2014 Employee Benefits Year
in Review
…and What’s Coming for 2015!
Brian Gilmore
Lead Benefits Counsel
Click here for audio recording
JANUARY 29, 2015
Agenda
The ACA Never Sleeps…
-
Employer mandate pay or play rules
-
Expatriate plans get clarity
-
§6055/§6056 Health care reform
information reporting
-
New excepted benefits rules
-
90-day waiting period rules
-
End of HIPAA certificates of creditable
coverage
-
Out-of-pocket maximum rules
-
-
Reference-based pricing
Health FSA employee salary reduction
inflation increase
-
Transitional Reinsurance and PCORI fees
-
New SBCs for 2015
-
Health plan identifiers (HPIDs)
-
U.S. Supreme Court to rule on federal
exchange subsidies
-
Skinny plans and minimum value issues
-
Big topics we may see in 2015
-
Preventive care services (including
contraception)
-
New ACA section 125 permitted election
change events
-
Updated COBRA notices to address
exchange coverage
-
Individual policy reimbursement guidance
(again)
…Plus a Few Non-ACA Topics
-
Wellness programs in the news
-
SF Bay Area commuter benefits ordinance
-
California paid sick leave law
-
Changes to SF Health Care Security
Ordinance (HCSO)
.
2
The ACA – Employer Mandate
“Pay or Play” Rules
IRC §4980H penalties generally apply as of January 1, 2015
Generally requires applicable large employers to offer minimum essential
coverage that is affordable and provides minimum value to all full-time
employees (and their children to age 26) to avoid potential penalties.
• Applicable Large Employer
• Generally an average of at least 50 full-time employees (including full-time
equivalents) in the preceding calendar year
• Minimum Essential Coverage (MEC)
• Includes virtually any employer-sponsored major-medical coverage (but not dental,
vision, health FSA, EAP, disability, etc.)
• Affordable
• Employee share of the premium for the lowest cost self-only plan option that
provides minimum value does not exceed 9.5% of employee’s income under one of
three safe harbor approaches
• Minimum Value (MV)
• The percentage of the total allowed costs of benefits provided under the plan is no
less than 60 percent (aka 60% actuarial value, Bronze level plan)
• Full-Time Employees
• Employees averaging at least 30 hours of service per week under the monthly or
look-back measurement method
3
The ACA – Employer Mandate
§4980H Penalties
§4980H(a)—The “A Penalty”
§4980H(b)—The “B Penalty”
• Failure to offer MEC to at least 70% of
all full-time employees (and their
children to age 26)
• Applies where the employer is not
subject to the A penalty
• Threshold rises to 95% in 2016 and
beyond
• The A Penalty is triggered by at least
one such full-time employee who is
not offered MEC enrolling in
subsidized exchange coverage
• A Penalty liability is $2,000 annualized
($166.67/month) multiplied by all fulltime employees
• 80 full-time employee reduction from
multiplier in 2015
• 30 full-time employee reduction from
multiplier in 2016 and beyond
• Failure to:
• 1) Offer coverage that’s affordable
• 2) Offer coverage that provides MV
• 3) Offer MEC to a full-time employee
(where the employer has still offered at a
sufficient percentage to avoid A Penalty
liability)
• The B Penalty is triggered by any such
full-time employee enrolling in subsidized
exchange coverage
• B Penalty liability is $3,000 annualized
($250/month) multiplied by each such fulltime employee who enrolls in subsidized
exchange coverage
• Note that although the B Penalty amount is
higher ($3,000 vs. $2,000), the multiplier is
generally much lower
• The multiplier is only those full-time
employees not offered affordable/minimum
value coverage who enroll in subsidized
exchange coverage—not all full-time
employees
4
The ACA – Employer Mandate
Look-Back Measurement Method
The look-back measurement method provides an alternative to the monthly
measurement method. Under look-back, employers test whether an employee
averages 30 hours of service per week in a measuring period to lock in full-time or
part-time status for the associated stability period. Employers can also place new
variable hour, seasonal, and part-time employees in an initial measurement period
prior to reaching full-time status.
ONGOING EMPLOYEES
• Generally, if look-back measurement method is
used for one employee to determine full-time
status, it must be used for all employees
• Exception: Employer can choose separate
measurement methods for:
•
Hourly vs. salaried
•
Employees in different states
•
Union vs. non-union
•
Employees in different union groups
• Typical structure:
•
Measurement period: 10/15 – 10/14
•
Administrative period: 10/15 – 12/31
•
Stability period: 1/1 – 12/31
Note: 90-day administrative period limit prohibits
measurement period running from 10/1.
NEW HIRES
NEW HIRES CONT’D
• New Full-Time Employee: An employee who
is reasonably expected at the employee’s
start date to be a full-time employee (i.e.,
average 30 hours of service per week)—and
is not a seasonal employee
• New full-time employees must be offered coverage
by the first day of the fourth full calendar month of
employment to avoid potential penalties
• New Variable Hour Employee: The employer
cannot reasonably determine whether the
employee is expected to average at least 30
hours of service per week during the initial
measurement period
• New Seasonal Employee: An employee who
is hired into a position for which the
customary annual employment is six months
or less, and the period begins each calendar
year in approximately the same part of the
year
• New Part-Time Employee: An employee who
is reasonably expected to average less than
30 hours of service per week during the
initial measurement period
• New variable hour, seasonal, and part-time
employees may be placed in an initial
measurement period before being treated as fulltime
•
Combined duration of initial measurement period and
initial administrative period cannot exceed 13 months
(plus a partial month for mid-month hires)
• Typical structure for new variable/seasonal/parttime employee:
•
Hired on March 15, 2015
•
Initial administrative period: 3/15/15 – 3/31/15 (frontend of split administrative period)
•
Initial measurement period: 4/1/15 – 3/31/16
•
Initial administrative period: 4/1/15 – 4/30/16 (backend of split administrative period)
•
Initial stability period: 5/1/16 – 4/30/16
Note: Special rule permits 11-month initial measurement
period, which would allow a two-month back-end initial
administrative period.
5
The ACA – Employer Mandate
50-99 FTE Transition Relief
Transition relief provides these mid-sized employers an
exemption from the §4980H pay or play penalties in
2015 if they meet certain requirements. Note that the
§6055/§6056 reporting requirements still apply!
• Limited Workforce Size: The employer employs on average at least 50 full-time
employees (including full-time equivalents) but fewer than 100 full-time employees
(including full-time equivalents)
• Maintenance of Workforce and Aggregate Hours of Service: During the period from
2/9/14 – 12/31/14, the employer did not reduce the size of its workforce or the overall
hours of service of its employees to meet the limited workforce size requirement
above. Reductions for a bona fide business reason are permitted.
• Maintenance of Previously Offered Health Coverage: During the period from 2/9/14 –
12/31/14 (longer for non-calendar year plans), the employer does not eliminate or
materially reduce the health coverage offered as of 2/9/14. Employer qualifies if:
• (i) The employer continues to offer eligible employees an employer contribution for
employee-only coverage that either (a) is at least 95% of the 2/9/14 contribution (i.e., can’t
reduce dollar amount of contribution by more than 5%), or b) is at least the same
percentage of 2/9/14 contribution;
• (ii) If the plan changes, the coverage provides minimum value after the change;
• (iii) The employer does not narrow or reduce the class(es) of employees or dependents
eligible for coverage as of 2/9/14
• Certification of Eligibility for Transition Relief: The employer must certify on the §6056
reporting (via the Form 1094-C at the beginning of 2016) that it meets all of the
requirements above to qualify for the mid-sized employer transition relief.
6
The ACA – 6055/6056 Reporting
Background
The ACA added two new tax code sections: §6055 & §6056
§6055: Requires providers of health coverage to report
to the IRS and covered individuals that the persons were covered
by “minimum essential coverage.”
• This will demonstrate that each person has satisfied their
individual mandate, and therefore will not be subject to the tax
penalty.
§6056: Applies to “applicable large employers”—or “ALEs”—
subject to the employer mandate pay or play rules—generally
employers with at least 50 full-time employees, including full-time
equivalent employees.
• This will be used to determine whether the employer is subject
to any pay or play penalties under §4980H.
• It will also be used to determine whether the individual is
eligible for the premium tax credit on the Exchange.
7
The ACA – 6055/6056 Reporting
Which Employers need to Report?
Self-Insured Medical Plan
All employers with a self-insured medical plan must report.
• Employers under 50 full-time employees (plus full-time equivalents) will
be reporting only for §6055 (minimum essential coverage).
• Employers that are “applicable large employers” will report both for
§6055 (minimum essential coverage) and §6056 (employer mandate).
Insured Medical Plan
Only “applicable large employers’ – those with 50 or more full-time
employees (plus full-time equivalents) .
• FOR INSURED PLANS, THE INSURANCE CARRIER REPORTS FOR
§6055 (MINIMUM ESSENTIAL COVERAGE).
• However, the insurance carrier will not report for §6056 (employer
mandate)—that is always the employer’s responsibility.
8
Health Care Reform Reporting
Which Employers Need to Report?
Flow Chart
Is the medical plan fully insured?
NO
YES
ALE?
YES
N/A
ALE?
NO
§6055 & §6056 §6055 (MEC only)
Form 1094-C
Form 1094-B
Form 1095-C
Form 1095-B
Part III (MEC): Yes
N/A
YES
NO
§6056
NONE!
Form 1094-C
N/A
Form 1095-C
N/A
Part III (MEC): No
The ACA – 6055/6056 Reporting
What are the Forms?
• 1094-C – Transmittal Form
• Think of this as the cover sheet for the Forms 1095-C.
• Each member company within the controlled group must file a
separate Form 1094-C.
• Must be one “Authoritative Transmittal,” even if multiple
Forms 1094-C filed.
•
This will include aggregate information for all full-time employees of the
entire controlled group.
Information Reported
 Name, contact information, and EIN of the employer.
 Whether any streamlined reporting or transitional relief
applies:


e.g., 50-99 full-time employee delayed effective date to 2016 plan year.
e.g., Non-calendar year plan delayed effective date until 2015 plan year
begins.
 Whether the employer offered MEC to at least 70% of full-time
employees for each month in 2015 (95% for 2016 plan year).
 Total number of employees and full-time employees in each
month.
10
The ACA – 6055/6056 Reporting
What are the Forms?
• 1095-C – Employer Offer Details and Coverage Form
• This form will be completed for every full-time employee
•
Self-insured plans will also need to report all individuals covered
Instructions are clear that employer can file only one 1095-C
for each employee in the employer’s controlled group
•
•
Employees who work for more than one division of a company will have
only one combined 1095-C reported for that work—even though each
division files a separate 1094-C
Two main topics being reported:
•
•
•
1) §6055: Individuals covered by MEC for individual mandate compliance
–
Self-insured plans only – Employers with fully insured plans leave Part
III blank.
–
For insured plans, the insurance carrier uses the Form 1095-B to report
MEC.
–
Requires Social Security Number for all covered individuals
2) §6056: Employer mandate pay or play compliance for §4980H penalties
–
All ALEs must report on this – both self-insured and fully insured
–
Requires detail as to plan’s offer of coverage to all full-time employees
14
The ACA – 6055/6056 Reporting
What are the Forms?
• 1095-C – Employer Offer Details and Coverage Form
Information Reported
 Employee name, address, and Social Security Number
 Employer name, address, contact phone number, EIN
 Offer of coverage details for each month of coverage:
 Was the employee offered coverage for each month?
 Was the offer affordable and did it provide minimum value?
 Did the offer include an offer of coverage for dependents?
 Employee share of the monthly employee-only premium for
the lowest cost plan option that provides minimum value
 What affordability or other §4980H safe harbor applies:




Form W-2 affordability safe harbor
Federal poverty line affordability safe harbor
Rate of pay affordability safe harbor
Non-calendar year transition relief applies for any month
15
The ACA – 6055/6056 Reporting
What are the Forms?
• 1095-C – Employer Offer Details and Coverage Form
Information Reported – SELF-INSURED PLANS ONLY
Self-insured plans only will include MEC coverage
information in Part III of the Form 1095-C:
 Names of all covered individuals
 SSNs of all covered individuals
 Must make “reasonable efforts” to obtain the SSN for all covered
individuals
 Requires three attempts to solicit the SSN:
1) Initial solicitation at the time the relationship is established
2) If not received, second solicitation by December 31 of that year (by
January 31 of the following year if the relationship begins in December)
3) If not received, third solicitation by December 31 of the following year
 Enter date of birth for any covered individuals who don’t provide the
SSN
 Months of coverage (not just offered coverage, but actually
enrolled) for all covered individuals in the plan
16
The ACA – 6055/6056 Reporting
What are the Due Dates?
Form 1095-C: To Employees
Must be furnished by January 31 of the following year
• February 1, 2016 first due date because 1/31/16 is a Sunday
Forms 1094-C and 1095-C to the IRS
Due date depends on whether the employer files
electronically
• Paper: Must be furnished by February 28 of the following
year
• February 29, 2016 first due date because 2/28/16 is a Sunday
• Electronic: Must be furnished by March 31 of the following
year
• Employers that file 250 or more returns must file with the IRS
electronically
18
The ACA – 6055/6056 Reporting
What are the Penalties?
Same Penalties as Apply for Forms W-2
General penalty is $100 for each incorrect return
• Total fine not to exceed $1,500,000
• Penalty reduced to $30 if the corrected return is filed within 30
days after the required filing date—total fine max reduced to
$250,000
• Penalty reduced to $60 if corrected by August 1 of the year in
which the filing due—total fine max reduced to $500,000
Special Good Faith Efforts Rule for 2016
For the Forms 1094-C and 1095-C filed at the beginning of 2016,
a “good faith efforts” standard applies
• The IRS will not impose the penalties described above if the
employer can show that it has made “good faith efforts” to
comply with the information reporting requirements
• Applies to incorrect or incomplete information (including SSNs)
19
The ACA – Final 90-Day Waiting
Period Regulations
Effective as of plan years beginning on or after 1/1/14,
group health plans are prohibited from applying a
waiting period that exceeds 90 calendar days.
• Waiting Period Defined: The period that must pass before coverage for
an individual who is otherwise eligible to enroll under the terms of the
plan can become effective.
• Means that the waiting period applies only after the plan’s substantive
eligibility condition is satisfied.
• Permitted Eligibility Conditions Prior to Waiting Period:
• (i) Variable hour employees: The plan may impose an initial waiting period of
up to one year as the eligibility requirement, provided the coverage is effective
no later than 13 months from the employee’s start dates (plus a partial month
for mid-month hires)—aligns with pay or play rules
• (ii) Cumulative service requirements: The plan may first impose a cumulative
service requirement that does not exceed 1,200 hours as the substantive
eligibility condition, then a waiting period of up to 90-days once the employee
completes the requisite hours of service
• (iii) Bona fide orientation period: The plan may first impose a bona fide
orientation period of up to one month (not 30 days), then a waiting period of
up to 90-days once the employee completes the orientation period.
• Be careful with this! To comply with the pay or play rules, the waiting period
should not exceed 60 days plus the remainder of the month in which that 60-day
period ends. Otherwise, the employer will not always offer coverage by the first
day of the fourth full calendar month. Also beware of §125 nondiscrimination.
20
The ACA – Out-of-Pocket
Maximums
Effective as of plan years beginning on or after 1/1/14, nongrandfathered plans must impose an OOPM on essential health
benefits. For 2015, the ACA OOPM limit is $6,600 for self-only
coverage and $13,200 for other than self-only.
• The non-enforcement policy for separately-administered non-major
medical benefits (e.g., prescription drugs administered by a PBM) no
longer applies as of the first plan year beginning on or after 1/1/15
• Plans may divide the annual OOPM across multiple categories of
benefits rather than reconciling claims across multiple administrators,
provided the combined amount of the separate OOPMs does not
exceed the overall ACA limit
• For example, the plan could impose an employee-only OOPM on major
medical of $5,000, and an employee-only OOPM on prescription drugs
administered by a PBM of $1,600 (for a total of $6,600). This would avoid the
need for communicating between the plan’s different administrators.
• OOPM applies only to benefits that are EHB
• Remember that grandfathered plans, self-insured plans, and large group
insured plans are not required to cover EHB, but they are still prohibited from
imposing lifetime or annual dollar limits on EHB or an OOPM in excess of the
ACA limit
• Plans may use any state benchmark plan definition of EHB for these purposes
• Out-of-pocket costs for out-of-network or non-covered items or
services are not required to count toward the plan’s OOPM
21
The ACA – Reference-Based
Pricing
Reference-based pricing is an increasingly common plan design
mechanism to control benefit costs. It generally caps the amount of
plan benefits available for a certain item or service at a fixed dollar
amount. Participants who seek medical care from a provider that
charges more than the reference price will be responsible for paying
the excess out-of-pocket.
• Plans may treat providers that accept the reference price as the only innetwork providers (and therefore not count any amount in excess of
the reference price toward the OOPM) as long as the plan uses a
reasonable method to ensure that it offers adequate access to
quality providers.
• Five factors to assess reasonableness:
• Type of Service: Standards to ensure that the network is designed to enable
the plan to offer benefits for services from high-quality providers at reduced
costs
• Reasonable Access: Procedures to ensure that an adequate number of
providers that accept the reference price are available to participants
• Quality Standards: Procedures to ensure that an adequate number of
providers accepting the reference price meet reasonable quality standards
• Exceptions Process: Easily accessible exceptions process where access or
quality are concerns for providers accepting the reference price
• Disclosure: Automatic disclosures regarding the reference-based pricing
structure, services, and exceptions. List of providers upon request
22
The ACA – PCORI and
Transitional Reinsurance Fees
Patient-Centered Outcomes
Research Institute (PCORI) Fee
Transitional Reinsurance Program
(TRP) Fee
• Purpose is to “assist patients, clinicians,
purchasers, and policy-makers in making
informed health decisions by advancing
the quality and relevance of evidencebased medicine through the synthesis
and dissemination of comparative clinical
effectiveness research findings.”
• Purpose is to “provide payments to
health insurance issuers that cover
higher-risk populations and to more
evenly spread the financial risk borne
by issuers,” and “reduce the
uncertainty of insurance risk in the
individual market by partially offsetting
issuers' risk associated with high-cost
enrollees.”
• Fee applies to plan years ending after
October 1, 2012 and before October 1,
2019 (seven full plan years)
• Paid on IRS Form 720 by July 31 of the
year following the last day of the plan
year
• For plan years that end on or after
October 1, 2014, and before October 1,
2015 (including the 2014 plan year for
calendar-year plans), the fee is has
increased by eight cents per covered life
• For calendar-year plans, this means that
the fee will be $2.08 multiplied by the
average number of covered lives in the
plan for the 2014 plan year
• This 2014 amount is reported and paid no later
than July 31, 2015
• Fee applies to calendar years 2014 to
2016
• 2014 fee: $63.00 per covered life
• $52.50 initial, $10.50 subsequent
• 2015 fee: $44.00 per covered life
• $33 initial, $11 subsequent
• 2016 fee: $27.00 per covered life
• $21.60 initial, $5.40 subsequent
23
The ACA – HIPAA Health Plan
Identifier (HPID)
The purpose of the new HPID requirement is to have a uniform
identification method for standard HIPAA transactions (e.g., claims
processing). According to HHS, health care providers are
frustrated by the fact that identifiers for health plans currently differ
in length and format, causing processing errors. The new HPID is
intended to address these issues.
• Deadline was November 5, 2014 for large health plans to
obtain the HPID
• However, on Halloween CMS announced that it was
delaying enforcement of the HPID requirement “until further
notice”
• Delay is purportedly in response to recommendation from
the National Committee on Vital and Health Statistics
(NCVHS) that HHS take steps to “rectify” and “further clarify”
its final HPID regulations
• HHS says that it will take the time from the delay to “review the
NCVHS’s recommendation and consider any appropriate next
steps”
• For those plans that already completed the process, the
HPID will likely still be applicable when the rules take effect
24
The ACA – Skinny Plans Need to
Beef Up
For plan years ending on or after January 1, 2014 (which includes
the 2015 plan year for calendar-year plans), the IRS will no longer
consider skinny plans with significant limitations (or exclusions) on
in-patient hospitalization services or physician services to provide
minimum value.
• The ACA establishes that a plan provides minimum value if the
percentage of the total allowed costs of benefits provided under
the plan is no less than 60 percent
• One method to establish minimum value is to use the HHS
calculator
• The IRS notice states that employers will no longer be permitted to
rely on the HHS minimum value calculator to establish that a plan
excluding substantial coverage for in-patient hospitalization
services or physician services (or both) provides minimum value
• This means that these skinny plans will not avoid the potential for B
Penalty liability under the pay or play rules ($3,000/year/full-time
employee) because they do not provide minimum value
25
The ACA – Preventive Services
The ACA requires that non-grandfathered health plans provide
coverage for certain preventive services, and that any such innetwork preventive coverage not be subject to any cost-sharing
requirements (e.g., deductibles, copayments, coinsurance).
• The preventive items and services subject to the mandate are those set forth on:
• The United Sates Preventive Services Task Force (USPSTF) A and B
recommendations
• The Health Resources and Services Administration (HRSA) women preventive
services guidelines
• The HRSA guidelines for infants, children, and adolescents
• The Advisory Committee on Immunization Practices (ACIP) immunizations
recommended for routine use
• When a new preventive item or service is added to the USPSTF, HRSA, or ACIP
list of required coverage, the plan must cover the new item or service without
cost-sharing (in-network) for plan years that begin on or after the date that is one
year after the date the recommendation or guideline is issued
• For example, non-grandfathered plans must cover a new September 24, 2013
USPSTF recommendation regarding medications for risk reduction of primary breast
cancer for women who are at increased risk (e.g., tamoxifen or raloxifene) without
cost-sharing as of the first plan year beginning on or after September 24, 2014 (i.e.,
as of January 1, 2015 for a calendar-year plan)
26
The ACA – New Section 125 Cafeteria Plan
Permitted Election Change Events
The IRS recently issued guidance adding two new Section 125 midyear permitted election change events that allow employees to revoke
their election for health coverage under their employer’s plan. Both
new events are a result of changes under the ACA that create new
reasons why an employee would want to opt-out of an employer’s plan
prior to the next open enrollment period.
Event #1: Reduction in Hours
• Current Section 125 rules permit mid-year election changes upon experiencing a
change in status, including upon a change in employment status from full-time to parttime
• However, these rules require that the change in status affect eligibility for coverage under
the employer’s plan
• This new permitted election change event applies where an employee who was
expected to average 30 hours of service per week (i.e., full-time under the pay or play
rules) experiences a change in employment status that reduces the expectation to
fewer than 30 hours of service per week
• Key addition is that the employee may change his or her election to revoke the employer
coverage even if the reduction in hours does not result in the employee losing eligibility
under the employer's plan
• The employee’s revocation of employer-sponsored coverage must correspond to the
employee’s (and any related dependents whose coverage is being dropped)
enrollment in another plan that provides minimum essential coverage (e.g., coverage
through the exchange or a spouse’s employer-sponsored plan)
• Enrollment in the other plan must be no later than the first day of the second month
following the month the employee dropped coverage
• Employers may rely on the employee’s reasonable representation that the above
requirements are satisfied
27
The ACA – New Section 125 Cafeteria Plan
Permitted Election Change Events Cont’d
Event #2: Enrollment in Exchange Coverage
• Current Section 125 rules do not permit employees to revoke an
election for employer-sponsored group health plan coverage in order
to enroll in coverage on the exchange
• This new permitted election change event allows employees to drop
their employer health coverage, and instead enroll in coverage on the
exchange, in the following two circumstances:
• 1) An employee in a non-calendar year cafeteria plan can drop employer
coverage and enroll in exchange coverage without having a gap in coverage
between the end of the employer’s plan year and the beginning of the next
calendar year
• 2) An employee can also drop employer health plan coverage upon
experiencing a Special Enrollment Period (SEP) on the exchange (e.g.,
marriage, birth)
• In either case, the employee must intend to enroll in exchange
coverage as of the day immediately following the last day of coverage
under the employer-sponsored plan
• Employers may rely on the employee’s reasonable representation that the
above requirements are satisfied
The Section 125 cafeteria plan must be amended by the last
day of the plan year to add these new permitted election
change events. (Note that special 2014 rule permits
amendment to be adopted by last day of 2015 plan year.)
28
The ACA – Updated COBRA Notices
The DOL issued updated model COBRA general and
election notices to address exchange coverage options as
an alternative to COBRA.
• Individuals with COBRA rights can decline the offer of COBRA and
qualify for a special enrollment period (SEP) on the exchange that
lasts for 60 days after the employer-sponsored coverage ends
• Note that unlike COBRA, exchange enrollment will not be retroactive to
the date coverage is lost
• Means will need to elect COBRA to cover expenses retroactively
• However, individuals who elect COBRA will not have another SEP
on the exchange until they exhaust the COBRA maximum coverage
period (generally 18 months)
• Makes the decision between COBRA or exchange coverage more
important
• In most cases where the individual is subsidy-eligible, exchange will
probably offer cheaper coverage options
29
The ACA – Prohibited Individual Policy
Reimbursement Arrangements
At the end of 2014, the Departments issued yet another FAQ
strongly cautioning of the dire potential consequences for
employers that offer individual policy reimbursement
arrangements.
• Individual policy reimbursement arrangements are considered a group health plan that
violates ACA prohibition of annual or lifetime dollar limits on essential health benefits,
and the requirement to provide preventive care with no cost-sharing
• Results in a $100/day/employee excise tax under IRC §4980D
• That’s $36,500 in excise taxes per employee, per year!
• Pre-Tax: Departments again confirmed that pre-tax reimbursement arrangements will
never comply
• For example, a stand-alone HRA or old-fashioned §106 employer payment plan will never comply
because they are always considered a group health plan, and they cannot be integrated with the
individual policy coverage purchased by the employee.
• Post-Tax: Must meet DOL’s voluntary plan safe harbor to comply
• There must be an “unfettered right by the employee to receive the employer contributions in
cash.” Any payment structure should ensure that:
• Employee has an unrestricted right to receive the funds as cash
• Employee is not required to use the cash to purchase health coverage
• Employee has no health plan-related conditions on receiving the additional cash
• Employee is never required to substantiate the purchase of individual market coverage
30
The ACA – Exempt Expatriate Plans
The last-minute “CRomnibus” bill at the end of 2014 included
the “Expatriate Health Coverage Clarification Act.” This
replaces previous FAQ guidance that temporarily exempted
expatriate plans with a new permanent exemption.
• The main requirement for an expatriate plan to be exempt from much of the ACA
is that substantially all of the covered employees be “qualified expatriates”
• Qualified Expatriates in the U.S.:
• The individual’s skills, qualifications, job duties, or expertise is of a type that has
caused the employer to assign him to the U.S. for a specific temporary purpose or
assignment tied to employment, and
• The employer reasonably determines that the individual will require access to
health insurance in multiple countries, and is offered other multi-national benefits
on a periodic basis (e.g., tax equalization benefits, cross-border moving expenses,
compensation to enable the expatriate to return to his home country)
• Qualified Expatriates Outside of the U.S.:
• The individual is working outside of the U.S. for a period of at least 180 days in a
consecutive 12-month period that overlaps with the plan year.
• Expatriate health plans are minimum essential coverage that satisfy the
enrollee’s individual mandate
• Expatriate health plans are not exempt from the §6055/§6056 reporting
requirements (although the electronic distribution rules are looser) or the
Cadillac Tax
31
The ACA – Excepted Benefits
Excepted benefits are not subject to the HIPAA Portability
requirements (e.g., special enrollment rights) or the ACA market
reform requirements (which includes most of the provisions
applicable to employer-sponsored group health plans). Recent final
regulations made key changes.
Dental/Vision Benefits
• Fully Insured
Employee Assistance Plans (EAP)
1) The EAP does not provide significant
benefits in the nature of medical care
• Must be limited-scope (i.e., substantially all
benefits must be for treatment of the
mouth or eye)
• Takes into account the amount, scope,
and duration of the covered services
• Must be provided under a separate policy
of insurance (i.e., separate dental or vision
policy)
2) The EAP benefits are not coordinated with
another group health plan
• Self-Insured
• Must be limited-scope (i.e., substantially all
benefits must be for treatment of the
mouth or eye)
• Employees must have the right to elect
not to receive the dental or vision benefits
• No longer required to charge employees
an additional premium for the
dental/vision benefits
• More guidance to come
• EAP cannot be the gatekeeper for mental
health/substance use disorder benefits
under the major medical
• EAP eligibility cannot be dependent on
participation in the major medical
3) The EAP is free to the employee
• Cannot require that employee pay a share
of the premium for coverage
• Cannot require any cost-sharing for
covered services
32
The ACA – Farewell to HIPAA
Certificates of Creditable Coverage
As of December 31, 2014, health plans are no longer
required to provide a HIPAA certificate of creditable
coverage upon the loss of coverage. This is because the
ACA now prohibits all pre-existing condition exclusions.
• The purpose of the HIPAA certificate was to demonstrate that
individuals had maintained creditable coverage and therefore could
not be subject to any pre-existing condition exclusions
• The HIPAA certificate of creditable coverage is no longer relevant
in this phase of implementation, and therefore the Departments
have eliminated the requirement to provide the document
• It appears some carriers will continue to provide the HIPAA certificate
upon request
• Many carriers previously relied on the HIPAA certificate as
evidence of loss of coverage for purposes of demonstrating a midyear special enrollment event
• It’s not clear yet what other evidence carriers will use for this purpose
• Some examples might be the insurance ID card, records from medical
providers showing coverage, a written statement or call from the
previous plan/carrier verifying coverage
33
The ACA – Health FSA Gets Inflation
Increase
The ACA capped employee salary reductions to a health
FSA at $2,500 for plan years beginning in 2013. This limit
was indexed to cost-of-living adjustments tied to the CPI.
2015 represents the first increase in the contribution limit.
• For plan years beginning on or after January 1, 2015, there is a $50
increase in the contribution limit, up to $2,550
• The terms of the Section 125 cafeteria plan document govern whether
the plan offers the higher $2,550 contribution limit
• Plan Document Does Not Incorporate Adjustment:
Cafeteria plans that do not incorporation the inflation adjustment in the written
plan document terms will need an amendment to permit the higher $2,550
contribution level for the first plan year beginning on or after 1/1/15
• Plan Document Incorporates Adjustment:
Cafeteria plans that automatically incorporate the inflation adjustment in the
written plan document terms will need to offer the higher $2,550 contribution
level for the first plan year beginning on or after 1/1/15 (or amend the plan to
provide otherwise)
• Don’t forget that ACA prohibits employer contributions of more than
$500 to a health FSA
• Max contribution would therefore be $2,550 (employee salary contribution
reductions) + $500 (employer contribution, if offered) = $3,050 (combined)
34
The ACA – SBCs Refreshed for 2015
At the end of 2014, the Departments issued new SBC
proposed regulations to incorporate most of the FAQ
guidance we’ve received over the last few years. They also
issued an updated SBC template and uniform glossary.
• The new SBC has been streamlined from four double-sided pages to
two and a half pages
• The updated SBC now includes clearer descriptions of whether the plan
satisfies the individual mandate (i.e., is minimum essential coverage) and
provides minimum value (i.e., has at least a 60% actuarial value)
• It also includes a new coverage example highlighting the plan’s coverage and
patient responsibility for a simple foot fracture with an emergency room visit
(to add to the existing examples for having a baby and managing type 2
diabetes)
• Under the new proposed regulations, employers and insurance carriers
would be required to use the new SBC for the next open enrollment
period that begins on or after September 1, 2015
• It’s not clear yet whether the Departments’ current policy not to impose
penalties if the plan is working diligently and in good faith to provide the
required SBC content consistent with the rules will continue to apply to the
new SBCs distributed on or after September 1, 2015
35
The ACA – Another Landmark U.S.
Supreme Court Decision Looms…
In King v. Burwell, the U.S. Supreme Court will decide
whether IRS regulations authorizing premium tax credits for
coverage on the federal exchange (healthcare.gov) do not
properly implement the statutory authority from the ACA.
• Lower courts have split on whether the IRS approach is consistent
with the ACA
• By a literal reading, the ACA permits premium tax credits to flow only on
an exchange “established by the State.”
• Government argues that the provision was intended to apply to federallyfacilitated exchanges, too
• Among the seemingly infinite implications of the court’s decision
will be whether employers based only in states with federal
exchanges will be subject to the pay or play penalties
• Only employees who receive subsidized coverage on the exchange can
trigger those penalties—wouldn’t be possible in states without a state-run
exchange
• Currently only 14 states have established an exchange
• Decision is expected by June 2015
36
The ACA – Big Topics to Come…
While much of the ACA has now been implemented, there
are still a few big ticket items that should be on our radar.
We may see proposed regulations or other forms of
guidance relating to these topics in 2015.
• Nondiscrimination Rules for Insured Plans
• These requirements have been delayed until the Departments issue
regulations
• The Departments have promised that the effective date will not be until plans
following a specified period after the regulations are issued (e.g., first plan
year beginning six months after date regulations issued)
• All we know at this point is that the rules will be “similar to” the existing
nondiscrimination rules for self-insured eligibility and benefits under §105(h)
• Automatic Enrollment
• These requirements have been delayed until the DOL issues final regulations
• We may see the DOL issue proposed regulations this year
• Will apply only to employers with more than 200 full-time employees
• Cadillac Tax
• Does not take effect until 2018
• We may see legislative or regulatory activity surrounding these rules in 2015
• 40% nondeductible excise tax on high-cost health coverage
37
Wellness Programs in the News
The HIPAA/ACA issues for wellness programs are fairly wellestablished at this point based off 2013 final regulations. However,
the EEOC is attempting to shut down a common wellness program
design based on violations the ADA that are not well understood.
This has been very controversial.
EEOC v. Honeywell International Inc.
• EEOC has filed suit in federal court alleging that Honeywell’s wellness
program violates the ADA
• Honeywell’s program assesses a surcharge on employees and spouses who
fail to undergo biometric testing for blood pressure, HDL and total cholesterol,
non-fasting glucose, BMI, and waist circumference
• Also includes blood screening to determine whether the employee or spouse
smokes tobacco
• Generally a $500 surcharge for failure to complete the biometrics/blood draw,
a $1,000 tobacco surcharge, and a loss of up to $1,500 in HSA contributions
• ADA generally prohibits requiring employees to undergo medical
exams that are not job-related or consistent with business activity,
unless the medical exam is “voluntary”
• EEOC does not interpret meeting the HIPAA/ACA rules as necessarily making
the wellness program “voluntary” under the ADA
• However, it’s still unclear what constitutes “voluntary” under the ADA
• EEOC also arguing that GINA prohibits obtaining medical information of an
employee’s spouse
38
Bay Area Commuter Benefits Program
As of September 30, 2014, employers in the SF Bay Area
with 50 or more full-time employees must offer transit
benefits to all employees who work at least 20 hours per
week in the SF Bay Area.
• Offering the standard pre-tax employee contribution option under §132(f)
satisfies this requirement
• Other options include an employer-provided transit subsidy of at least $75/month,
employer-provided transit (e.g., Google or Facebook busses), or approved
alternatives
• Reporting: Employers must designate a Commuter Benefits Coordinator to
report annually on the program option offered to employees
• Recordkeeping: Employers must maintain and retain records, files, and
documents to establish compliance with the program for at least three years
• These documents must be available to the Bay Area Air Quality Management
District upon request
• Notice: Employers must notify employees of the program by “appropriate
means”
• Must be included as part of benefits package to new hires and provided annually
• Enforcement: Penalties generally range from $1,000/day to $10,000/day
• It appears that the Air District will work with employer before levying penalties
39
California Paid Sick Leave
AB 1522 imposes the first statewide paid sick day
requirements for employees. Beginning July 1, 2015,
employees working at least 30 days in a year will need to
start accruing paid sick time.
• Accrual: Must accrue at least one hour of paid sick time for every
30 hours worked (or 3 days/24 hours provided up-front annually)
• Access: Must have access to the paid sick days as of the 90th day
of employment
• Use: May cap employees’ use of paid sick days at 24 hours or
three days per year
• Carryover: Must carry over unused sick days up to 48 hours or six
days (unless 3 days/24 hours provided up-front annually)
• Notice: California Labor Commissioner has provided model
template for mandatory notice to new non-exempt hires on or after
January 1, 2015 (exemptions for public entities and union EEs)
• Poster: California Labor Commissioner has provided model
template for mandatory poster to be displayed in a “conspicuous
place” as of January 1, 2015
• Recordkeeping: Must keep three years of records for all the above
40
San Francisco Health Care Security
Ordinance Updates
The HCSO generally requires employers with 20 or more
employees (50 or more for non-profits) to make a minimum
level of health care expenditures for employees performing
at least eight hours of work per work in San Francisco.
Employer Size
2014 Rate
2015 Rate
Large:
100+ Employees
$2.44/hour
payable
$2.48/hour
payable
Medium:
Business w/ 20-99
Nonprofit w/ 50-99
$1.63/hour payable
$1.65/hour payable
Small:
Business w/ 0-19
Nonprofit w/ 0-49
Exempt
Exempt
• Recent HCSO changes also require that all employer health care
expenditures be irrevocable (e.g., not HRA contributions) with a
three-year phase in process:
• 2015: At least 60% of the required health care expenditures are irrevocable
• 2016: At least 80% of the required health care expenditures are irrevocable
• 2017: 100% of the required health care expenditures are irrevocable
41
2014 Year in Review
ABD Office Hours Webinar Series
Content Disclaimer: The intent of this analysis is to provide the recipient with general
information regarding the status of, and/or potential concerns related to, the recipient’s
current employee benefits issues. This analysis does not necessarily fully address the
recipient’s specific issue, and it should not be construed as, nor is it intended to provide,
legal advice. Furthermore, this message does not establish an attorney-client
relationship. Questions regarding specific issues should be addressed to the person(s)
who provide legal advice to the recipient regarding employee benefits issues (e.g., the
recipient’s general counsel or an attorney hired by the recipient who specializes in
employee benefits law).
ABD makes no warranty, express or implied, that adherence to, or compliance with any
recommendations, best practices, checklists, or guidelines will result in a particular
outcome. ABD does not warrant that the information in this document constitutes a
complete list of each and every item or procedure related to the topics or issues
referenced herein. Federal, state or local laws, regulations, standards or codes may
change from time to time and the reader should always refer to the most current
requirements and consult with their legal and HR advisors for review of any proposed
policies or programs.
2014 YEAR IN REVIEW
Thank You!
Brian Gilmore
Lead Benefits Counsel
ABD Insurance & Financial Services, Inc.
BrianG@theabdteam.com
For more information, please contact me or your ABD Team Member
2014 YEAR IN REVIEW