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I have been practicing since last year’s FERMA Family Feud contest!
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FERMA “1st and 10” – 2015 Conference Lido Beach
John M. Drye, Esq.
What We Will Accomplish Today:
General Counsel & Chief Risk
Strategist – Campus Benefits
1. Goal #1 – Figure out what QUESTIONS to be asking
Home Office – Atlanta, GA
PPACA , Healthcare Reform &
Public School Employee Benefits
In 2013 - 2015, completed training
sessions to 315 + Public School
Systems in GA, AL, TN and FL.
Contact:
2. Current issues stemming from the Supreme Court, IRS,
DOL and lower courts
3. Cyber issues for school districts
4. All you need to know about (and the solution to)
1094/1095 reporting in 1 minute (maybe)
Jdrye@CampusBenefits.com
Presentation Disclaimer:
www.CampusBenefits.com
This presentation is not intended to be
exhaustive nor should any discussion or opinions
be construed as legal advice. Listeners should
contact school legal counsel for legal advice.
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REVIEW REVIEW REVIEW REVIEW REVIEW REVIEW
P.P.A.C.A.
Patient Protection and
Affordable Care Act
1.
Passed by 111th Congress in March 2010.
2.
Framework of directives & yet to be
finalized set (1) Taxes, (2) Regulations.
3.
Designed to be implemented during 2010 –
2018 with the majority of provisions to
execute 2014 - 2016.
4.
Significant new set of (1) compliance
requirements for the employer marketplace
and (2) responsibility for the Individual.
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FERMA
RISK – Not knowing all the answers to the topics below
Management – Knowing the questions to ask trusted advisors
Sample 2015 Checklist
1.
2.
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6.
7.
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10.
11.
12.
13.
14.
15.
16.
FL Health Insurance Exchange (Marketplace)
How Marketplace Subsidies work
Exchange Plans: Bronze, Silver, Gold, Platinum
Individual Mandate
Pre-Existing Exclusions
Wellness Program – Health Plan Discounts
Annual or Lifetime Limits
“Employer Shared Responsibility Provisions”
Automatic Enrollment
Medicaid Expansion
Employer Reporting Requirements
MEC – Minimum Essential Coverage
EHB – Essential Health Benefits
SBC – new SBC requirements under PPACA
W-2 Reporting Requirements
What Fees apply to our district?
1.
2.
3.
4.
PCORI (IRC 720) fees and applicability
Transitional Reinsurance Fee
Health Insurance Provider Fee
High Value Plan Tax (Cadillac Tax in 1018)
17. Required Notices (ie: Exchange Coverage options)
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
Review Plan Design
Budget for Required Fees/Payments
Prepare for Required Admin Tasks
Review FSA Design
Determine ALE and process
Review Employer Mandate Penalties
Review Affordability/Minimum Values
Determine Measurement periods
Begin Tracking Employees
Prepare Required Reporting
What Needs Documentation
Future Requirements
1. What to Do
2. What to Wait on
Question
What makes a
teacher effective?
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Lets Focus on some of the Challenges
facing school districts in 2015 - 2016
FMLA
FLSA
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Challenge #1 - Busy Supreme Court
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Significant Ruling #1 from SCOTUS on the PPACA
National Federation of Independent Business (NFIB) vs. Sebelius
SCOTUS Case No. 11-393 (2012)
Issue:
Is the requirement that most Americans obtain insurance or
pay a penalty was authorized by Congress’s power to levy taxes.
Decision:
The vote was 5 to 4, with Chief Justice John G. Roberts Jr.
joining the court’s four more liberal members.
Majority:
Chief Justice Roberts wrote in the majority opinion.
“The Affordable Care Act’s requirement that certain individuals
pay a financial penalty for not obtaining health insurance may
reasonably be characterized as a tax”
“Because the Constitution permits such a tax, it is not our role to
forbid it, or to pass upon its wisdom or fairness.”
Majority
The Governments claim requiring the purchase of insurance was
constitutional under the interstate commerce clause failed.
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Significant Ruling #1 from SCOTUS on the PPACA
National Federation of Independent Business (NFIB) vs. Sebelius
SCOTUS Case No. 11-393 (2012)
What is the impact?
(7/15/15 IRS report)
• About 6.6 million U.S. taxpayers paid a penalty for 2014 for not having insurance
• Roughly 10% more than the Obama administration had estimated
• The average penalty was $190 according to the National Taxpayer Advocate, the
in-house ombudsman of the IRS.
• 300,000 taxpayers overpaid the penalty by a total of $35 million.
• The average overpayment was a little more than $110. The IRS hasn’t decided
yet whether to issue a refund for the overpayments.
• About 10.7 million taxpayers filed for an exemption from the penalty.
• 2.6 million filed for premium tax credits to help them afford insurance, adding up
to $7.7 billion in subsidies.
• The average tax credit was $3,000
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Significant Ruling #1 from SCOTUS on the PPACA
National Federation of Independent Business (NFIB) vs. Sebelius
SCOTUS Case No. 11-393 (2012)
Why does it matter for school districts?
First:
Understand the context of “THE MATH” and
why employer penalties are so important to
pay for PPACA.
1. As the Individual Mandate penalty escalates for taxpayers, and the “claw back”
increases from the IRS, more individuals will look to join (not covered now) or
remain on your health plan.
2. 1094/1095 - “Notice for Penalty” letters (love notes) could become a more time
consuming task than districts are currently planning for.
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Significant Ruling #2 from SCOTUS on the PPACA
King v. Burell
SCOTUS Case No. 14-114 (June 25, 2015)
Issue:
Can individuals be eligible for Health Insurance Subsidies in states
(ie: FL) that did not form a “state-based” Health exchange/marketplace.
Decision:
The vote was 6 - 3 and upheld the acts section 36B tax credits available
to individuals who qualify regardless of state or FFE(34), with Chief
Justice Roberts again joining the court’s more liberal members.
Majority:
Chief Justice Roberts wrote in the majority opinion.
"Congress passed the Affordable Care Act to improve health insurance
markets, not to destroy them," Roberts wrote in his opinion.
"The combination of no tax credits and an ineffective coverage
requirement could well push a State's individual insurance market into a
death spiral," Roberts wrote, aligning with the argument of Solicitor
General Donald Verrilli.
Majority
The key question in the case centered on whether the federal
government (not states) had the ability to provide subsidies to help
low-income Americans buy health insurance
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Significant Ruling #2 from SCOTUS on the PPACA
King v. Burell
SCOTUS Case No. 14-114 (June 25, 2015)
Why does it matter for school districts?
(1) Solidifies the “Pay or Play” mandate. Because the employee going to an exchange has to
receive a subsidy to trigger an employer penalty, a decision the other way would have
rendered the mandate ineffective in 34 states
(2) Employers adopting a “wait and see” approach – Time is up… in fact at this point you are
behind the curve if you have not adopted a strategy for implementation, reporting and
penalty review.
(3) Reinforces the need for HR personnel to understand the state exchange.
(4) Have you put into place a plan for “waiver of coverage” during open enrollment?
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Significant Ruling #3 from SCOTUS on the PPACA
Obergefell v. Hodges
SCOTUS Case No. 14-556 (June 26, 2015)
Note: 2nd Anniversary of the Windsor decision (DOMA)
Issue:
Recognizing same-sex marriage in all states
Decision:
In a 5-4 decision. The Fourteenth Amendment requires a State to license
a marriage between two people of the same sex and to recognize a
marriage between two people of the same sex when their marriage was
lawfully licensed and performed out-of-State.
Majority:
Justice Kennedy wrote the majority opinion.
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Significant Ruling #3 from SCOTUS on the PPACA
Obergefell v. Hodges
SCOTUS Case No. 14-556 (June 26, 2015)
Note: 2nd Anniversary of the Windsor decision (DOMA)
Why does it matter for school districts?
(1) The ruling has effectively created the issue of marriage equality vs. domestic partners.
• Many employers in states that did not recognize same-sex marriage, did recognize
benefit eligibility for unwed domestic partners.
• Not all states have clearly defined registration requirements or rules so employers
were left to set standards for what constituted enough of a commitment for a domestic
partner to warrant coverage.
(2) Review your benefit eligibility rules as it relates to domestic partnerships. Does it need to
be updated (Board decision?)
(3) What is your policy on “Dependent audits”?
(4) When was the last time you updated your Employee handbook?
(5) Do you understand how this applies to FMLA issues?
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Court Case I am watching : Southern District of New York
Marin v. Dave & Busters, Inc.
S.D.N.Y, No. 1: 15-cv-03608 (Filed May 2015)
Issue:
Approximately a class of 10,000 workers filed suit alleging that their
employer reduced the worker’s hours to keep them from attaining full-time
status for the purpose of avoiding mandated coverage offer under the ACA.
Theory: ERISA Section 105 Violation which prohibits employers and plan sponsors
from interfering with an employee’s attainment of benefits, effectively
prohibiting employers from reducing work hours for the purpose of avoiding
the requirement to offer health coverage under the ACA.
My Opinion:
1.
2.
Significant case to watch as it could open the proverbial flood gates.
I would argue that a strategy, structured properly, does not interfere with the
employees attainment of benefits under ERISA Section 510
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Court Case I am watching : Southern District of New York
Marin v. Dave & Busters, Inc.
S.D.N.Y, No. 1: 15-cv-03608 (Filed May 2015)
Why does it matter for school districts?
1. As we all know the ACA Employer Mandate generally requires employers to offer
coverage to all “FTE” (avg. of 30+ hours)
2. How a school district complies with ACA requirements not only affects potential
penalties but law suits as well.
3. Have you set a solid plan into action for classifying certain types of employees.
4. Question: What kind of paper trail are you creating with your compliance
requirements?
5. Have you budges for professional advice? accountants, legal, insurance brokers
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Challenge #2 – Keeping up with the DOL
1. June 12, 2015 Final
Regulations updated on SBC
and Uniform Glossary
2. June 30th Proposed
Amendments to increase
threshold of FLSA White Collar
Exemption – Expanding the
number of employees eligible
for overtime.
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FLSA – Fair Labor Standards Act
The Basics
•
•
•
•
FLSA was enacted in 1938 to establish minimum living standards for workers
Found in 29 U.S.C. 201 et seq. & 29 C.F.R. Part 541
Florida Code 448.01
Initial Minimum Wage was 25 cents an hour
• Employers determine Exempt and Non-exempt employees
• Appropriate record keeping must be maintained by the employer on non-exempt
employees
•Current salary threshold to be exempt from FLSA is $445 a week / $23,660 a year
•General Rule:
• Executives, Administrators, Teachers are Exempt Employees
• Service Employees such as school secretaries, bus drivers, lunch room
workers, and maintenance personnel may be non-exempt
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FLSA – Fair Labor Standards Act
The Proposed Rule Change
• June 30 – 295 page report issued to amend FLSA (29 CFR Part 541)
• Proposed salary threshold to be exempt from FLSA:
• Moving from $445 a week to $970 a week
• Moving from $23,660 / year to $50,440 / year
• Did not address duties test but did amend salary basis and salary level test.
• If adopted will eliminate an estimated 21.4 million exempt employee status.
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FLSA – Fair Labor Standards Act
Why does it matter for school districts?
1. Employee tracking and analysis (ie: 1094/1095 reporting) is becoming more
important. How are you devoting resources?
2. Are you data collection practices and software ready to meet new challenges?
3. All employers should start planning for an increase in overtime eligible
employees
4. All employers should review the job duties and salary levels of employees
currently classified as exempt and determine which employees will likely be
deemed nonexempt under the new (proposed) regulations.
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FLSA – Fair Labor Standards Act
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Challenge #3 - Healthcare “Data” Protection
Cyber Attacks on Districts
Data Security
BBA Agreements
Notification Requirements
Communication Strategies
IT Due Diligence
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What happened? Why it affects all SHBP members…
January 29, 2015
•
Anthem victim of a cyber attack (BREACH)
•
80 Million current and former customers
(dating back to 2004) data stolen
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Names, birthdays, medical IDs/social
security numbers, street addresses, email
addresses and employment information,
including income data.
•
No evidence that credit card or medical
information, such as claims, test results or
diagnostic codes were targeted or
compromised.
•
Impacted individuals offered (by Anthem)
credit monitoring/identity protection
California, Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri, Nevada, New
Hampshire, New York, Virginia, and Wisconsin.
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Why did it happened?
•
Hospitals, clinics, Insurance carriers and affiliated entities
traditionally do not meet the high standards required to
protect data including “PHI” Personal Health Information.
•
The main reason these institutions fail is due to
consolidation and mergers where smaller entities
computer systems don’t always connect or data
management becomes challenging.
•
Dell Security works reports that a “complete set of health
insurance credentials” sold for $20 on underground
markets in 2013.
•
That is 10-20 times the price for a US credit card number
with a security code
•
This is not the first time Anthem (formerly WellPoint) has
been breached. In 2013, Anthem agreed to pay $1.7
million to resolve allegations it left information for
612,000+ members available online because the insurer
failed to execute adequate safeguards
People’s Liberation Army’s Unit 61398
1.
2.
3.
Illegal & Bogus Treatment
Buy Addictive drugs
Obtain free treatment
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July 9th announcement of OPM Hack
Overview
• 21.1 Million applicants had their personal data stolen
• Two Breaches between 2013 – 2014
• April 4.2 Million people
• July 21.5 million people
• Total 22.1 (3.6 million overlap)
•Among the data stolen (fingerprints , Social Security numbers, Health records)
• Same week announced: United Airlines, Wallstreet Journal and NYSE all had
their systems attacked and taken off-line.
• Has the Cold war has turned into the Cyber war?
• Credit Card Breach – Phone Call / Zero liability
• Medical ID Breach – If used for treatments what happens if you show up to
the hospital and your blood type or allergies list is different?
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The Law -- Exposure School Districts Have…
Federal Law – There are several areas pertinent to discussion (especially
notification requirements) but an important law to understand as an employer or
business partner is related to the U.S. Health and Human Services office for
Civil Rights. As required by section 13402(e)(4) of the HITECH Act, the
Secretary must post a list of breaches of unsecured protected health
information affecting 500 or more individuals.
Since 1997 HHS has logged over 1,200 breaches. This list includes hospitals,
doctors, dentist, insurance brokers, universities, state and county governmental
entities and many others.
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The Law (Florida) -- Exposure School Districts Have…
State of Florida Law - The Florida Information Protection Act of 2014 repeals
section 817.5681 and replaces it with a new statute: section 501.171 Notification
required upon breach of security regarding personal information:
The new statute requires notice to be provided to affected individuals within
30 days. In addition, notice must now be provided to the Florida Department
of Legal Affairs for any breach affecting 500 or more individuals within 30
days of the breach unless good cause is provided to the department in
writing for an additional 15-day delay. The new statute authorizes the Florida
Office of Attorney General to bring enforcement actions under FDUTPA for
any statutory violations, but does not create private rights of action for
affected individuals.
The new statute expands the definition of “personal information” to include health
insurance policy or subscriber numbers, information regarding an individual’s
medical history, financial information, and online user names or email addresses
in combination with their associated passwords or security questions and answers
to permit account access.
The civil penalties for FDUTPA violations could be up to $1,000 per day for the first2830
days and $50,000 for each subsequent 30-day period, not to exceed a total of $500,000.
Lessons Learned & Tips for Superintendents
Why does it matter for school districts?
1. Have you documented any training on cyber security in HR?
2. One “Hacktivist” can cause substantial damage and financial penalty. Do you
have the right BBA agreements in place with your vendors.
3. Do you have a HIPAA compliance training course in place for your employees?
Best Practices:
Review your exposure and test the security of your Business Associates:
1. BBA Agreement Review
2. Mandatory “Site Visit” for Insurance and
Retirement Brokers/Providers
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The 1-minute solution to 1095 Filings
Legal Notice: Do not try this at home or work. It is a very bad idea.
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Informational Reporting 1094/1095
STOP attending seminars on the nitty gritty
details of 1094/1095 until:
– You read the instructions for the forms
– Your print off and review the forms
– You understand the top 12 Questions
surrounding 1094 / 1095-C reporting
I will release a client alert in the beginning of
August if you are interested
jdrye@CampusBenefits.com
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jdrye@CampusBenefits.com
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Bonus Material – What will cause the most
“Reporting Stress” for your HR Departments?
NEW PPACA Reporting
Requirements – IRS
Code Sections
§6055 & §6056
That require
IRS Reporting Forms
1094 / 1095
-----------------Health Waiver Documentation
SBC Disclosures
Marketplace Disclosures
Timeline
Penalties
Administration
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New Burdensome Reporting Requirements
The Affordable Care Act (“ACA”) created new
reporting requirements under Internal Revenue
Code (“IRC”) §6055 and §6056.
1. Under these new reporting rules, certain employers must provide
information to the IRS about the medical plan coverage they offer (or do not
offer) to their employees.
2. Code §6055 requires insurers, self-insured health plan sponsors,
government agencies that administer government-sponsored health
insurance programs and any other entity that provides minimum essential
coverage (“MEC”) to report information on that coverage to the IRS and
covered individuals.
3. Code §6056 requires applicable large employers (“ALEs”) subject to the
employer shared responsibility rules to report information on the health
coverage offered to full-time employees to the IRS and covered individuals.
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Why???
In order to enforce
New Reporting Requirements
and pay for
PPACA:
The Government needs data to administer significant parts of the PPACA
mandates, such as:
(1) Employer Shared Responsibility Penalty (ALE (Applicable Large Employer – 50+) )
(2) Individual Mandate
(3) Each State “Exchange / Marketplace” Subsidy eligibility
July 24, 2014 (draft forms) – February 4, 2015 final forms
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What???
New Reporting Requirements
Form 1095–C : Employer-Provided Health Insurance Offer & Coverage
•
•
•
•
Offer of coverage “code”
Employee Share of Lowest “MEC” offered plan (Affordable?)
Must report every month
List of covered individuals
Similar in nature to a
w-2 form, this
informational notice
is required for
individuals to show
proof of coverage to
avoid “individual
mandate penalties”
and/or qualify for
exchange subsidies
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What???
New Reporting Requirements
What information will school districts need to collect and merge into one file?
1. What employees were full-time during 2015 and when
•
Define and track full-time status
2. What months was coverage offered to each employee
3. Was the coverage offered minimum value
The Not So
“simple” Six
4. What affordable safe harbor was met and when
5. Which transitional rule was applied and when
6. Was coverage offered to spouse and dependents and when
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When???
New Reporting Requirements
Form 1095–C : Employer-Provided Health Insurance Offer & Coverage
Deadlines in 2016
1. Statements must be furnished by mail, unless the
recipient affirmatively consents (proof) to receive
the statements electronically
2. First statements are due to individuals by
February 1, 2016
3. Statements must be filed with the IRS (along with Form 1094):
• February 28th
(if by paper)
• March 31st
(if electronically)
• (Employers with more than 250 must file electronically)
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When???
New Reporting Requirements
Form 1095–C : Employer-Provided Health Insurance Offer & Coverage
Challenge #1: IRS is not ready to accept electronic feeds and may not be
ready by the deadline: (Publication 5165 ACA Information Returns Guide for more details and file format)
Challenge #2: SHBP and (ADP) have not fully determined the process of
getting needed data to the school systems and it will likely not occur until
January giving little time for districts without advance planning to file.
Challenge #3: School District Data, Data, Data
•
•
•
•
Aggregating data needed to complete the forms (Merge from SHBP)
Classifying employees by the coding system
Sending forms to both employees who elected and who did not
“Look back” and tracking for eligibility
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What???
Form 1094-C :
New Reporting Requirements
Transmittal Form summarizing all 1095-C forms issued
Similar in nature to
the w-3 Form that
summarizes all w-2s
issued to employees.
Significant work is
required to classify
employee “codes” and
Certifications of
eligibility safe harbors
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Penalties???
New Reporting Requirements
Two different sections of the Internal Revenue Code discuss the penalties for
not complying with Code §6055 and §6056 reporting:
1. Code §6721 discusses failing to send correct returns to the IRS.
•The basic penalty is $100 for each incorrect return.
•The total fine during any calendar year will not exceed $1,500,000.
2. Code §6722 discusses failing to provide employee statements.
•The penalty is the same as above but applies for not providing individual statements.
However, initially penalties may be waived if the failure is due to
reasonable cause
and not to willful neglect.
§4980 (H) a & b – Codes section describing the “tracking” penalty traps
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Penalties???
New Reporting Requirements
Final regulations include short term relief from penalties to allow time to develop
appropriate procedures for data collection and compliance with these new reporting
requirements.
For returns and statements filed and furnished in 2016 (reporting for 2015 calendar
year), the IRS will not impose penalties on reporting entities that can show they
make good faith efforts to comply with the information reporting requirements.
• This relief is provided only for incorrect or incomplete information reported
on the return or statement, including social security #’s, TINs or dates of
birth.
• No relief is provided for reporting entities that do not make a good faith
effort to:
• Comply with these regulations or
• Fail to timely file an information return or statement.
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Challenge #3 – “Under the Gold Dome”
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