The Affordable Care Act:
What You Need to Know to be
Compliant
Al Holifield
Tina Haley
Holifield & Associates, PLLC
11907 Kingston Pike, Suite 201
Knoxville, TN 37934
aholifield@hapc-law.com
thaley@hapc-law.com
Phone: (865) 566-0115
Fax: (865) 566-0119
www.holifieldlaw.com
ACA Timeline
2014:

Individual mandate (must have qualifying coverage); January 1, 2014

Health insurance premium and cost sharing subsidies (premium subsidies for families
with incomes between 133-400% of poverty level; cost sharing subsidies for those
with income up to 250% of poverty level); January 1, 2014

Health insurance marketplace (exchanges); January 1, 2014

Guaranteed availability of insurance (guaranteed issue and renewability regardless of
health status; rating variation based on certain limited criteria, eliminates preexisting condition exclusions); January 1, 2014

No limits on annual coverage (prohibition on annual limits on dollar value of
coverage); January 1, 2014

Essential health benefits (provides coverage for 10 general categories of benefits that
must be included in any policies offered in the “exchange” as well as plans sold in
states’ small-group and individual markets; cost sharing limited to HDHP limits
($63,50/individual, $12,700 for 2014)); January 1, 2014

Out-of-pocket maximums (limited to HDHP limits ($6,350/individual, $12,700/family
for 2014)); January 1, 2014
2
ACA Timeline
2014 (continued):

Annual deductible limits ($2,000/single coverage, $4,000/family); January 1, 2014

Waiting periods (cannot exceed 90 days); January 1, 2014

Increase in small business tax credit (up to 50% of employer’s contribution; up to
35% credit for small non-profit organizations); January 1, 2014

Medicaid expansion (individuals who earn less than 133% of poverty level eligible to
enroll in Medicaid); January 1, 2014

Prohibition against dropping or limiting coverage for individuals participating in
clinical trials (applies to clinical trials that treat cancer or other life-threatening
diseases); January 1, 2014
2015:

Employer mandate (pay or play); January 1, 2015
3
Grandfathered Plans
Grandfathered health plans under the ACA are those
existing without major changes to their provisions since
March 23, 2010, the date of the ACA's enactment. As
employers determine their plan designs for the coming
year, those with grandfathered plans must decide if
maintaining that status is their best option.
4
Grandfathered Plans
Grandfathered plans are not required to meet these ACA requirements:
•
Coverage of preventive care without employee cost-sharing, including
contraception for women.
•
Limitations on out-of-pocket maximums (starting in 2014).
•
Essential health benefits, metal levels and deductible limits (starting in
2014; these only apply to insured small group plans).
•
Modified community rating (starting in 2014; this only applies to insured
small group plans).
•
Guaranteed issue and renewal (starting in 2014; this only applies to
insured plans).
5
Grandfathered Plans
Grandfathered plans are not required to meet these ACA requirements
(cont’d):
•
Nondiscrimination rules for fully insured plans (requirement has
been delayed indefinitely).
•
Expanded claims and appeal requirements.
•
Additional patient protections (right to choose a primary care
provider designation, OB/GYN access without a referral, and
coverage for out-of-network emergency department services).
•
Coverage of routine costs associated with clinical trials (starting in
2014).
•
Reporting to HHS on quality of care (requirement has been delayed
indefinitely).
6
Grandfathered Plans
To maintain grandfathered status, a plan must look at its benefits and
contribution levels as of March 23, 2010 and must not:

Eliminate or substantially eliminate benefits for a particular condition.

Increase cost-sharing percentages.

Increase co-pays by more than $5 or a percentage equal to medical
inflation (currently 9.5 percent) plus 15 percent, whichever is greater.
-- For example, if a plan covered counseling and prescription drugs to treat certain
mental and nervous disorders and eliminates coverage for counseling, the plan will
lose grandfathered status.
-- For example, if the plan had an 80 percent coinsurance rate in March 2010 and
decreases the rate to 70 percent, the plan will lose grandfathered status.
-- For example, if the plan had an office visit copay of $30 in March 2010, it could
increase it to $37.35 without losing grandfathered status.
7
Grandfathered Plans
To maintain grandfathered status, a plan must look at its benefits and contribution
levels as of March 23, 2010 and must not:

Raise fixed amount cost-sharing other than co-pays by more than medical
inflation (currently 9.5 percent) plus 15 percent.
-- For example, if the plan had a deductible of $1,000 and an out-of-pocket maximum of
$2,500 in March 2010, it could increase the deductible to $1,200 and the out-of-pocket limit
to $3,100 without losing grandfathered status.

Lower the employer contribution rate by more than 5 percent for any group of
covered persons.
-- For example, if the employer contributed 80 percent of the cost of employee-only
coverage and 60 percent of the cost of family coverage in March 2010, if the employer
keeps its contribution percentage for employee-only coverage at 80 percent but reduces its
contribution for family coverage to 50 percent, the plan will lose grandfathered status.

Add or reduce an annual limit.
-- For example, a plan that previously had no limit on MRIs could not impose a $10,000 per
year maximum on MRIs without losing grandfathered status.
8
Grandfathered Plans
A plan will not lose grandfathered status if it:
 Changes insurers (on or after Nov. 15, 2010) or third party
administrators, as long as benefits do not change.
 Moves between self-funded and insured status, as long as
benefits don't change.
 Makes changes required by law.
 Increases benefits.
 Makes any change other than a prohibited change (for
example, a change to eligibility rules).
9
Grandfathered Plans
A plan will not lose grandfathered status if it:
 Moves drugs to a different copay tier because the drugs
have become generic.
 Changes networks.
 Passes along premium increases (as long as the increase
is essentially shared pro rata).
 Adds new employees or family members to the plan.
10
Exchanges
 All states to establish an Exchange by January 1, 2014
•
The American Health Benefit Exchange
•
Small Business Health Options Program (SHOP) Exchange
for individuals and small businesses
 States must demonstrate to federal government that
efforts are underway by January 1, 2013
 Types of Exchanges:
•
State Exchange
•
Partnership Exchange
•
Federally Facilitated Exchange
11
Exchanges
 Initial open enrollment period: October 1, 2013 through
March 31, 2014
 For benefit years in 2015 or later, the annual open
enrollment period will be from October 15 to December
7
 Special enrollment provisions will be included
12
Exchanges
 The Metals
Coverage:
– Exchanges
•
Bronze (60%)
•
Silver (70%)
•
Gold (80%)
•
Platinum (90%)
to Offer Four Levels
of
 Catastrophic plan for individuals under 30
 Insurers may offer separate health plan products outside
of an Exchange, but they are prohibited from offering
rates for those health plan products that are lower than
those offered within the Exchange
13
Essential Health Benefits
1.
Ambulatory patient services
2.
Emergency services
3.
Hospitalization
4.
Maternity and newborn care
5.
Mental health and substance use disorder services,
including behavioral health treatment
6.
Prescription drugs
7.
Rehabilitative and habilitative services and devices
8.
Laboratory services
9.
Preventive and wellness services and chronic disease
management
10. Pediatric services, including oral and vision care
14
Employer “Pay-or-Play” Mandate
 Beginning January 1, 2015, the pay-or-play mandate
requires employers of 50 or more full time employees that do not meet the transition relief requirements
delaying the mandate to 2016 – to offer quality,
affordable health insurance coverage to full time
employees and their dependents (no spouses)
 Full time employees: those employees working on
average 30 hours or more per week
 Failure to offer such coverage may subject the employer
to a penalty for a given month if a full time employee
receives a federal premium tax credit or cost-sharing
reduction and is enrolled in coverage through a health
insurance exchange
15
When is an Employer Subject to
Pay-or-Play?
For these purposes only, full time
employees are determined by taking
the sum of the employer’s full time
employees (using a 30 hour per
week standard) and the number
determined by dividing the hours of
service of employees who are not
full time employees by 120 (“fulltime equivalents”).
16
When is an Employer Subject to
Pay-or-Play?
Examples:
 Employer employs 40 full time employees
and 20 part-time employees who each
work 60 hours per month.
50 FTE: 40 + (20 × 60 ÷ 120) = 50
 Employer employs 35 full time employees
and 20 part-time employees who each
work 96 hours per month
51 FTE: 35 + (20 × 96 ÷ 120) = 51
17
Who is an Employee?
Nationwide Mutual Insurance
Company v. Darden
503 U.S. 318, 112 S.Ct. 1344 (1992)
Established a 20 factor test to
determine “employee” status.
18
20 Factor Test:
1. Actual instruction or direction of worker
2. Training
3. Integration of services
4. Personal nature of services
5. Similar workers
6. Continuing relationship
7. Full-time worker
8. Work on premises
9. Order of performance
10. Hours of work
19
20 Factor Test:
11. Submitting reports
12. Method of payment
13. Payment of expenses
14. Tools and materials
15. Investment
16. Profit or loss
17. Exclusivity of work
18. Available for general work
19. Right of discharge
20. Right to quit
20
Who is an Independent Contractor?
Anyone who is not an Employee.
21
Seasonal Employees
Special rule for seasonal employees
Seasonal workers are those who
perform labor or services on a
“seasonal basis” as defined by the
DOL and retail workers employed
exclusively during holiday seasons
22
What are the Pay-or-Play Penalties?
 “Pay” penalty: Employers who opt out of providing
benefits (often referred to as the “A” penalty because
the penalty is imposed pursuant to § 4980H(a)):
 Employers who do not offer health coverage to at least 95%
(70% for 2015 only) of full time employees (and their
dependents (no spouses)) are penalized.
• If at least one full time employee (30 or more hrs/wk or
130 or more hours/month) enrolls in exchange coverage
and receives a tax credit, the employer is subject to an
annual penalty of $2,000 × all full time employees
(except for the first 30 (80 for 2015 only))
• Penalty is assessed monthly (i.e., $167.67 per full time
employee per month) on EIN basis
23
What are the Pay-or-Play Penalties?
 Example 1: No full time employee receives a tax credit
• No penalty assessed
 Example 2: One or more full time employees receive a
tax credit
• The annual penalty is calculated by taking the
number of full time employees minus 30 (80 for
2015 only), multiplied by $2,000
• If there are 50 full time employees, the penalty
would not vary if only one employee or all 50
employees received the credit; the employer’s annual
penalty would be:
(50-30) × $2,000 = $40,000
24
What are the Pay-or-Play Penalties?
 “Play” penalty: Employers who do not provide
affordable coverage (often referred to as the “B”
penalty because the penalty is imposed pursuant
to §4980H(b))
 Coverage is affordable only if the premium for single
coverage under the employer’s lowest cost plan with at
least a 60% “actuarial value” does not exceed 9.56% of
household income (or W-2 wages).
 Annual penalty is the lesser of $3,000 for each full time
employee who receives a tax credit and enrolls in
exchange coverage, or $2,000 multiplied by all full time
employees (subtracting first 30 (80 for 2015 only)).
 Penalty is assessed monthly (i.e., $250 per subsidyreceiving full time employee per month) on EIN basis
25
What are the Pay-or-Play Penalties?
 Example 1: No full time employee receives a tax credit no penalty assessed
 Example 2: One or more full time employees receive a tax
credit: For an employer with 50 full time employees, the
annual penalty is the lesser of:
1) The number of full time employees minus 30, multiplied
by $2,000, or
2) The number of full time employees who receive tax
credits multiplied by $3,000
•
Assuming 10 full time employees received tax credits, the
potential annual penalty on the employer would be 10 X $3,000
or $30,000.
•
However, if the employer had 30 full time employees who
received tax credits, the annual penalty would be capped at
$40,000 (20 employees × $2,000) rather than $90,000 as
calculated (30 employees × $3,000).
26
Who Must Be Offered Coverage:
Determining an Employee’s Full
Time Status
 Reasonable expectation at hiring determines method
used.
 If employee is “reasonably expected” to work at least 30
hours per week (or 130 hours per calendar month), they
must be offered coverage by the first day of the fourth
calendar month after employment begins.
 If employee is NOT “reasonably expected” to work at
least 30 hours per week (or 130 hours per calendar
month), the employer may use the MONTHLY METHOD
or the LOOK-BACK METHOD to determine full time
status.
27
The Monthly Method
 130 hours of service in a calendar month is deemed the
equivalent of an average of 30 hours per week
 “Hour of service” = each hour for which employee is
paid, including vacation, holiday, illness, disability or
other paid leave of absence.
 Salaried employees: three methods for determining
hours worked:
• Same method used for hourly employees
• Days-worked equivalency (worker is credited with 8
hours for each day worked)
• Weeks-worked equivalency (worker is credited with
40 hours for each week worked)
28
The Look-Back Method
 Select a “measurement period” of at least 3 but
not more than 12 months and use employee’s work
hours during that period to establish eligibility for
health coverage.
 Eligibility
status
established
during
measurement period will apply during
subsequent “stability period”.
the
the
 Employers may also include an “administrative
period” of not more than 90 days between the
measurement period and stability period to allow
for eligibility determinations and coordination with
open enrollment.
29
Determination of Full Time Employee
Status Using Look-Back Method
 An
employer
elects
a
6-month
measurement period and a 6-month
stability
period
for
purposes
of
determining its full time employees
 The first measurement period runs from
January 1, 2014 through June 30, 2014
and the associated stability period runs
from July 1, 2014 through December 31,
2014
30
Variable Hour Employees & Full Time
Employee Status
 Variable Hour Employee (new employees only)
• On start date, it cannot be determined whether
employee is reasonably expected to work on average at
least 30 hours per week
 Initial Measurement Period of between 3 and 12 months
• Assess hours during Initial Measurement Period
• Assessment is then used for stability period that is the
same as for ongoing employees
 Use of Administrative Period
• Can use an administrative period but total of initial
measurement period and administrative period cannot
exceed 13 months from date of hire (plus the remainder
of the month if anniversary falls in middle of month)
31
ACA Strategies
 Offering unaffordable insurance (“skinny plans” –
those that are not affordable for some segment of
employee population):
• Employer subject to “B” penalty only (lesser of
$2,000 x FT employees or $3000 per FT employee
who obtains subsidized coverage)
• Encourage employees to obtain non-subsidized
coverage to reduce and/or eliminate “B” penalty
 Under 30 catastrophic plans
 Parent’s plan (for employees age 26 and under)
 Spouse’s plan
 Medicaid
32
ACA Strategies
 Offering skinny plan may benefit lower paid employees;
leaves them eligible for subsidized coverage
 Beware of “red flags” – encouraging only employees with
high claims to move to exchange; can have implications
under ERISA, HIPAA, ADA, Medicare, tax law and state
privacy laws
 In some cases, exchange plan may offer more coverage for
lower premium than employer skinny plan
•
Example: Single mother with one dependent making $25,000
per year
 Employer plan premium: $197/month, 60% actuarial value
 Silver exchange plan: $94/month (subsidized coverage),
70% actuarial value
 Note: to be eligible for a subsidy, the employee must select
at least a silver plan from the exchange
33
Regulatory Audits and Other Minefields
 DOL, IRS, and HHS audits will increase
• Already seeing audits of grandfathered status by DOL
under the ACA
• Worker misclassification
 DOL efforts focus on increasing employer
compliance
rather
than
assessing
penalties in early years
 Form 5500 – Annual Reports – rejection of
plan audit attached to annual report
34
Impact on COBRA Coverage
 As of January 1, 2014, individuals may elect
coverage under COBRA or from an Exchange
 Special enrollment period until July 1, 2014
 Exchange vs. COBRA
•
Exchange offers premium subsidies for individuals with
household income up to 400% of the federal poverty level
•
Cost of exchange correlates directly to individual’s age
•
Cost of employer coverage, and thus COBRA, reflects a
broader range of ages
•
Exchange does not cover dental, vision, medical flexible
spending accounts, health reimbursement accounts, and
employee assistance plans, which are subject to COBRA
35
Impact on Retiree Health Coverage
 Does not affect Medicare payments
 More employers incentivized to get rid of early
retirement plans
 Some large employers have already begun to
remove retirees from company health plans to
private exchanges:
• IBM
• Caterpillar
• Time Warner
• General Electric
• Wal-Mart
36
NEW DEVELOPMENTS
 New COBRA Guidance
 Repeal of Deduction Limits
 Out-of-Pocket Limits
 New HSA Limits for 2015
 Employer ACA Reporting
 Nondiscrimination requirements for
fully insured plans
37
New COBRA Guidance
 Issued May 2, 2014
 General rule for former employees in an Exchange
•
May enroll:
(i) during Exchange open enrollment (Oct. 15 – Dec. 7);
(ii) during 60-day window following loss of coverage due
to termination of employment; or
(iii) after fully exhausting COBRA
 “Special” Special Enrollment Rule:
•
HHS concerned that individuals didn’t know rules
•
Limited enrollment opportunity until July 1, 2014
•
Interested individuals need to call
 Updated Model COBRA Notices Released
•
www.dol.gov/ebsa/modelgeneralnotice.doc
•
www.dol.gov/ebsa/modelelectionnotice.doc
38
Out-of-Pocket Limits

Plan years beginning on or after 1/1/14

Out-of-Pocket Limits (non-grandfathered plans)

•
Applies to in-network essential health benefits
•
2014 limits: $6,350 single / $12,700 family
•
2015 limits: $6,600 single / $13,200 family
•
Deductibles, coinsurance and copayments apply toward the limit
Transition Relief for Plans that use Multiple Service Providers
•
Applies only to the first plan year beginning in 2014
•
Generally applicable to self-insured plans that use a PBM
•
Department will consider a plan to have satisfied OOP limits if:
1. Plan complies with OOP limit for major medical coverage; and
2.
To the extent the plan includes an OOP limit on the other
coverage (e.g., there is a separate OOP limit for Rx) it complies
with the limit.
39
HSA Limits for 2015
2014/2015
Minimum
Annual
Deductible
for HDHP
2014/2015
Maximum
Annual
HSA
Contribution
2014/2015
Maximum
Annual
Out-ofPocket
Individual
$1,250 /
$1,300
$3,300 /
$3,350
$6,350 /
$6,450
Family
$2,500 /
$2,600
$6,550 /
$6,650
$12,700 /
$12,900
o 2015 HDHP limit is lower than the ACA’s OOP limit ($6,600 /
$13,200)
o Expenses will accumulate toward the HDHP limit more quickly
because the HDHP limit applies to all covered in-network
benefits, not just essential health benefits
40
Employer ACA Reporting
 Code § 6055 Reporting – All health insurance
providers
 Discloses information about entity providing
coverage, individuals who are covered and the
months for which they were covered
 Includes employers that sponsor self-insured plans
 Reporting not required for HSAs, on-site medical
clinics, wellness programs or dental/vision
 Employers subject
combine reporting
to
41
§
6056
reporting
may
Employer ACA Reporting
Code § 6056 Reporting:
 Form 1094-C (transmittal to IRS)
•
Filed with IRS by February 28 (March 31 if filing electronically)
 Form 1095-C (provided to employees)
•
Provided to full-time employees by January 31
•
Fully-insured plans: Employer only completes top half of the
form
•
Self-insured plans: Employer completes both sections to satisfy
its Code §§ 6055 and 6056 reporting requirements
 Draft forms were issued June 24, 2014; finalized February
8, 2015
 Electronic delivery is permissible with employee’s consent
42
Employer ACA Reporting
Code § 6056 – Simplified Method #1 – “Qualifying Offers”
 Qualifying offer = offer of minimum value coverage to the
employee, spouse and children that costs the employee
no more that 9.56% of the FPL (approximately $1,100 in
2014) for single coverage
 Employers making a qualifying offer will only need to
report names, addresses, and tax IDs of employees who
receive qualifying offers
 For 2015, employers making a qualifying offer to 95% of
their FT employees (including spouses and children) may
use the simplified reporting method for all employees
43
Employer ACA Reporting
Code § 6056 – Simplified Method #2 – “Option to
Report without Separate Certification of FT
Employees”
 Employers that offer affordable, minimum
value coverage to at least 98% of employees
included on the report may certify the offering
without including specific names and numbers
of full time employees
44
Employer ACA Reporting
 Effective Dates – Both reporting rules were effective in
2014; however, compliance is voluntary until 2015.
 First mandatory reporting in January/February 2016 for
2015.
•
Includes employers with 50-99 FTEs that are exempt from the
pay-or-play mandate in 2015 (and generally for any portion of
the plan year that extends into 2016)
•
Despite their exemption from the penalty, they are still subject
to Code § 6056 reporting for 2015
•
Must certify on Code § 6056 reporting filed in 2016 that they
qualify for the transition relief in the pay-or-play regulations
•
Use Code § 6056 form filed in 2017 to certify for the
months of the 2015 plan year that fall in calendar year 2016
45
Employer ACA Reporting
W-2 Reporting of Health Costs:
 Beginning with 2012 forms (issued in January 2013),
employers must report aggregate cost of health coverage
 Small employer exception: reporting is optional for
employers issuing less than 250 W-2s in prior year until
further guidance is issued
 Reportable cost includes the entire cost of coverage
(without any reduction for employee contributions)
 Cost of coverage is determined under rules similar to those
for determining COBRA premiums (excluding the 2%
administrative charge)
46
ACA Disclosures: Summary of
Benefits and Coverage (SBCs)
 Final rule effective September 23, 2012
 SBC cannot exceed four double-sided pages in length and
must be “culturally and linguistically appropriate”
 SBC must be
available at:
•
•
accompanied
by
a
“uniform
glossary”,
www.healthcare.gov
www.dol.gov/ebsa/healthreform/
 HHS forms available at:
•
http://cciio.cms.gov/resources/other/index.html#sbcug
 Upon renewal, SBC need only be provided for the benefit
option in which a participant is enrolled, unless SBCs for
other options are requested.
 SBC is in addition to SPD requirement.
47
ACA Disclosures: Summary of
Benefits and Coverage (SBCs)
 SBC requirement applies jointly to plans and carriers:
•
Carrier responsible for SBC for insured plans
•
Employer responsible for SBC for self-funded plans
o Penalty for failure to provide SBC: up to $1,000 per
offense for willful failure to provide notice
o SBC may be included with other documents (i.e., SPD)
as long as it is “prominently displayed”
o Premiums not required to be disclosed on SBC
48
ACA Disclosures: Summary of
Benefits and Coverage (SBCs)
 Timing of Initial Distribution: based on participant’s
enrollment status –
•
Enrolling or re-enrolling at open enrollment (including late
enrollees) – provide before the first day of open enrollment
beginning on or after September 23, 2012
•
Enrolling other than at open enrollment (including newly
eligible and special enrollees) – starting on the first day of
the plan year beginning on or after September 23, 2012
49
ACA Disclosures: Summary of
Benefits and Coverage (SBCs)
 Timing of Distribution in Subsequent Plan Years:
•
Upon request (ASAP, but no later than 7 days)
•
Within 90
enrollment
•
With open enrollment materials (or, if no materials are
provided, by the date the participant is eligible to enroll)
•
If the SBC cannot be timely provided because the plan
terms have not been finalized, the SBC must be provided
within 7 days of finalizing the plan terms
days
of
enrolling
50
under
a
HIPAA
special
ACA Disclosures: Summary of
Benefits and Coverage (SBCs)
 Methods of Distribution:
•
SBC requirement met is single SBC provided to employee
and spouse knowns to reside at same address
•
SBC may be provided electronically, provided the
distribution option complies with ERISA’s electronic
disclosure rules
 Changes to SBC:
•
If a material modification is made mid-year that affects the
content of the SBC, and change is not reflected in most
recent SBC, the plan or carrier must provide enrollees 60
days’ advance notice of the change
•
Plans not required to distribute a new SBC 60 days in
advance of changes made in connection with a renewal
51
Nondiscrimination Requirements
 Already apply to self-insured health plans
 Application to fully insured plans, non-grandfathered
plans delayed until regulatory guidance is issued
 Eligibility and benefits test
•
70% participation or coverage offered to a “reasonable
classification”
•
If benefit is offered to one highly compensated employee
(HCE), it must be offered to all non-highly compensated
employees (NHCEs)
•
“highly compensated employee” = top 25% of workforce on
a controlled group basis
52
Nondiscrimination Requirements
 Common
employer
practices
considered discriminatory:
that
are
• Management-only plans
• Higher employer contribution to premiums
for HCEs (i.e., HCEs pay 20% of premium,
while NHCEs pay 30%)
• Paying for COBRA coverage for HCEs only
• Waiving waiting periods or other eligibility
requirements for HCEs only
53
Nondiscrimination Requirements
Penalty = $100 per day per
“Affected Person” (NHCEs) to
lesser of 10% of premium or
$500,000
54
ACA Stuff You Need to Know
o Independent Review Organizations
o Health Plan IDs Delayed Until Further Notice
o Individual penalty for not having health coverage: higher
of these two amounts (2015):
• $325 per person ($162.50 per child under 18),
maximum for family $975; or
• 2% of your yearly household income
o Wellness Program Compliance
o Integration requirements
o Cafeteria plan amendments
55
Independent Review Organizations
(IROs)
 Overview:
•
Participant may request review by an external independent
review organization (IRO) after exhausting internal appeals
•
IRO’s decision is final and binding on the parties
•
Insured plans already may be subject to a state-required
external review
•
Self-insured plans may use the safe harbor (3 IRO process)
until federal government establishes an external review
procedure for self-insured plans.
56
Independent Review Organizations
(IROs)
Available external review processes:
 Private accredited independent review organization
process (“3 IRO process”) – safe harbor for self-insured
plans
 HHS-administered process
 State external review process:
•
State process only compliant
protection standards included
•
HHS determines compliance
57
if
minimum
consumer
Independent Review Organizations
(IROs)
Self-insured ERISA
– covered plans
Self-insured public
sector plans
Fully insured plans
3 IRO process
HHS-approved State
process, if applicable
HHS-approved State
process
HHS-approved State
process, if State
opens its process and
plan opts to
participate
Otherwise, elect a
Federal process and
notify HHS of
election
If State does not
have one, elect a
Federal process and
notify HHS of
election
(private sector or
multiemployer)
(private or public
sector, or
multiemployer)
Independent Review Organizations
(IROs)
 IRO contracting process
•
Contract with at least 3 IROs
•
Rotate assignments among the IROs, or incorporate other
independent, unbiased methods for IRO selection, such as
random selection
•
IROs must not be eligible for financial incentives based on
likelihood to support a benefit denial
o Safe harbor: contract with at least two IROs by January
1, 2012, and with at least three IROs by July 1, 2012
59
Independent Review Organizations
(IROs)
Eligible under Federal
processes
Ineligible under Federal
processes
• Claims that involve
“medical judgment” as
determined by the external
reviewer (IRO)
• Claims that involve a
rescission of coverage
• Federal agencies could
expand the scope of claims
that are eligible for review
beyond those noted above
• Claims based on whether
the claimant meets the
eligibility requirements
under the plan’s terms,
such as worker
classification
• Claims that do not involve
“medical judgment” or
rescission
Independent Review Organizations
(IROs)
 State external review process:
•
States determine what claims are eligible for review under
their external review processes
61
Independent Review Organizations
(IROs)
Standard Review
•
•
•
•
•
•
•
•
•
Claimant has 4 months to file
Preliminary review and notice by plan
Plan assigns to IRO, and submits
documents and information to IRO
IRO notifies claimant, and may accept
additional information from claimant
IRO provides additional information to
plan for reconsideration (if applicable)
IRO reviews claim de novo
IRO reviews plan document/SPD to
assure the IRO decision is not contrary
to plan terms
IRO issues written decision within 45
days
If IRO reverses the plan’s denial,
coverage must be provided immediately
Expedited Review
•
•
•
Generally available if standard time
frame for completing an expedited
internal appeal or a standard
external review would seriously
jeopardize the life or health of the
claimant or the claimant’s ability to
regain maximum function
IRO and plan must follow standard
process on expedited basis
IRO must make its determination
as quickly as possible, but within
no more than 72 hours
Independent Review Organizations
(IROs)
 About IROs
•
Utilization Review Accreditation Commission (URAC)
•
Over 50 URAC accredited IROs
•
National Association of Independent Review Organizations
(NAIRO) formed by the majority of URAC-accredited IROs
63
Independent Review Organizations
(IROs)
 Issues to consider when choosing an IRO
•
Years of experience as IRO
•
Number of external reviews conducted
•
Implementation of new ACA standards
•
Credentials of reviewers
•
How fees are charged
•
Compliance with HIPAA and HITECH
64
Independent Review Organizations
(IROs)
 Implications of external reviews
•
Loss of control over claims decision making process
•
Fiduciary issues
•
Administrative costs and burdens
•
Possible increase in need for stop loss insurance
65
Independent Review Organizations
(IROs)
 Action Items:
•
Select external review process
•
If using 3 IRO Process:
 Determine whether the plan will delegate the external review
process to a TPA or administer it in-house
 Prepare and distribute RFIs for IROs
 Evaluate responses and select IROs as appropriate
•
Review plan documents, SPDs, etc. to ensure that they are
written as clearly as possible, especially key plan terms and
definitions
•
Incorporate required changes in plan documents, SPDs,
notices, announcements, etc.
66
Wellness Programs
 Final regulations issued jointly by Department of Treasury,
Department of Labor and Health and Human Services on
June 3, 2013.
 Final regulations apply to plan years beginning on or after
January 1, 2014.
 Types of Wellness Programs:
• Participatory Wellness Programs
• Health-contingent Wellness Programs:
 Activity-only
 Outcome-based
67
Wellness Programs
 A wellness program is a program of health promotion or
disease prevention.
 1996: HIPAA added provisions to the IRC, ERISA, and
PHS Act prohibiting group health plans and group health
insurers
from
discriminating
against
individual
participants and beneficiaries in eligibility, benefits, or
premiums based on a health factor.
•
Exception: Premium discounts or rebates or modification to
otherwise applicable cost sharing (including copayments,
deductibles, or coinsurance) in return for adherence to
certain programs.
68
Wellness Programs
 2006 – Final regulations were issued implementing
HIPAA nondiscrimination and wellness provisions.
 2010 – ACA amend the PHS Act (but not ERISA or IRC)
•
Added nondiscrimination and wellness provisions which
largely reflected the 2006 regulations and extended HIPAA
nondiscrimination protections to the individual market.
•
Wellness program exception to prohibition on discrimination
applies to group health plans (and any health insurance
coverage offered in connection with such plans) but does
not apply to coverage in the individual market.
69
Participatory Wellness Programs
 Programs that either do not provide a reward or do not
include any conditions for obtaining a reward that are
based on an individual satisfying a standard that is
related to a health factor.
 No changes under final regulations – still must be made
available to all similarly situated individuals regardless of
health status.
 Examples:
•
Completing a health risk assessment or having a diagnostic
test performed
•
Attending a monthly, no-cost health education seminar
•
Program that reimburses employees for all or part of fitness
center or gym membership
70
Health-Contingent Wellness Program
 A program that requires an individual to satisfy a standard
related to a health factor to obtain a reward (or requires an
individual to undertake more than a similarly situated
individual based on a health factor to obtain the same
reward).
 Two types:
•
Activity-only
•
Outcome-based
 5 requirements for health-contingent wellness programs:
•
Opportunity to qualify
•
Size of reward
•
Reasonable design
•
Uniform availability
•
Notice of alternative standard
71
Activity-Only Wellness Program
 A program that requires an individual to perform or
complete an activity related to a health factor to obtain
a reward but does not require the individual to attain or
maintain a specific health outcome.
 Examples:
•
Walking
•
Diet
•
Exercise program
72
Outcome-Based Wellness Program
 A program that requires an individual to attain or
maintain a specific health outcome to obtain a reward.
 Examples:
•
Not smoking
•
Attaining certain results on biometric screenings
73
Notice of Availability of Reasonable
Alternative Standard
 Plans and issuers must disclose the availability of a
reasonable alternative standard to qualify for the reward
(and, if applicable, the possibility of waiver of such
standard).
 Outcome-based wellness programs must also include
this notice in any disclosure that an individual did not
satisfy an initial outcome-based test:
 What must be included:
•
Contact information for obtaining the alternative standard
•
Statement that recommendations of an individual’s personal
physician will be accommodated
74
Health Contingent Wellness Programs
Requirements
Activity-Only Wellness
Programs
Outcomes-Based
Wellness Programs
Opportunity to Qualify
At least once per year
At least once per year
Size of the Reward
Limited to 30% of the cost
of coverage
Limited to 30% of the cost
of coverage, plus an
additional 20% for nontobacco use
Reasonable Design
Must not be overly
burdensome or a
subterfuge for
discrimination based on
health status. Must offer a
reasonable alternative
standard to qualify for the
reward to every individual
who does not meet the
initial standard
Must not be overly
burdensome or a
subterfuge for
discrimination based on
health status. Must offer a
reasonable alternative
standard to qualify for the
reward to every individual
who does not meet the
initial standard
Health Contingent Wellness Programs
Requirements
Activity-Only Wellness Outcomes-Based
Programs
Wellness Programs
Uniform Availability
An alternative to qualify for
the full reward (or waiver of
standard) must be offered if
activity would be medically
inadvisable or unreasonable
due to a medical condition.
An alternative to qualify for
the full reward (or waiver of
the standard) must be
offered to individuals who
do not meet the initial
standard.
Notice of Alternative
Standard
Must provide notice of
availability of alternative
standard in all materials
describing the program.
Notice must include contact
info and statement that
recommendations from the
individual’s physician will be
accommodated.
Must provide notice of
availability of alternative
standard in all materials
describing the program and
in disclosures that individual
did not satisfy the initial
outcome-based standard.
Notice must include contact
info and statement that
recommendations from the
individual’s physician will be
accommodated.
Americans with Disabilities Act (ADA)
 Does my wellness program have to comply with the
ADA? If so, which parts?
YES – Wellness programs must comply
with certain sections of the ADA
77
ADA Section 102(d)(4)
(4) Examination and inquiry –
(A) Prohibited examinations and inquiries. A covered
entity shall not require a medical examination and shall not
make inquiries of an employee as to whether such
employee is an individual with a disability or as to the
nature or severity of the disability, unless such examination
or inquiry is shown to be job related and consistent with
business necessity.
(B) Acceptable examinations and inquiries. A covered
entity may conduct voluntary medical examinations,
including voluntary medical histories, which are part of an
employee health program available to employees at that
work site. A covered entity may make inquiries into the
ability of an employee to perform job-related functions.
78
ACA Section 503(a) and (b)
Prohibition against retaliation and coercion:
(a) Retaliation
No person shall discriminate against any individual
because such individual has opposed any act or practice made
unlawful by this chapter or because such individual made a
charge, testified, assisted, or participated in any manner in an
investigation, proceeding, or hearing under this chapter.
(b) Interference, coercion, or intimidation
It shall be unlawful to coerce, intimidate, threaten, or
interfere with any individual in the exercise or enjoyment of, or
on account of his or her having exercised or enjoyed, or on
account of his or her having aided or encouraged any other
individual in the exercise or enjoyment of, any right granted or
protected by this chapter.
79
Genetic Information Nondiscrimination
Act (GINA):Section 202(b)
(b) Acquisition of Genetic Information.
It shall be an
unlawful employment practice for an employer to request,
require, or purchase genetic information with respect to an
employee or a family member of the employee except –
(1) where
an employer inadvertently requests or
requires family medical history of the employee or family
member of the employee;
(2) where –
(A) health or genetic services are offered by the
employer, including such services offered as part of a
wellness program;
(B) the employee provides
voluntary, and written authorization;
80
prior,
knowing,
Genetic Information Nondiscrimination
Act (GINA):Section 202(b)
(C) Only the employee (or family member if the family
member is receiving genetic services) and the licensed health
care professional or board certified genetic counselor involved
in providing such services receive individually identifiable
information concerning the result of such services; and
(D) Any individually identifiable genetic information
provided under subparagraph (C) in connection with the
services provided under subparagraph (A) is only available for
purposes of such services and shall not be disclosed to the
employer except in aggregate terms that do not disclose the
identify of specific employees; and
(E) The employer, excluding any licensed health care
professional or board certified genetic counselor that is
involved in the genetic monitoring program, receives the
results of the monitoring only in aggregate terms that do not
disclose the identify of specific employees.
81
Integration Requirements:
HRAs and FSAs
 IRS Notice 2013-54/DOL Technical Release 2013-03:
•
Issued September 13, 2013; effective for plan years
beginning on or after January 1, 2014
•
New guidance on the effect of the ACA on HRAs and health
FSAs
•
New requirements for HRAs and health FSAs that could
require employers to make changes to their existing plans,
particularly “stand-alone” HRAs and health FSAs
•
New requirements for integration of HRAs and health FSAs
with group health plans.
82
Integration Requirements: HRAs
 Plan years beginning on or after January 1, 2014, standalone HRAs (those not offered in conjunction with a
separate group health plan) will no longer be permitted
unless they provide benefits to retirees only or provide
only excepted benefits, such as dental or vision benefits.
 For the majority of employers, this means that HRAs
must be “integrated” with a group health plan that
meets the requirements of the ACA.
 HRAs that are not integrated may continue to exist and
pay benefits until existing account balances have been
exhausted. However, new amounts may not be added
after December 31, 2013. Any amounts added during
2013 must be based on the HRA plan terms in effect on
January 1, 2013.
83
Integration Requirements: HRAs
 Two integration methods; which method is used depends
on whether the group health plan provides “minimum
value” as defined under the ACA.
•
Minimum Value Not Required:
 The employer must offer a group health plan, other than the
HRA, that does not consist solely of excepted benefits (plan may
be offered by a different employer, i.e. a spouse’s employer).
 The employees are eligible for the HRA only if they actually
enroll in the group health plan.
 Reimbursements under the HRA must be limited to copays, coinsurance, deductibles, premiums and medical care that does
not constitute essential health benefits.
 Employees must be allowed to opt out of the HRA at least
annually or to permanently opt out and waive all future
reimbursements from the HRA.
84
Integration Requirements: HRAs
•
Minimum Value Required:
 The employer must offer a group health plan, other than the
HRA, that provides minimum value under the ACA (This group
health plan may be offered by a different employer, i.e. a
spouse’s employer).
 The employees are eligible for the HRA only if they are actually
enrolled in a group health plan that provides minimum value.
 Reimbursements under the HRA are generally not limited (other
than qualifying as a Code Section 213(d) medical expense).
 Employees must be allowed to opt out of the HRA at least
annual or to permanently opt out and waive all future
reimbursements from the HRA.
85
Integration Requirements: FSAs
 Effective January 1, 2014, a health FSA must be offered in
conjunction with a group health plan; “stand alone” FSAs (those not
offered in conjunction with a group health plan) cannot meet the
requirements of the ACA regarding preventive benefits and annual
dollar limits.
 A health FSA that is an “excepted benefit” is exempted from these
requirements.
•
Employer must make other group health coverage available to
employees (no requirement that the employee actually enroll in the
group health plan, just that they be eligible for it)
•
Sponsor of the “other” group health plan does not have to be the
same sponsor of the FSA (employee could participate in his
employer’s FSA and enroll in group health coverage offered by his
spouse’s employer); the “other” group health plan coverage must
meet ACA requirements
•
Maximum benefit under the FSA must not exceed two times the
participant’s salary reduction election OR, if greater, $500 plus the
salary reduction election; the amount of any employer contribution
is tied to the participant’s salary reduction election.
86
Integration Requirements: FSAs
Assume maximum salary deferral is $2,500
(beginning in 2013 plan years, salary reduction
contributions to FSAs are limited to $2,500). The
maximum amount of the employer contribution is
calculated based on the participant’s salary reduction
election:
Salary deferral
election
2 Xs salary
deferral
Salary deferral +
$500
Employer
contribution
250
500
600
1000
1200
1500
2000
2500
500
1000*
1200*
2000*
2400*
3000*
4000*
5000*
750*
1000
1100
1500
1700
2000
2500
3000
500
500
600
1000
1200
1500
2000
2500
*=maximum benefit payable under regulations
87
Cafeteria Plan Amendments
 Same-Sex benefits:
•
Regulatory guidance issued by the IRS regarding the U.S.
Supreme Court decision in U.S. v. Windsor allows
participants in cafeteria plans with same-sex spouses to
make mid-year election changes to elect to pay for
employer-sponsored health coverage on a pre-tax basis (if
coverage of same-sex spouses is offered by the employer).
•
Amendment to the cafeteria plan is required if the plan
document does not already contain language allowing midyear election changes upon a change of marital status.
•
The deadline to adopt such an amendment is end of the
plan year in which change is effective.
88
Cafeteria Plan Amendments
 Mid-year election changes:
•
IRS Notice 2014-55 (effective Sep. 18, 2014)
•
Adds 2 additional circumstances under which participants
may prospectively and mid-year change their elections
regarding a group health plan (not a health FSA) that
provides minimum essential coverage
89
Cafeteria Plan Amendments
 Revocation due to reduction in hours of service:
•
Employee’s expected hours of service change from at least
30 hours/week to less than 30 hours/week (even if this
change does not result in employee ceasing to be eligible
for coverage)
•
Employee’s revocation of coverage under group health plan
corresponds with intended enrollment of employee (and
spouse and dependents, if applicable) in another plan that
provide minimum essential coverage and that will be
effective no later than the first day of the second month
following the month in which the employer group coverage
is revoked.
90
Cafeteria Plan Amendments
 Revocation due to enrollment in a qualified health plan
•
Employee is eligible for a special enrollment period to enroll
in a QHP through the exchange or seeks to enroll in a QHP
during exchange open enrollment
•
Employee’s revocation of coverage under group plan
corresponds to intended enrollment of employee (and
spouse and dependents, if applicable) in a QHP through the
exchange for new coverage that will be effective no later
than the day immediately following the last day that the
employer group health plan is effective.
91
Cafeteria Plan Amendments
 Employer may rely on reasonable representations of
employee that they have enrolled or intend to enroll in
another plan that meets the requirements.
 Participants may not change their elections for health FSAs
even if hours are reduced or they enroll in a QHP through
the exchange.
 Employers not required to amend cafeteria plan to allow the
new mid-year changes.
 Amendment must be adopted on or before the last day of
the plan year in which the elections are allowed; may be
effective retroactively if notice is provided to participants.
 May amend for 2014 plan year if amendment adopted on or
before the last day of the 2015 plan year.
92
EEOC Lawsuits
In 2014 the EEOC filed three causes of action against three
different employers regarding their wellness programs.
o EEOC v. Orion Energy Systems (Eastern District of
Wisconsin, Aug. 20, 2014)
o EEOC v. Flambeau, Inc. (Western District of Wisconsin,
Oct. 1, 2014)
o EEOC v. Honeywell International (District Court of
Minnesota, Oct. 27, 2014)
93
What is the litigation about?
 Americans with Disabilities Act
 Genetic Information Nondiscrimination Act
 Affordable Care Act
 HIPAA/HITECH
94
What are the implications of
these cases and regulations?
95
The ACA Litigation Minefield
Employee Claims under the ACA
• Workforce Realignment
• Independent Review Organizations
(IROs)
• Claims to Mandated Benefits
• Whistleblower Actions
• Mental Health Parity Act
96
ACA LITIGATION
Regulations requiring employers who are closely-held
corporations to provide their female employees with
no-cost access to contraception violate the Religious
Freedom Restoration Act.
 Burwell v. Hobby Lobby Stores, Inc., 573 U.S.
_____, 134 S. Ct. 2751 (U.S. 2014).
 Conestoga Wood Specialties Corp. v. Sebelius,
573 U.S. _____,134 S. Ct. 1536 (U.S. 2014).
 Wheaton College v. Burwell, 573 U.S. ____,134
S. Ct. 2806 (U.S. 2014).
97
MORE ACA LITIGATION
Validity of regulations to extend tax-credit subsidies
to
coverage
purchased
through
exchanges
established by the federal government (as opposed to
exchanges established by a state).
 Halbig v. Burwell, 758 F.3d 390 (D.C. Cir. 2014);
en banc review on hold pending decision in King v.
Burwell.
 King v. Burwell, 759 F.3d 358 (4th Cir. 2014);
Petition for cert granted No. 7, 2014; oral
argument held March 4, 2015; decision expected
end of June, 2015.
98