In February 2015, the IRS released final forms and instructions related to information reporting under the Affordable Care Act (the “ACA”). These forms include Form 1095-B, Health Coverage, Form 1094-B, Transmittal of Health Coverage Information Returns, Form 1095-C, Employer-Provided Health Insurance Offer and Coverage, and Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage.
The issuance of the final forms is a critical step in implementing the ACA’s reporting requirements, which enable the government to track compliance with the individual and employer mandates, and to determine eligibility for premium tax credits used to purchase health insurance coverage through a Health Insurance Marketplace (the “Marketplace”). Read more
The Affordable Care Act (ACA) created new reporting requirements under Internal Revenue Code (Code) Sections 6055 and 6056, and the clock is ticking! Under these new reporting rules, certain employers must provide information to the IRS about the health plan coverage they offer (or do not offer) to their employees. The additional reporting is intended to promote transparency with respect to health plan coverage and costs. It will also provide the government with information to administer other ACA mandates, such as the large employer shared responsibility penalty and the individual mandate.
On Tuesday, June 3rd, the IRS issued a revised Form 720 and instructions for filing the PCORI fees by July 31, 2014. Filers will enter covered-lives counts and applicable rates ($1 for plan years ending before Oct. 1, 2013; $2 for plan years ending on or after Oct. 1, 2013) in Part II of Form 720 (line 133) to calculate the amount owed.
Instructions include a table for use by filers with plans or policies subject to both the $1 and $2 applicable rates. Though Form 720 is generally used for quarterly excise taxes, PCORI filers remit that fee annually – by July 31 – and complete only line 133 (unless also submitting excise taxes).
Under the Affordable Care Act, the PCORI fee applies to each plan or policy year that ends after Sept. 30, 2012, and before Oct. 1, 2019.
8,019,763 people selected marketplace plans from October 1, 2013 through April 19, 2014.
Nearly 2.6 million signed up via state-based exchanges, and there were over 5.4 million plan selections via the federally facilitated and partnership marketplaces.
About 3.8 million people were procrastinators and enrolled from March 2-April 19.
Of the more than 8 million:
54% female, 46 % male
63% Caucasian, 17% African-American, 11% Latino, and 8% Asian
34% < 35 years old;
28% are between 18 and 34 years of age;
65% selected a Silver plan;
20% went with a Bronze plan; and
85% were eligible for a premium tax credit
Being a red state or a blue state didn’t really matter. More than a third of the sign-ups came from three states with large numbers of uninsured residents. California had 1.4 million of its citizens sign up, whereas Florida and Texas brought in 980,000 and 730,000 enrollees respectively. The next closest states were New York and North Carolina, which each signed up more than 350,000 residents.
The states that enrolled the smallest % of their uninsured populations were Iowa, South Dakota, and Massachusetts.
I was privileged to be asked to speak at the 43rd Annual Mini-Institute for the Central Illinois Society of Financial Service Professionals on May 1st in Bloomington, Illinois on the subject of “Health Care Reform – Challenges and Opportunities”. Basically the speech provided a retrospective (what’s occurred to date), perspective (what’s currently in play), and prospective (what things may look like in the near and longer terms) around the Patient Protection & Affordable Care Act (PPACA). Since it was geared to financial advisors, the takeaways address the sorts of things that advisors should be speaking with their clients about as it relates to the law and its impact on their lives and businesses.
At the end of 2013 many companies and organizations with less than 50 employees did something called an “early renewal” with their group health insurance plans as a means of kicking the can down the road, many until December 1, 2014, to defer their compliance with Health Care Reform for up to 11 months. The principal reason for doing such in most cases was to avoid a significant rate increase at the end of 2013 with the thought of “Let’s buy some time”.
QUESTION – If your company is one of these companies that bought some time by doing an early renewal, what is your strategy at the end of 2014 for reasonably managing costs of complying then?
Did you know that there are viable group health insurance financing options available in the market to help you avoid the Health Care Reform “cost conundrum” later this year when your company’s / organization’s group plan renews? Self-insurance either with an insurance company or third party administrator (TPA) providing plan administration and purchasing catastrophic insurance coverage called “stop loss insurance” will, no doubt, be a solution for many small employers wrestling with this issue this year.
Self-insured medical plans are exempt from some of the more onerous provisions of Health Care Reform, such as the Health Insurance Tax (HIT) and Modified Community Rating. Avoiding these two aspects of Health Care Reform alone can result in saving tens and even potentially hundreds of thousands of dollars of expense.
Benico, Ltd. provides private companies, public sector employers, and not-for-profit organizations of all sizes with strategic advice around the design, risk management, communication, and enrollment of their health and welfare plans and with compliance around the laws and regulations relating to the same. To discuss your company’s situation, please contact Benico’s principal, John Garven, at 847-669-4800, ext. 202.
The purpose of this blog post is to provider our readers with some perspective about where things currently stand and where they are headed this year with regard to the timing and types of guidance around the Affordable Care Act (“ACA”, aka “ObamaCare”) that we should expect to receive from the federal agencies having jurisdiction (principally HHS, DOL, and the IRS).
First, we believe everyone will agree that February was a VERY BUSY MONTH with regard to ACA guidance. To this point, the final regulations around the employer mandate were released on Monday, February 10th. Following are our thoughts about this development:
1) Generally speaking, we are sure the fact of the delay for compliance with the employer mandate until 2016 for businesses / organizations having less than 100 but more than 50 full-time equivalent employees (FTEs) will at least come as welcome news in the short term.
2) Perhaps even as significant as the 1st point, though, is the transitional relief afforded businesses / organizations having 100 or more FTEs under Section 4980H(a) of the law. Specifically, larger employers next year will NOT be subject the $2,000-per-employee “no coverage” penalty if they, in fact, offer compliant, “qualified” coverage to at least 70% of their full-time employees. This is a change from the proposed rule, under which employers would have had to offer coverage to at least 95% of their full-time employees right away.
3) It should be kept in mind that next year under the 70% standard and, in 2016 and thereafter under the 95% standard for all “applicable large employers” (businesses / organizations with 50 or more FTEs), employers may still be subject to an “affordability” penalty of $3,000 for any otherwise eligible employee who obtains government-subsidized coverage through the public exchange.
4) It should also be kept in mind by businesses / organizations that the “no coverage” and “affordability” penalties are excise taxes, meaning that they’re NOT deductible business expenses for tax purposes.
5) There is some helpful guidance in the final regulations around seasonal employees who may be excluded entirely if they work less than 6 months as well as for educational employees.
Second, we anticipate that the rest of 1Q2014 will prove to be a very important period in terms of guidance and developments, including the final stretch before the end of the Marketplace open enrollment period on March 31st. It was recently reported that there are 56 active items of ACA guidance currently in the works between the IRS, DOL, and HHS. 43 of the 56 items are expected to be released during 2014, and several of them are frankly needed very soon. In addition, the continued Congressional negotiations on the debt ceiling and the federal budget could have ACA implications.
Finally, just a note that our firm offers the following “on-demand” Health Care Reform (HCR) resources:
In closing, our continued challenge is education. Most Americans (62% according to a recent Kaiser Health News poll) do not realize that most significant ACA provisions have taken effect. 2013 was in many ways a year of survival. 2014 will be a year of strategy. To this end, our firm stands ready to engage with our clients to deliver real-world and practicable solutions that fit their strategy around compliance and cost management.
The open enrollment period is expected to end on March 31, 2014. Anyone can sign up for an individual medical plan during this time period. There is speculation that the open enrollment period will be extended because of the problems with the initial roll-out of the exchanges, but for now it is still scheduled to end on March 31, 2014.
Applications and premium payments for coverage, whether purchased on the exchange or off, must be received by the 15th of the month to receive an effective date of the 1st of the following month. For example, an application must be submitted and the initial premium must be paid by January 15th to receive a February 1st effective date. The application submission dates and premium due dates may be different for off-exchange health plans.
After the open enrollment period ends on March 31st, individuals must experience a qualifying event to be eligible to enroll in a medical plan or make a plan change mid-year. Individuals will have 60 days from the date of the qualifying event to sign up for coverage or make a plan change. See the list of qualifying events below.
As long as an individual submits an application by March 31st they will be exempt from the health care law’s individual mandate penalties provided they maintain coverage throughout the rest of the year. This statement holds true even if the individual receives an effective date that would cause them to be without coverage for more than 3 consecutive months. Individuals that are without coverage for 3 or more consecutive months out of the year for other reasons will be subject to the Individual Mandate penalties unless they qualify for an exemption.
The next open enrollment period will occur from Nov. 15, 2014 to Jan. 15, 2015. It was originally scheduled to occur between Oct. 15, 2014 and Dec. 7, 2014, but has since changed. During this time period anyone may sign up for coverage or make a plan change without a qualifying event.
List of Qualifying Events – Special Enrollment Periods for Individual Medical Plans
If an individual experiences a qualifying event he/she will have 60 days from the date of the qualifying event to apply for an individual medical plan or make a change to their existing coverage. The following list outlines the qualifying events that have been identified by the Affordable Care Act (ACA).
Involuntary loss of minimum essential coverage, for example, because of a job loss (voluntarily terminating coverage or policies that are canceled for non-premium payment are not qualifying events);
Change of family structure (i.e. marriage, divorce, death, newborn);
Gaining citizenship or permanent resident status;
Becoming newly eligible for a premium or cost sharing subsidy (generally results from mid-year income changes);
Becoming ineligible for a premium or cost sharing subsidy (generally results from mid-year income changes);
Change of residential address that results in new medical plan options available;
Did not enroll during the open enrollment period because of a mistake, misrepresentation or inaction of an officer, employee or agent of the Health Insurance Marketplace;
The insurance company substantially violated a material provision of its health insurance contract;
The individual is a member of an American Indian Tribe (can enroll or make a plan change one time per month); or
The individual can demonstrate to the Health Insurance Marketplace that he/she has other extenuating circumstances that qualify him/her for special enrollment.
The FAQ provides guidance on a number of issues, including new recommendations made by the U.S. Preventive Services Task Force and how they affect the ACA’s preventive care requirement, limits on participant cost-sharing (i.e., out-of-pocket limits), expatriate health plans, wellness programs, fixed-indemnity insurance, and guidance on the ACA’s impact on the MHPAEA.
The FAQ generally confirms previous Department guidance on the issues addressed and does not significantly change the application of these rules and mandates to employer-sponsored group health plans.
Benefit Advisors Network (BAN) Compliance Director, Peter Marathas, discusses the Affordable Care Act and rising health insurance premiums. BAN Smart Partner, Benico, Ltd., can help companies address the concerns mentioned in this short, informative video.
PPACA (aka “ObamaCare”) requires employers to provide employees with a written notice about the new health insurance marketplaces (exchanges) in which enrollment is set to commence October 1st.
On September 11th the Department of Labor (DOL) issued an “FAQ on Notice of Coverage Options”, clarifying there is no fine or penalty under the law for failing to provide the notice. However, that does not mean that noncompliance is a good option, or that the noncompliant employer may not be subject to other penalties or civil damages. To this point, employees in plans subject to ERISA will likely be granted the right in the future to recover damages sustained as a result of the employer failing to provide information as directed under the law’s notice requirement. ERISA also provides for recovery of legal fees and other related damages. Furthermore, in the future compliance with notice requirements could become a focus of routine DOL audits.
Aside from possible ERISA-related concerns, there are several other reasons why employers may still want to provide the notice. The notice can help employers answer employee questions about:
What the Marketplace is;
Whether the employer will still provide a plan once the Marketplace is operational;
How Marketplace plans are different from the employer’s plan; and
Whether the employer’s plan is intended to be affordable and provide minimum value.
In many cases, employer-sponsored coverage may be a better option for employees than Marketplace coverage. For example, premium contributions for employer-sponsored coverage through payroll will often be less expensive for the employee than the premiums for Marketplace coverage because of the employer’s level of subsidy. Additionally, the employee portion of the premium for employer-sponsored coverage is typically excluded from taxable income and is therefore tax-free. This is not the case at all with Marketplace plans.
Despite the lack of penalty, in the FAQ posting the DOL indicated that employers should provide the marketplace notices to employees and reiterated the content that should be included. The FAQ also provides links to the model notices issued by the DOL earlier in the year.
Please visit the DOL website or contact Benico, Ltd. at 847-669-4800 for more information on the Marketplace Notice requirement.
On September 11th in its online FAQ, the Department of Labor confirmed the fact that currently there will be no penalties for employers surrounding a failure to issue Marketplace Notices (also known as “Notice of Exchange Coverage”) to employees. Some may have interpreted the new FAQ statement as being new guidance. In fact, the absence of penalties under the ACA surrounding the Exchange Notices, is not news, and has been a known under Fair Labor Standards Act (FLSA) §18b.
Employers subject to FLSA are still required to distribute a Marketplace Notice to all current employees by October 1, 2013, and new hires going forward.
As precautionary and to be completely clear: despite the fact that there is no statutory penalty, there could be ERISA fiduciary issues under case law related to the failure to communicate to participants in the absence of the employer communication. In general, employers that sponsor ERISA plans have a duty to be straightforward with participants. Therefore, we recommend that you comply with this requirement and we would not advise that an employer could safely disregard this obligation.
Below are some additional questions and answers surrounding the Exchange Notice requirement. If you have any additional questions on this, or any compliance issue, please contact us at your earliest convenience.
Question: If there is no penalty, if the notice is not sent out, and there is no “proof” of delivery requirement, what would the employer face if they did not send out the Exchange Notice and saved all that cost?
Answer: If the exchange has the employer’s contact information, it may establish a dialogue with an employer whose employee is applying for a subsidy, which at least notifies the employer that its employee may be getting a subsidy. Failure to provide the notice could also potentially be viewed as interfering with an employee’s ability to get a subsidy, which is generally prohibited under ACA.
Question: Regarding the model Notice of Exchanges that is required to be customized by employers, the notice itself does not include any required information in regards to payroll contribution for 2014 – there is a section on the second page that addresses this and it is marked as optional.
However, the data form on employer coverage (link to the Marketplace Application Checklist document is below) does provide a block where information must be provided on the payroll contributions for the plan.
The question is, what if the employer has not set their 2014 payroll contributions by October 1? If this has not been determined, how should an employer answer this item? Is there any employer penalty (or other ramifications) for not establishing the 2014 payroll contribution by October 1?
An employer that is presented with a copy of the Employer Coverage Tool by an employee who is applying for Exchange coverage should complete it to the best of their ability.
The form notes that with respect to the question you reference about premiums (#16), an employer would only complete that section if the plan year is about to end and the employer knows the premium and other information for the upcoming year.
Question: We know the Exchange Notices need to be delivered by 10/1/13 to all current employees, and starting 10/1/13 on an ongoing basis to all new employees, but what is the frequency that this notice needs to be distributed going forward? Must an employer distribute it each year at their company’s renewal, each year prior to a set date or only when there is a change to the notice?
Answer: It is not an annual requirement based on current guidance.
Question: Does the notice need to be distributed only to those employees who work more than 30 hours per week? Or can an employer deliver one notice to those who work more than 30 hours and another notice to those who work less?
Answer: The notice should go to all employees regardless of hours or other status.
Question: Page 2 of the Notice outlines the eligibility requirements for the plan – can the employer provide a different notice to Seasonal, Variable Hour and Regular Employees since there are different eligibility requirements for each class?
Answer: The notice should go to all employees regardless of hours or other status. The notice is designed to be able to be provided to all employees without tailoring it to specific classes; however, it should generally be permissible for an employer to do so.
Question: If an employer is meant to use only one notice for all employees, how does an employer determine whether to check the box for whether the coverage meets the affordability requirements, IF the coverage provided is expected to be affordable for some employees, but not all (which may be the case, especially if the notice must be provided to those working less than 30 hours who are still eligible for benefits, Minimum Value coverage may still be offered to Part Time 20 hour/week employees, but for those employees that coverage may not be affordable)
Answer: An employer should consider the relevant facts and circumstances when deciding whether to check the box regarding affordability.
Question: If an employer’s plan is affordable and adequate, can they write a cover letter when sending out the exchange notice to notify their employees that they wouldn’t qualify for subsidies?
Answer: Yes, that would be fine. Note that the first page of the exchange notice also states that employees who are eligible for affordable, minimum value employer coverage will not be eligible for a subsidy.
Free Series to Help Small Business Owners Runs Through September
The U.S. Small Business Administration and the Small Business Majority (a national nonprofit advocacy organization) have announced the next set of Affordable Care Act 101 Weekly Webinar dates:
Thursday, August 22 at 2:00 PM ET;
Thursday, September 5 at 2:00 PM ET;
Thursday, September 12 at 2:00 PM ET;
Thursday, September 19 at 2:00 PM ET; and
Thursday, September 26 at 2:00 PM ET.
The first series of webinars began in July and will cover the same content; a second round of webinars featuring new content will be held in October to prepare for the opening of the Health Insurance Exchanges (Marketplaces).
During the hour-long presentation, business owners learn key pieces of the law, including what they should know about tax credits, the new small employer health insurance marketplace (SHOP), and more. A brief question and answer period follows each webinar.
Click here to register for the presentations. After registering, you will receive a confirmation email with all of the information needed to access the webinar by telephone.
We have become aware of a very cost-effective group insurance product solution, one appearing to be completely legitimate, for firms / organizations that do not offer health insurance coverage to at least 95% of their “2014 PPACA eligible” employees. As we understand it, if implemented this particular product helps such firms/ organizations avoid the prospect of being exposed to the really onerous ObamaCare “no coverage” penalty of $2,000 per full-time employee (minus 30 full-time employees in the event that at least one employee applies for and receives a premium tax credit in 2014 for Exchange coverage).
To gain the benefit of some context and perspective about this, please be sure to first read the following Wall Street Journal article published on May 20th – “Employers Eye Bare-Bones Health Plans Under New Law” – http://on.wsj.com/17vhDhp. The article talks about “skinny plans” that are believed by many experts to be fully in compliance with the law. Quoting from this article – “Such policies would generally cost far less to provide than paying the penalty or providing more comprehensive benefits, say benefit-services firms. Some low-benefit plans would cost employers between $40 and $100 monthly per employee, according to benefit firms’ estimates.”.
Further, a gentleman by the name of Andy Adams, Vice President and General Counsel for Adams Insurance Service in Houston, writes a great blog post at http://bit.ly/140XwDK about this very same subject, and his conclusion is the same as ours – this is a good deal for many employers, particularly those firms / organizations that have a lot of low wage workers and high turnover. That said, the types of firms / organizations that are probably best suited for this product solution include restaurants, staffing companies, nursing homes, home health care agencies, hotels, resorts, casinos, and security companies.
Please let us know if you have any questions about or interest in this particular concept. We would be delighted to help in any way possible.
On April 23, 2013, the Departments of Labor, Health and Human Services (HHS), and Treasury issued Frequently Asked Questions (FAQs) regarding implementation of the Summary of Benefits and Coverage (SBC) provision of the Patient Protection and Affordable Care Act (PPACA).
Effective January 1, 2014, the SBC will need to state whether the plan provides “minimum essential coverage” (MEC) as required by the “individual mandate.”
It will also need to state whether the plan meets the “minimum value” (MV) requirement. Minimum value means the plan pays at least 60% of allowed charges for covered services, as required by the “employer mandate.”
The Departments provided a new template that incorporates these statements, but allows plans or issuers that are unable to modify their SBCs to continue using the current template, as long as they provide a cover letter or other disclosure that confirms whether the plan meets the MEC/MV requirements.
What Stayed the Same?
Coverage examples have not changed for 2014.
The SBC template was not changed to reflect PPACA’s requirement to eliminate annual limits on essential health benefits. Original instructions still apply:
Answer “no” where the template asks, “Is there an overall annual limit on what the plan pays?”
In the Why This Matters column, state: “The chart starting on page 2 describes any limits on what the plan will pay for specific covered services, such as office visits.”
As an alternative, plans/issuers are now permitted, but not required, to remove the entire row from the document if there are no plan level annual dollar limits.
Additional Safe Harbors Extended
Regulators are extending the safe harbors and enforcement relief provided last year. Penalties will not be imposed on plans/issuers that are working “diligently and in good faith” to comply.
The Departments will:
Continue to work with plans/issuers to help them come into compliance.
Allow modifications to the SBC for plan terms/conditions that do not fit within the SBC requirements, as long as the SBC is completed as closely in line with the instructions as possible.
Allow electronic delivery if enrollment/renewal is electronic, if a person requests the SBC be provided electronically or in compliance with ERISA electronic delivery safe harbor.
Permit continued use of the HHS coverage examples calculator.
Allow carve out benefits to be provided in separate SBCs “until further guidance is issued.”
Exempt fully insured and self-insured Expatriate and Medicare Advantage plans for 2014.
Extend the anti-duplication rule to student health insurance – if another party (e.g., a health insurance issuer) provides a timely and complete SBC to the individual, the SBC requirement is satisfied.
Extend relief to closed blocks of business to September 23, 2014, as long as the product is not actively marketed, never provided an SBC or was not marketed after September 23, 2012. Closed blocks are no longer sold, but may continue to have individuals enrolled in the plans.