a Section 125 plan.  In addition, the Office of Chief Counsel recently commented informally on this type of wellness arrangement saying that amounts reimbursed to employees are taxable, notwithstanding what promoters claim.

In other words, the HRP’s reimbursement of wellness plan premiums is illegal.  An employer using one of these arrangements will be exposed to under-reporting and under-withholding penalties (as well as back taxes), because they’ve failed to include the HRP reimbursement in income when it’s used to reimburse the wellness plan premium.  There is also the concept of “secondary liability,” under which the employer becomes liable for the employees’ portion of FICA taxes, which cannot be collected from the employees.

What’s Really Going On

Of course, these schemes present a number of issues.  We’re just pointing out one.  There are others.  For example, the final Americans with Disabilities Act (ADA) regulations that were released May 16 restrict rewards under all wellness programs (including participatory programs) to 30% of the cost of self-only coverage.  The Equal Employment Opportunity Commission would consider these arrangements to be a per se violation of the ADA because the reward exceeds 30% of the cost of coverage.

Even if these programs worked, the savings is 7.65% on amounts employees contribute pre-tax, which is the employer’s share of FICA.  The promoter is typically looking for 5% of FICA as part of its administrative fee, which is 65% of the employer’s savings!

Also, it is important to remember that these arrangements are not fair to employees, as they often do not understand the potential consequences.  Significantly reducing income via pre-tax salary reductions may decrease an employee’s social security retirement income, particularly for lower paid employees.

As mentioned, any employer considering one of these arrangements should consult with an employee benefits attorney with whom they have a direct attorney-client relationship.

 

About The Authors. This alert was prepared for Benico, Ltd. by Stacy Barrow and Mitchell Geiger. Mr. Barrow and Mr. Geiger are nationally recognized experts on the Affordable Care Act.  Their firm, Marathas Barrow & Weatherhead LLP, is a premier employee benefits, executive compensation and employment law firm.  They can be reached at  sbarrow@marbarlaw.com or mgeiger@marbarlaw.com

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EEOC Releases Final Rules for Wellness Programs under ADA and GINA

May 26th, 2016 § 0 comments § permalink

On Monday, May 16, the Equal Employment Opportunity Commission (EEOC) released final regulations (Final Regulations) under Title I of the Americans with Disabilities Act (ADA) and Title II of the Genetic Information Nondiscrimination Act (GINA) governing wellness programs. The ADA rules cover an employer’s requests for health information from employees and the GINA rules cover requests for health information from family members.

The Final Regulations can be found here (ADA) and here (GINA). Additional Q&A guidance and information for small employers can be found here. The Final Regulations are effective for plan years beginning on or after January 1, 2017, and they apply to all workplace wellness programs, including those offered to employees or their family members that do not require participation in a particular health plan.

The rules clarify the EEOC’s stance on wellness programs and how to determine limits on incentives for spouses, although it is not all good news for employers. As discussed below, there continues to be significant disconnect between EEOC and U.S. Department of Labor (DOL) rules on wellness programs, most notably on the treatment of health risk assessments (HRAs) and biometric screenings when used as a gateway to eligibility.

Overview of the Final Wellness Program Regulations

The Final Regulations apply to any wellness program—both participation-based and outcome-based—that includes disability-related inquiries and/or medical examinations. In other words, if there’s no medical exam or inquiry, the program isn’t subject to the Final Regulations.

Under the ADA rules, the maximum reward (or penalty) attributable to an employee’s participation in a wellness program is 30% of the total cost of self-only coverage. Likewise, under GINA, the maximum reward (or penalty) attributable to a spouse’s participation in a wellness program is also 30% of the total cost of self-only coverage.

The Final Regulations reaffirm that the 30% limit includes financial (cash) rewards as well as in-kind incentives (e.g., time-off awards, prizes, and other items), even those of minimal value. To be clear: rewards under both participation and outcome-based wellness programs are counted toward the 30% limit, and there is no “de minimis” rule for cash or non-cash incentives.

As shown in the table below, the 30% limit applies differently depending on whether the wellness program is offered to all employees or only enrolled employees, and whether the employer also sponsors one or more group health plans.

Wellness Program Design Reward Limit
Wellness program offered only to employees enrolled in the employer’s group health plan Wellness program offered only to employees enrolled in the employer’s group health plan
Wellness program offered to all employees regardless of health plan participation; employer offers one group health plan 30% of the total cost of coverage under the benefit option offered by the employer
Wellness program offered to all employees regardless of health plan participation; employer offers multiple group health plans 30% of the total cost of coverage under the least expensive benefit option offered by the employer
Wellness program offered to all employees; employer does not offer a group health plan  30% of the cost of self-only coverage under the second lowest cost Silver Plan for a 40-year-old nonsmoker on the Exchange in the employer’s principal place of business

Treatment of Incentives for Spouses and Children

The final GINA regulations limit incentives for spouses to provide health information to a wellness program to 30% of the cost of self-only coverage under the applicable plan based on the table above. The rules also prohibit an employer from providing any incentives for an employee’s children (juvenile or adult, natural or adopted) to provide information to a wellness program. The final rule confirms that employers are prohibited from providing incentives for spouses to undergo genetic testing – only information about a spouse’s “manifestation of disease or disorder” may be obtained. For example, spouses may be induced to answer questions related to weight or blood pressure, or whether they have diabetes.

Tobacco Cessation Programs

The Final Regulations confirm that tobacco cessation programs that do not request any medical information from employees are not covered by the ADA.

For example, a wellness program that merely asks employees whether or not they use tobacco (or whether they ceased using tobacco by the end of the program) is not a wellness program that asks disability-related questions. This program would generally be covered by the 50% limit established by the DOL for outcome-based wellness programs, if connected to a group health plan. However, if the program includes a medical exam or inquiry, such as biometric screening or cotinine testing, then it will be subject to the 30% limit described in the Final Regulations. The EEOC does not consider medical exams or inquiries related to a spouse’s tobacco use to be a request for genetic information covered by GINA.

HRAs and Biometric Screening

There continues to be deep disconnect between the EEOC and DOL when it comes to HRAs and biometric screening. Under DOL rules, employers may require employees to complete an HRA and biometric screening in order to be eligible to enroll in benefits. However, the Final Regulations specifically prohibit an employer from denying access to the plan or a particular benefit option if an employee or spouse declines to participate in a wellness program that includes a medical exam or inquiry. The EEOC continues to assert this position, although two district courts that have examined the issue have come to a different conclusion, as discussed below.

EEOC’s Position on Recent Court Cases

Two district courts in Florida and Wisconsin have held that a certain provision in the ADA known as the “insurance safe harbor” applies to wellness programs in a way that allows employers to penalize employees who do not answer disability-related questions or undergo medical examinations in connection with wellness programs (e.g., employees who refuse to complete an HRA and/or biometric screening).

The EEOC believes both cases (Seff v. Broward County and EEOC v. Flambeau)were wrongly decided. The EEOC’s position is that the safe harbor is a relic that was included in the ADA to allow health plans to engage in some practices that are no longer permitted, such as charging enrollees higher rates based on increased risks associated with their medical conditions. The ADA’s safe harbor provision, the EEOC argues, was intended to protect this now unlawful practice, provided that any decision to treat people differently because of their medical conditions was based on risks and costs associated with those conditions.

The EEOC rejects the idea that the safe harbor could apply to employer wellness programs, since employers are not using information to determine whether employees with certain health conditions are insurable or to set insurance premiums. The Final Regulations contain a new provision explicitly stating that the safe harbor provision does not apply to wellness programs even if they are part of an employer’s health plan.

Reasonably Designed

The Final Regulations affirm that a wellness program must be “reasonably designed to promote health or prevent disease” in order to offer incentives.

A wellness program will not be “reasonably designed” if the employer collects health-related information without giving any feedback to the employees or spouses who provide it, or without using the information to design a program that addresses at least a subset of conditions identified. Nor will it be “reasonably designed” if it simply shifts health costs from the employer to the employee.

Employers must also provide employees with detailed information about what medical information will be obtained through the wellness program, how it will be used, who will receive it, and the restrictions on disclosure. An employer’s existing wellness program materials may suffice, although an employer may need to revise its materials if their existing communications are not detailed enough. The EEOC also intends to provide a sample notice on its website within the next 30 days that employers may use.

Lastly, an employer may only receive information collected by a wellness program in aggregate form. The format cannot be likely to disclose the identity of specific individuals except as necessary to administer a health plan.

About The Authors. This alert was prepared for Benico, Ltd. by Stacy Barrow and Mitchell Geiger. Mr. Barrow and Mr. Geiger are employee benefits attorneys with Marathas Barrow & Weatherhead LLP, a premier employee benefits, executive compensation and employment law firm.

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EEOC Releases Final Rules for Wellness Programs under ADA and GINA

May 26th, 2016 § 0 comments § permalink

On Monday, May 16, the Equal Employment Opportunity Commission (EEOC) released final regulations (Final Regulations) under Title I of the Americans with Disabilities Act (ADA) and Title II of the Genetic Information Nondiscrimination Act (GINA) governing wellness programs. The ADA rules cover an employer’s requests for health information from employees and the GINA rules cover requests for health information from family members.

The Final Regulations can be found here (ADA) and here (GINA). Additional Q&A guidance and information for small employers can be found here. The Final Regulations are effective for plan years beginning on or after January 1, 2017, and they apply to all workplace wellness programs, including those offered to employees or their family members that do not require participation in a particular health plan.

The rules clarify the EEOC’s stance on wellness programs and how to determine limits on incentives for spouses, although it is not all good news for employers. As discussed below, there continues to be significant disconnect between EEOC and U.S. Department of Labor (DOL) rules on wellness programs, most notably on the treatment of health risk assessments (HRAs) and biometric screenings when used as a gateway to eligibility.

Overview of the Final Wellness Program Regulations

The Final Regulations apply to any wellness program—both participation-based and outcome-based—that includes disability-related inquiries and/or medical examinations. In other words, if there’s no medical exam or inquiry, the program isn’t subject to the Final Regulations.

Under the ADA rules, the maximum reward (or penalty) attributable to an employee’s participation in a wellness program is 30% of the total cost of self-only coverage. Likewise, under GINA, the maximum reward (or penalty) attributable to a spouse’s participation in a wellness program is also 30% of the total cost of self-only coverage.

The Final Regulations reaffirm that the 30% limit includes financial (cash) rewards as well as in-kind incentives (e.g., time-off awards, prizes, and other items), even those of minimal value. To be clear: rewards under both participation and outcome-based wellness programs are counted toward the 30% limit, and there is no “de minimis” rule for cash or non-cash incentives.

As shown in the table below, the 30% limit applies differently depending on whether the wellness program is offered to all employees or only enrolled employees, and whether the employer also sponsors one or more group health plans.

Wellness Program Design Reward Limit
Wellness program offered only to employees enrolled in the employer’s group health plan Wellness program offered only to employees enrolled in the employer’s group health plan
Wellness program offered to all employees regardless of health plan participation; employer offers one group health plan 30% of the total cost of coverage under the benefit option offered by the employer
Wellness program offered to all employees regardless of health plan participation; employer offers multiple group health plans 30% of the total cost of coverage under the least expensive benefit option offered by the employer
Wellness program offered to all employees; employer does not offer a group health plan  30% of the cost of self-only coverage under the second lowest cost Silver Plan for a 40-year-old nonsmoker on the Exchange in the employer’s principal place of business

Treatment of Incentives for Spouses and Children

The final GINA regulations limit incentives for spouses to provide health information to a wellness program to 30% of the cost of self-only coverage under the applicable plan based on the table above. The rules also prohibit an employer from providing any incentives for an employee’s children (juvenile or adult, natural or adopted) to provide information to a wellness program. The final rule confirms that employers are prohibited from providing incentives for spouses to undergo genetic testing – only information about a spouse’s “manifestation of disease or disorder” may be obtained. For example, spouses may be induced to answer questions related to weight or blood pressure, or whether they have diabetes.

Tobacco Cessation Programs

The Final Regulations confirm that tobacco cessation programs that do not request any medical information from employees are not covered by the ADA.

For example, a wellness program that merely asks employees whether or not they use tobacco (or whether they ceased using tobacco by the end of the program) is not a wellness program that asks disability-related questions. This program would generally be covered by the 50% limit established by the DOL for outcome-based wellness programs, if connected to a group health plan. However, if the program includes a medical exam or inquiry, such as biometric screening or cotinine testing, then it will be subject to the 30% limit described in the Final Regulations. The EEOC does not consider medical exams or inquiries related to a spouse’s tobacco use to be a request for genetic information covered by GINA.

HRAs and Biometric Screening

There continues to be deep disconnect between the EEOC and DOL when it comes to HRAs and biometric screening. Under DOL rules, employers may require employees to complete an HRA and biometric screening in order to be eligible to enroll in benefits. However, the Final Regulations specifically prohibit an employer from denying access to the plan or a particular benefit option if an employee or spouse declines to participate in a wellness program that includes a medical exam or inquiry. The EEOC continues to assert this position, although two district courts that have examined the issue have come to a different conclusion, as discussed below.

EEOC’s Position on Recent Court Cases

Two district courts in Florida and Wisconsin have held that a certain provision in the ADA known as the “insurance safe harbor” applies to wellness programs in a way that allows employers to penalize employees who do not answer disability-related questions or undergo medical examinations in connection with wellness programs (e.g., employees who refuse to complete an HRA and/or biometric screening).

The EEOC believes both cases (Seff v. Broward County and EEOC v. Flambeau)were wrongly decided. The EEOC’s position is that the safe harbor is a relic that was included in the ADA to allow health plans to engage in some practices that are no longer permitted, such as charging enrollees higher rates based on increased risks associated with their medical conditions. The ADA’s safe harbor provision, the EEOC argues, was intended to protect this now unlawful practice, provided that any decision to treat people differently because of their medical conditions was based on risks and costs associated with those conditions.

The EEOC rejects the idea that the safe harbor could apply to employer wellness programs, since employers are not using information to determine whether employees with certain health conditions are insurable or to set insurance premiums. The Final Regulations contain a new provision explicitly stating that the safe harbor provision does not apply to wellness programs even if they are part of an employer’s health plan.

Reasonably Designed

The Final Regulations affirm that a wellness program must be “reasonably designed to promote health or prevent disease” in order to offer incentives.

A wellness program will not be “reasonably designed” if the employer collects health-related information without giving any feedback to the employees or spouses who provide it, or without using the information to design a program that addresses at least a subset of conditions identified. Nor will it be “reasonably designed” if it simply shifts health costs from the employer to the employee.

Employers must also provide employees with detailed information about what medical information will be obtained through the wellness program, how it will be used, who will receive it, and the restrictions on disclosure. An employer’s existing wellness program materials may suffice, although an employer may need to revise its materials if their existing communications are not detailed enough. The EEOC also intends to provide a sample notice on its website within the next 30 days that employers may use.

Lastly, an employer may only receive information collected by a wellness program in aggregate form. The format cannot be likely to disclose the identity of specific individuals except as necessary to administer a health plan.

About The Authors. This alert was prepared for Benico, Ltd. by Stacy Barrow and Mitchell Geiger. Mr. Barrow and Mr. Geiger are employee benefits attorneys with Marathas Barrow & Weatherhead LLP, a premier employee benefits, executive compensation and employment law firm.

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DOL’s Final Fiduciary Rules for Investment Advisors Apply to HSAs

May 4th, 2016 § 0 comments § permalink

On April 8, 2016, the DOL finalized its fiduciary regulations which, among other things, expand the definition of who is an ERISA fiduciary to those providing “investment advice” with respect to Health Savings Accounts (HSAs). As a result, the new guidance regarding what constitutes investment advice and the rules for best interest standards apply to HSAs in the same way in which they apply to IRAs, 401(k) and other retirement plans.

There is, however, exclusion for health insurance policies, disability insurance policies, term life insurance policies and similar assets that do not include an investment component from the final rule definition of “investment property.”

Investment Advice

Under the final regulations, two types of advice will trigger fiduciary status when provided for a fee or other compensation: (1) recommendations to buy, sell, hold, or exchange securities or other investment property, or regarding how to invest securities or other property following a rollover, transfer, or distribution; and (2) recommendations on managing securities or other investment property, including investment policies, portfolio composition, selection of other persons as investment advisers or managers, selection of account type (e.g., brokerage versus advisory), or recommendations about rollovers, transfers, and distributions (including whether to make, amount, form, and destination).

The key aspect of this definition is whether or not a recommendation is made. According to the rule, a recommendation is a communication that, based on its content, context, and presentation, would reasonably be viewed as a suggestion that the participant engage in or refrain from taking a particular course of action. The more specific and individually tailored the communication, the more likely the communication will be viewed as a recommendation and therefore fall under the provisions of the fiduciary rule.

The DOL listed three types of relationships that must exist for a recommendation to trigger fiduciary status. This includes both direct and indirect recommendations in exchange for a fee or other compensation. If a person:

  • Represents or acknowledges that they are acting as a fiduciary within the meaning of ERISA or the Internal Revenue Code (Code);
  • Renders advice pursuant to a written or verbal agreement, arrangement or understanding that the advice is based on the particular investment needs of the advice recipient; or
  • Directs the advice to a specific recipient or recipients regarding the advisability of a particular investment or management decision with respect to securities or other investment property of the plan or IRA.

The Best Interest Standard

The Best Interest Contract Exemption (BIC) provides relief for common compensation and fee structures, such as commissions, revenue sharing, and 12b-1 fees, so long as firms adhere to certain conditions that minimize conflicts of interest and provide advice that is in the best interest of their clients. BIC requires financial institutions to acknowledge that the firm and its advisors are fiduciaries and commit to an impartial conduct standard (i.e., prudent advice in the investor’s best interest, no misleading statements, and reasonable compensation). For IRAs and HSAs, the advice must be provided under a written, binding contract.

The final regulations require a regularly updated website that contains information about the financial institution’s business model; any associated conflicts of interest, a written description of the institution’s policies to mitigate the conflict, and disclosure of any compensation and incentive arrangements with advisors or third parties.

Impact on Insurance Brokers

The Fiduciary Rules should have little impact, if any, on group insurance brokers who do not provide investment advice. As mentioned above, group insurance policies for health and welfare benefits with no investment components are excluded from the definition of “investment property” and a broker’s involvement in helping an employer identify an HSA custodian will not rise to the level of investment advice as it relates to an HSA.

Effective Date

The final regulations are effective June 7, 2016, but most of the provisions do not apply until April 10, 2017.

 

About The Authors. This alert was prepared for Benico, Ltd. by Stacy Barrow and Mitchell Geiger. Mr. Barrow and Mr. Geiger are employee benefits attorneys with Marathas Barrow & Weatherhead LLP, a premier employee benefits, executive compensation and employment law firm

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HHS Announces Start to Phase 2 of HIPAA Audit Program

April 12th, 2016 § 0 comments § permalink

Benico, Ltd. News Alerts

On March 21, 2016 the U.S. Department of Health and Human Services’ Office for Civil Rights (OCR) announced the start of phase 2 (Phase 2) of the Health Insurance Portability and Accountability Act (HIPAA) Audit Program. Phase 2 will consist of more than 200 desk and onsite audits of both covered entities and business associates to determine their compliance with HIPAA’s Privacy, Security, and Breach Notification rules. By contrast, the Phase 1 pilot audit program conducted in 2011 and 2012 targeted only covered entities and involved just 115 audits.

According to an OCR press release, Phase 2 will include “a broad spectrum of audit candidates” that OCR will randomly select from pools that “represent a wide range of health care providers, health plans, health care clearinghouses and business associates.”

OCR is currently verifying contact information and sending initial emails to potential subjects with a pre-audit questionnaire that will gather data about the “size, type, and operations of potential auditees.” Based on pre-audit questionnaires, OCR will choose the final pool of auditees and send letters shortly. OCR has stated that it is “committed to transparency about the process” and will post on its website updated audit protocols that have been developed based on the Phase 1 HIPAA Audits. Phase 2 Audits will include both desk and on-site audits for covered entities and their business associates.

Covered entities and business associates will have 10 business days to respond to OCR’s audit request. The data requests will specify the content, file names and other documentation requirements, and the auditors may contact the covered entities and business associates for clarifications or additional documentation. In addition, all documents must be in digital form and must be submitted electronically to a secure online portal that OCR has specifically developed for Phase 2. Auditors will then perform a desk audit and provide draft findings. OCR will begin a round of desk audits for covered entities, followed by a round of desk audits for business associates and all desk audits are expected to be completed by the end of December 2016.

Auditors will review the documentation and provide draft findings. Subjects of the audit will then have 10 business days to review the findings and return written comments, if desired. If an on-site audit is required, auditors will schedule a date and provide information about the process. On-site audits will last three to five days depending upon the size of the entity. Like desk audits, auditees will have 10 days to review the findings from the audit and return written comments if any.

While Phase 2 audits aren’t intended “to be a punitive mechanism,” more serious compliance reviews may be triggered if audits uncover serious compliance issues. Based on the results of the further compliance reviews, covered entities and business associates may be liable for penalties.

For the time being, covered entities should respond to OCR’s pre-audit screening questionnaire if they receive one, including providing the names of business associates. The individual identified to OCR as a primary contact should be on the lookout for email from OCR, including by checking their junk or spam email folders. If an entity doesn’t respond to OCR, OCR will use publically available information to create its audit pool, and so the entity may still be selected for an audit or subject to a compliance review despite not responding. To prepare for a possible HIPAA audit, employers sponsoring group health plans should review their compliance with HIPAA’s Privacy, Security and Breach Notification Rules and ensure their policies, procedures and training materials are up-to-date.

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HHS Finalizes 2017 Notice of Benefit and Payment Parameters

March 24th, 2016 § 0 comments § permalink

Out-of-Pocket Maximums, Marketplace Guidance

On March 8, 2016, HHS published the final version of its 2017 Notice of Benefit and Payment Parameters.  The Notice is issued each year as part of the Affordable Care Act (ACA). For the most part, the guidance is focused on the ACA Marketplaces and insurers offering qualified health plans. It does, however, include several items relevant to employers and group health plans, specifically:

  • Annual limits for cost sharing (out-of-pocket limits)
  • Marketplace eligibility notifications to employers
  • Marketplace annual open enrollment period
  • Small Business Health Options (SHOP) Exchange

 

Annual Limits for Cost Sharing:  The annual out of pocket limits for plan years beginning on or after January 1, 2017 are $7,150 for individual coverage and $14,300 for family coverage.  These cost sharing limits apply to in-network essential health benefits offered under non-grandfathered health plans, both fully and self-insured.  Annual deductibles, in-network co-insurance and other types of in-network cost sharing accumulate toward the out-of-pocket limit, including prescription drug copayments.  Not included are premium payments, out-of-network cost sharing and spending on non-essential health benefits.

Marketplace Eligibility Notifications to Employers:  Beginning in 2017, the Marketplace will notify an employer as soon as possible when one of its employee’s first enrolls in subsidized Marketplace coverage.  Since some employers may be liable for a penalty under the ACA’s employer mandate when an employee qualifies for a subsidized Marketplace coverage, this change to a more proactive notification process will hopefully provide employers with the opportunity to work with CMS in cases where an improper subsidy has been provided.

Marketplace Annual Open Enrollment Period:  Open Enrollment in the Health Insurance Marketplace, Healthcare.gov, for 2017 and 2018 will take place from November 1, 2016 through January 31, 2017 and November 1, 2017 through January 31, 2018, respectively.

Small Business Health Options (SHOP) Exchange:  Beginning in 2017, small employers electing coverage in the SHOP Exchange will have the option of “vertical choice,” offering plans across all metal levels (platinum, gold, silver and bronze) from one insurer. States who opt out of the vertical choice option will continue to offer employers the choice of selecting health plans that are available at one single metal level of coverage.

About The Authors. This alert was prepared for Benico, Ltd. by Stacy Barrow and Mitchell Geiger. Mr. Barrow and Mr. Geiger are employee benefits attorneys with Marathas Barrow & Weatherhead LLP, a premier employee benefits, executive compensation and employment law firm. They can be reached at sbarrow@marbarlaw.com or mgeiger@marbarlaw.com. This is a service to our clients and friends. It is designed only to give general information on the developments actually covered. It is not intended to be a comprehensive summary of recent developments in the law, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion. Benefit Advisors Network and its smart partners are not attorneys and are not responsible for any legal advice. To fully understand how this or any legal or compliance information affects your unique situation, you should check with a qualified attorney.
© Copyright 2015 Benefit Advisors Network. All rights reserved.

The post HHS Finalizes 2017 Notice of Benefit and Payment Parameters appeared first on Benico, Ltd..

HRCI Continuing Education Credits Now Available

March 8th, 2016 § 0 comments § permalink

HRCI Continuing EducationHRCI Continuing Education Credits are now available when you attend a Benico, Ltd. webinar.

All of our webinars are designed to give you the critical information you need to stay abreast of HR trends, Health and Welfare plans, and insight into Healthcare Reform and benefits regulations. And now, the same great webinars you already attend will afford you the benefit of continuing education credits.

What is HRCI?

The HR Certification Institute™ (HRCI™) is an independent, nonprofit organization dedicated to advancing the HR profession by developing and administering best-in-class accredited certifications.

Recertification and Continuing Education

Achieving certification from the HR Certification Institute is a long-term commitment, and recertification is the process of renewing one’s certification. To maintain certification, one must be prepared to continue to learn, grow and increase current knowledge. Recertification demonstrates a commitment to staying current in the field of Human Resources, and says you are building upon your knowledge, growing as a professional and increasing one’s experience daily. One of the many ways HRCI credits can be earned is through approved continuing education, such as the regular Benico, Ltd. HR and benefits webinars.

How does it work

Participants who wish to receive HRCI credit must participate in the full webinar. Shortly after the completion of a webinar, Benico, Ltd. will send the HRCI Activity ID that you will use to verify your attendance.

Instructions for submitting this activity for recertification credit

  1. Login to your profile at https://hrci.org/login
  2. Click the My Recertification link
  3. Review your progress dashboard and requirements
  4. Find the Continuing Education: Pre-Approved Activities section of your learning plan
  5. Click Add Activity
  6. Enter the Activity ID and click Search
  7. Click Select next to the activity title
  8. Enter the Start and End Dates that you attended the activity* and click Next
  9. Review the activity details, agree to the attestation and click Submit

* Because some activities are ongoing throughout the year, the Start and End Dates are left intentionally blank.

The use of this seal is not an endorsement by the HR Certification Institute of the quality of the program. It means that this program has met the HR Certification Institute’s criteria to be pre-approved for recertification credit.

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Agencies Release New Summary of Benefits and Coverage Templates

March 3rd, 2016 § 0 comments § permalink

Health care reform expands ERISA’s disclosure requirements by requiring that a summary of benefits and coverage (SBC) be provided to applicants and enrollees before enrollment or re-enrollment. Specifically, an SBC must be provided at open enrollment, initial enrollment and special enrollment or upon request. The SBCs allow health insurance shoppers to more easily make comparisons among available health plans and assist enrollees to better understand and use their own coverage.

The initial templates, instructions, and related materials were published in 2011. After input from a stakeholders group, convened by the National Association of Insurance Commissioners (NAIC) which included consumer testing, an updated set of forms were suggested to the Departments of Labor, Health and Human Services, and Treasury. On February 25, 2016 the departments released a proposed five page revised SBC template, proposed individual and group instructions, and a proposed uniform glossary. The documents are currently under a thirty-day comment period. It is anticipated that once changes to the templates are finalized, they will apply in connection with coverage renewing or beginning on the first day of the first plan year that begins on or after January 1, 2017 (including open enrollment periods that occur in the Fall of 2016 for coverage beginning on or after January 1, 2017).

The proposed template includes a new question to better identify first dollar coverage and also requires plans offering family coverage to disclose whether the plan has “embedded” deductibles or out-of-pocket limits, or “non-embedded” deductibles and out-of-pocket limits.

The proposed instructions require the disclosure of tiered networks with more information in the common medical events chart. Plans must make clear which provider tiers are most and least expensive. Also under the proposed instructions, qualified health plans offered through the Marketplaces are required to disclose whether or not they cover abortion services.

The proposed Summary of Benefits and Coverage includes three coverage examples: maternity, diabetes, and a simple fracture. It focuses on cost-sharing parameters that would apply to services received for these conditions and on what consumers would spend in cost sharing for these services. The coverage examples are to be calculated by plans that have wellness programs assuming that enrollees are not participating in the wellness program, although the plan can also indicate that costs may be reduced if enrollees do participate.

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New Agency Guidance and Relief on Offering Student Health Insurance

February 22nd, 2016 § 0 comments § permalink

On Feb. 5, 2016, the Departments of the Treasury, Labor, and Health and Human Services (the Departments) issued a technical release (2016-01) addressing the application of market reforms and other provisions of the Affordable Care Act (ACA) to student health coverage, and providing temporary transition relief from enforcement by the Departments for non-compliant colleges and universities.

The release discusses previous guidance which established that employer payment plans (EPPs) (i.e. arrangements that reimburse employees for all or some of the premium expenses incurred for individual market coverage) and health reimbursement arrangements (HRAs) that do the same will fail to comply with certain ACA market reforms; namely, the prohibition on annual dollar limits and the requirement to provide certain preventive services without cost sharing.

That previous guidance also provided that these health care arrangements wouldn’t violate the market reforms when integrated with a group health plan that does comply with those requirements, as long as they do not reimburse premiums for individual market coverage. HHS has previously defined “student health insurance coverage” as a type of individual market health insurance coverage that is offered to students and their dependents under a written agreement between an institution of higher education (as that term is defined for purposes of the Higher Education Act of 1965) and an issuer. So, in some cases, when a school defrays the costs of student health insurance through a subsidy, it creates an EPP and violates the ACA market reforms.

Many colleges and universities provide students (typically graduate students) with student health coverage at reduced or no cost as part of their student package, which often includes tuition assistance and a stipend for living expenses. For these students, the bill they receive from the school for the health coverage premium may take into account a premium reduction arrangement. It appears that, if the amounts are paid towards student health insurance coverage in a student’s capacity as an employee (as a graduate assistant), then the subsidy is an EPP and subject to the market reforms.

The Departments recognize that many schools have unintentionally been using EPP arrangements, and that schools may need additional time to adopt a suitable alternative or make other arrangements to come into compliance. Accordingly, the Departments indicate that they will not assert that a premium reduction arrangement fails to satisfy the ACA’s mandates regarding annual limits and preventive care if the arrangement is offered in connection with other student health coverage (insured or self-insured) for a plan year or policy year beginning before January 1, 2017 (therefore including, for example, plan years or policy years that are roughly coterminous with academic years beginning in the summer or fall of 2016 and ending in 2017).

Educational institutions should be reviewing all health coverage offered to students and determining whether the coverage offered is student health insurance or coverage under an employer’s group health plan, to make sure that all coverage offered meets the requirements of the ACA.

This alert was prepared for Benico, Ltd. by Peter Marathas and Stacy Barrow. Mr. Marathas and Mr. Barrow are nationally recognized experts on the Affordable Care Act. Their firm, Marathas Barrow & Weatherhead LLP, is a premier employee benefits, executive compensation and employment law firm.This alert is designed only to give general information on the developments actually covered. It is not intended to be a comprehensive summary of recent developments in the law, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion. Benefit Advisors Network and its smart partners are not attorneys and are not responsible for any legal advice. To fully understand how this or any legal or compliance information affects your unique situation, you should check with a qualified attorney.
© Copyright 2015 Benefit Advisors Network. All rights reserved.

The post New Agency Guidance and Relief on Offering Student Health Insurance appeared first on Benico, Ltd..

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