The House of Repersentives has just passed the American Health Care Act (AHCA), new legislation to begin the repeal process of the ACA. Check out this great article from HR Morning and take a look how this new legislation will affect HR by Jared Bilski.
Virtually every major news outlet is covering the passage of the American Health Care Act (AHCA) by the House. But amidst all the coverage, it’s tough to find an answer to a question that’s near and dear to HR: What does this GOP victory mean for employers?
The AHCA bill, which passed in the House with 217 votes, is extremely close to the original version of the legislation that was introduced in March but pulled just before a vote could take place due to lack of support.
While the so-called “repeal-and-replace” bill would kill many of the ACA’s taxes (except the Cadillac Tax), much of the popular health-related provisions of Obamacare would remain intact.
However, the new bill does allow states to waive certain key requirements under the ACA. One of the major amendments centers on pre-existing conditions.
Under the ACA, health plans can’t base premium rates on health status factors, or pre-existing conditions; premiums had to be based on coverage tier, community rating, age (as long as the rates don’t vary by more than 3 to 1) and tobacco use. In other words, plans can’t charge participants with pre-existing conditions more than “healthy” individuals are charged.
Under the AHCA, individual states can apply for waivers to be exempt from this ACA provision and base premiums on health status factors.
Bottom line: Under this version of the AHCA, insurers would still be required to cover individuals with pre-existing conditions — but they’d be allowed to charge astronomical amounts for coverage.
To compensate for the individuals with prior health conditions who may not be able to afford insurance, applying states would have to establish high-risk pools that are federally funded. Critics argue these pools won’t be able to offer nearly as much coverage for individuals as the ACA did.
Under the AHCA, states could also apply for a waiver to receive an exemption — dubbed the “MacArthur amendment” — to ACA requirement on essential health benefits and create their own definition of these benefits.
So what does all this mean for HR pros? HR Morning spoke to healthcare reform implementation and employee benefits attorney Garrett Fenton of Miller & Chevalier and asked him what’s next for the AHCA as well as what employers should do in response. Here’s a sampling of the Q&A:
HR Morning: What’s next for the AHCA?
Garrett Fenton: The Senate, which largely has stayed out of the ACA repeal and replacement process until now, will begin its process to develop, amend, and ultimately vote on a bill … many Republican Senators have publicly voiced concerns, and even opposition, to the version of the AHCA that passed the House.
One major bone of contention – even within the GOP – was that the House passed the bill without waiting for a forthcoming updated report from the Congressional Budget Office. That report will take into account the latest amendments to the AHCA, and provide estimates of the legislation’s cost to the federal government and impact on the number of uninsured individuals …
… assuming the Senate does not simply rubber stamp the House bill, but rather passes its own ACA repeal and replacement legislation, either the Senate’s bill will need to go back to the House for another vote, or the House and Senate will “conference,” reconcile the differences between their respective bills, and produce a compromise piece of legislation that both chambers will then vote on.
Ultimately the same bill will need to pass both the House and Senate before going to the President for his signature. In light of the House’s struggles to advance the AHCA, and the razor-thin margin by which it ultimately passed, it appears that we’re still in for a long road ahead.
HR Morning: What should employers be doing now?
Garrett Fenton: At this point, employers would be well-advised to stay the course on ACA compliance. The House’s passage of the AHCA is merely the first step in the legislative process, with the bill likely to undergo significant changes and an uncertain future in the Senate. The last few months have taught us nothing if not the impossibility of predicting precisely how and when the Republicans’ ACA repeal and replacement effort ultimately will unfold. To be sure, the AHCA would have a potentially significant impact on employer-sponsored coverage.
However, any employer efforts to implement large-scale changes in reliance on the AHCA certainly would be premature at this stage. The ACA remains the law of the land for the time being, and there’s still a long way to go toward even a partial repeal and replacement. Employers certainly should stay on top of the legislative developments, and in the meantime, be on the lookout for possible changes to the current guidance at the regulatory level.
HR Morning: Specifically, how should employers proceed with their ACA compliance obligations in light of the House passage of the AHCA?Garrett Fenton: Again, employers should stay the course for the time being, and not assume that the AHCA’s provisions impacting employer-sponsored plans ultimately will be enacted. The ACA remains the law of the land for now. However, a number of ACA-related changes are likely to be made at the regulatory and “sub-regulatory” level – regardless of the legislative repeal and replacement efforts – thereby underscoring the importance of staying on top of the ever-changing guidance and landscape under the Trump administration.
Fenton also touched on how the “MacArthur amendment” and the direct impact it could have on employers by stating it:
“… could impact large group and self-funded employer plans, which separately are prohibited from imposing annual and lifetime dollar limits on those same essential health benefits. So in theory, for example, a large group or self-funded employer plan might be able to use a “waiver” state’s definition of essential health benefits – which could be significantly more limited than the current federal definition, and exclude items like maternity, mental health, or substance abuse coverage – for purposes of the annual and lifetime limit rules. Employers thus effectively could be permitted to begin imposing dollar caps on certain benefits that currently would be prohibited under the ACA.”
See the original article Here.
Bilski J. (2017 May 5). Health reform expert: here’s what HR needs to know about GOP repeal bill passing [Web blog post]. Retrieved from address http://www.hrmorning.com/health-reform-expert-heres-what-hr-needs-to-know-about-gop-repeal-bill-passing/
Make sure you are aware of all the requirements for Form 5500 reporting. Take a look at this great article from our partner, United Benefit Advisors (UBA) about how to properly file Form 5500 by Anne B. Vandeveer.
Most companies are fully aware of Form 5500 reporting requirements related to their 401(k) plans, but are less familiar with the Form 5500 reporting requirements for their health and welfare benefit plans.
Requirements: Most employer-sponsored health and welfare benefit plans, including, but not limited to, group health, dental, vision, life insurance, disability insurance, voluntary worksite benefits (typically, but not always), and health flexible spending account (FSA) plans are subject to the reporting requirements under the Employee Retirement Income Security Act (ERISA) of 1974.
A Form 5500 is due to be filed with the Department of Labor (DOL) within seven months after the end of the plan year.
Exemptions: While there are a few common exceptions to filing for smaller plans and those sponsored by certain governmental and church plans, most employers who are filing Form 5500 for their retirement plans will also have Form 5500 reporting requirements for their health and welfare plans. Certain funding types (VEBAs, Trusts) may not be exempt based on size, however.
Normal Annual Filing: Once Schedule A information is available on the plan, from the carrier or third-party administrator (TPA), this information, along with some general participant enrollment information, is used to complete the filing. So long as company ownership, participation, and plans offered haven’t changed from year to year, it’s a fairly simply process.
It is worth reviewing the filing history of all plans subject to ERISA for all prior years to rule out any delinquencies in advance of filing for the current year. If all is in order, the filing deadline is the last day of the seventh month after the end of the plan year. Extensions, of up to 2.5 months, are available if the company applies prior to the initial deadline by filing Form 5558 with the Internal Revenue Service (IRS).
Failure to File and Remedy: If a Form 5500 filing is determined to be delinquent, the company is potentially subject to penalties imposed by the DOL (up to $1,100 per day) if the DOL discovers this before the return is filed electronically. The company can voluntarily “enter” the DOL’s delinquent filer amnesty program. The program is formally named the Delinquent Filer Voluntary Compliance Program (DFVCP) and entering it will eliminate the risk of any future penalty associated with the delinquent Form 5500 returns. However, the DOL still imposes a lower, capped dollar penalty, which is assessed on a “per plan” basis.
The first step for a DFVCP filing is in defining the applicable plans and plan years along with the due date for each plan, historically. Correction is generally suggested as far back as the delinquency goes, or minimally as far back as documentation can be provided. That said, many companies choose to internally review all options and risks.
Preparation of Filings: The DOL mandates electronic filings under its EFAST2 system and it can be challenging for employers to prepare their own Form 5500 filings. Defining whether, and which of, your plans are subject to the ERISA reporting requirements is the best first step of the ERISA reporting process.
Because the forms resemble IRS tax forms, companies often assume that an accountant is needed for preparation. This is not necessarily the case and it is more common to rely on a benefits consultant with domain expertise. These consultants routinely determine filing requirements, have experience dealing directly with the DOL (not IRS), and transmit hundreds of filings annually.
That said, it is important to note that, regardless of who prepares the filing, it remains the sole responsibility of the employer, or Plan Sponsor, when it comes to Form 5500 transmissions or failures to file.
Vandeveer A. (2017 April 18). Discovery for health and welfare benefit plans: required ERISA reporting-form 5500[Web blog post]. Retrieved from address http://blog.ubabenefits.com/discovery-for-health-and-welfare-benefit-plans-required-erisa-reporting-form-5500
Find out how HR professionals really felt about the fall of the AHCA in this great article from HR Morning by Tim Gould.
Everybody knows that the GOP’s attempt to repeal and replace Obamacare came to a rather ignominious end. But how did the HR community feel about that outcome?
HR powerhouse Mercer addressed that question in a recent webcast, and the results were eye-opening.
Here are some stats from the webcast, which asked a couple key questions of 509 benefits pros.
On how they felt about the American Health Care Act being pulled:
So (utilizing our super-sharp math skills here) considerably more than half of the participants were not in favor of the AHCA, while just slightly more than one in five were disappointed it was shot down. Looks like Obamacare isn’t as deeply disliked as we’ve been led to believe — at least with benefits pros.
Mercer also asked participants to rate priorities for improving current healthcare law — using 5 as the top rating and 1 as the lowest. Those results:
Perspective? As Beth Umland wrote on the Mercer blog, “Policymakers should view this health reform ‘reboot’ as an opportunity to partner with American businesses to drive higher quality, lower costs, and better outcomes for all Americans.”
In case you’ve been hiding in a cave somewhere for the past several months, here’s a quick recap of the fate of the American Health Care Act.
Why did the AHCA fail, despite Republicans controlling the House, Senate and White House?
The answer starts with the fact that the GOP didn’t have the 60 seats in the Senate to avoid a filibuster by the Democrats. In other words, despite being the majority party, it didn’t have enough votes to pass a broad ACA repeal bill outright.
As a result, Senate Republicans had to use a process known as reconciliation to attempt to reshape the ACA. Reconciliation is a process that allows for the passage of budget bills with 51 votes instead of 60. So the GOP could vote on budgetary pieces of the health law, without giving the Democrats a chance to filibuster.
The problem for Republicans was reconciliation severely limited the extent to which they could reshape the law — and it’s a big reason the why American Health Care Act looked, at least to some, like “Obamacare Lite.”
Ultimately, what caused Trump and Ryan to decide to pull the bill before the House had a chance to vote on it was that so many House Republicans voiced displeasure with the bill and said they wouldn’t vote for it.
Specifically, here are some of what conservatives didn’t like about the American Health Care Act:
Gould T. (2017 April 14). Hr pros were relieved when obamacare replacement bill got pulled Ob[Web blog post]. Retrieved from address http://www.hrmorning.com/hr-pros-were-relieved-when-obamacare-replacement-bill-got-pulled-off-the-table/
Great article from our partner, United Benefit Advisors (UBA) by Michael Weiskirch.
One might describe the series of events leading to the death of the American Health Care Act (Congress’s bill to repeal and replace the Affordable Care Act) as something like a ballistic missile exploding at launch. The Patient Protection and Affordable Care Act (ACA) repeal debate began nearly a decade ago with former President Barack Obama’s first day in office and reemerged as a serious topic during the 2016 presidential election. Even following the retraction of the House bill, repeal of the ACA remains a possibility as the politicians consider alternatives to the recent bill. The possibility of pending legislation has caused some clients to question the need to complete their obligation for ACA reporting on a timely basis this year. The legislative process has produced a great deal of uncertainty which is one thing employers do not like, especially during the busy year end.
While the “repeal and replace” activity is continuing, it is imperative that employers and their brokers put their noses to the grindstone to fulfill all required reporting requirements. To accomplish this, employers will need brokers that can effectively guide them through this tumultuous season. We recommend that employers ask their brokers about their strategies for
Employers should also inquire about any additional support that the broker provides. They should provide many of the services that we at Health Cost Manager provide to our clients: They should apprise their clients of the latest legislative updates through regular email communication and informational webinars. Brokers should also bring in experts in the field that have interacted with key stakeholders in Washington. And most important, they should remain available during this uncertain period to answer any questions or concerns from clients.
We know employers would prefer not to have to comply with these reporting obligations – many have directly told us so. We understand this requires additional work on their part to gather information for the reporting and increased compliance responsibility. Knowing how stressful the reporting season can be for employers, brokers should go out of their way to help their clients feel confident that they can steer through the reporting process smoothly. The broker’s role should be to take as much of the burden off the employer’s shoulders as possible to enable them to reach compliance in the most expedient manner possible. Sometimes this involves stepping in to solve data or other technical issues, or answering a compliance-related question that helps the client make important decisions. It’s all part of helping employers navigate through the ACA’s strong headwinds during these uncertain times.
Audit-proof your company with UBA’s latest white paper: Don’t Roll the Dice on Department of Labor Audits. This free resource offers valuable information about how to prepare for an audit, the best way to acclimate staff to the audit process, and the most important elements of complying with requests.
Weiskirch M. (2017 April 13). An employer’s guide to navigating the ACA’s strong headwinds [Web blog post]. Retrieved from address http://blog.ubabenefits.com/an-employers-guide-to-navigating-the-acas-strong-headwinds
With the passing of the AHCA, the ACA is now the norm for employers’ healthcare. Find out what employers need to know about ACA and how it will affect them in the future in this interesting article from Think Hr by Laura Kerekes.
The Trump administration’s effort to repeal and replace the Affordable Care Act (ACA) through legislation failed last month when House Republicans were unable to push their proposal forward. The proposed bill, called the American Health Care Act, would have eliminated most of the ACA’s taxes and fees on health plans along with removing penalties on large employers that did not offer coverage to their full-time workers. It is unclear whether Congressional leaders will make another attempt to legislate major changes in the ACA this year. Meanwhile, federal agencies under President Trump’s direction may begin to take steps to revise regulations that do not require changes in law.
The situation certainly has caused some confusion among employers, so it is important to note that, as of now, nothing has changed. The ACA’s existing rules for group health plans, required notices, and employer reporting duties remain in effect. Applicable large employers (ALEs), generally entities that employed an average of 50 or more full-time-equivalent employees in the prior year, are still subject to the ACA’s employer mandate or so-called “play or pay” rules.
As a reminder, here is a brief summary of the key ACA provisions that require action by employers:
Health Plan Fees:
Employer Mandate (“Play or Pay”): ALEs only. To avoid the risk of penalties, determine whether each employee meets the ACA definition of full-time employee and, if so, offer affordable minimum value coverage on a timely basis.
In summary, employers are advised to continue to comply with all ACA requirements based on the current rules.
On a related note, the ACA imposes several requirements on group health plans, whether provided through insurance or self-funded by the employer. Insured plans also are subject to the insurance laws of the state in which the policy is issued. In many cases, provisions matching the ACA are now embedded in state insurance laws. So future changes in the ACA, if any, may not apply to group medical policies automatically. Depending on the state and the type of change, additional legislation at the state level may be needed to enact the change.
Kerekes L. (2017 April 14). Employers and the ACA – it’s status quo for now [Web blog post]. Retrieved from address https://www.thinkhr.com/blog/hr/employers-and-the-aca-its-status-quo-for-now/
Do you receive your healthcare through an employer? Then take a look at this article from Benefits Pro about how the passing of the AHCA will affect employees who get their healthcare through an employer by Marlene Y. Satter.
It’s not just individuals without employer health coverage who could lose big under the newly revised version of the Republicans’ American Health Care Act.
People who get health coverage from their jobs could be left swinging in the wind, too—in fact, as many as half of all such employees could be affected.
That’s according to an Alternet report that says an amendment added to the bill currently being considered by the House of Representatives would allow insurers in states that get waivers from regulations put in place by the Affordable Care Act to deny coverage for 10 types of health services—including maternity care, prescription drugs, mental health treatment and hospitalization.
An MSNBC report points out that “because the Republican-led House is scrambling to pass a bill without scrutiny or serious consideration,” the last-minute amendment’s full effects aren’t even known, since “[t]his is precisely the sort of detail that would’ve come to light much sooner if Republicans were following the American legislative process. In fact, this may not even be the intended goal of the GOP policy.”
While the ACA prohibits employer-based plans from imposing annual limits on coverage and bare lifetime caps on 10 essential benefits, the Obama administration did loosen those restrictions back in 2011, saying that employers could instead choose to follow another state’s required benefits.
What the new Republican take on the AHCA does is push that further—a lot further—by allowing large employers to pick the benefit requirements for any state. That would let them limit coverage on such costly types of care as mental health and substance abuse services.
In a Wall Street Journal report, Andy Slavitt, former acting administrator of the Centers for Medicare and Medicaid Services under President Barack Obama, is quoted saying, “It’s huge. They’re creating a backdoor way to gut employer plans, too.”
The changes to employer-based plans would hit anyone not insured by Medicare or by small-business plans, because the bill includes cuts to Medicaid and changes to the individual market as well.
A report from the Brookings Institution points out that “One of the core functions of health insurance is to protect people against financial ruin and ensure that they get the care they need if they get seriously ill.” The ACA pushed insurance plans to meet that standard, it says, by requiring them to “limit enrollees’ annual out-of-pocket spending and [bar] plans from placing annual or lifetime limits on the total amount of care they would cover.”
However, while those protections against catastrophic costs “apply to almost all private insurance plans, including the plans held by the roughly 156 million people who get their coverage through an employer,” the Brookings report says, the amendment to the Republican bill “could jeopardize those protections—not just for people with individual market plans, but also for those with employer coverage.”
How? By modifying “the ‘essential health benefit’ standards that govern what types of services must be covered by individual and small group market insurance plans. The intent of the amendment is reportedly to eliminate the federal benefit standards that currently exist and instead allow each state to define its own list of essential health benefits.”
And then, with employers allowed to pick and choose which state’s regulations they’d like to follow, a loophole the size of the Capitol building would not only allow “states will set essential health benefit standards that are considerably laxer than those that are in place under the ACA,” says the report, but “large employers may have the option to pick which state’s essential health benefits requirements they wish to abide by for the purposes of these provisions.”
The result? “[T]his would likely have the effect of virtually eliminating the catastrophic protections with respect to large employers since employers could choose to pick whichever state set the laxest standards. The same outcome would be likely to occur for all private insurance policies,” the report continues, “if insurers were permitted to sell plans across state lines, as the Administration has suggested enacting through separate legislation.”
While the actual effect of the amendment is unclear, the Brookings report concludes, “there is strong reason to believe that, in practice, the definition of essential health benefits that applied to the catastrophic protections would be far weaker under the House proposal than under current law, seriously undermining these protections. These potential adverse effects on people with employer coverage, in addition to the potentially damaging effects of such changes on the individual health insurance market, are thus an important reason that policymakers should be wary of the House proposal with respect to essential health benefits.”
Satter M. (2017 May 4). Workers might see employer health coverage disappear under new GOP AHCA [Web blog post]. Retrieved from address http://www.benefitspro.com/2017/05/04/workers-might-see-employer-health-coverage-disappe?page_all=1
The House of Representatives last week passed the American Health Care Act (AHCA) bill to begin the process of repealing the ACA. Find out what this new legislation means for employers in the great article from Employee Benefits Adviser by Daniel N. Kuperstein.
The extremely emotional journey to repeal (more appropriately, to “change”) the Affordable Care Act reached a significant milestone this week: The Republican-led House of Representatives passed an updated version of the American Health Care Act. While more than 75% of the provisions of the ACA remain intact, the AHCA gutted or delayed several of the ACA’s taxes on employers, insurers and individuals.
So what does this mean for employers?
First off, it’s important to remember that this new bill is not law just yet. The House version of the bill now heads to the Senate, where there’s no guarantee that it will pass in its current form; the margin for victory is much slimmer there. Only three “no” votes by Senate Republicans could defeat the bill, and both moderate and conservative Republican lawmakers in the Senate have expressed concerns about the bill. In other words, employers don’t have to do anything just yet, but it’s still beneficial to understand the major changes that could be coming down the pike.
As employers know from working over the last seven years to implement provisions of the ACA, there will be a million tiny details to work through if the AHCA becomes law.
But for now, we see three major aspects that demand employers’ attention.
There will be more emphasis on health savings accounts
Under the AHCA, health savings accounts will likely become far more popular — and more useful. The HSA contribution limits for employers and individuals are essentially doubled. Additionally, HSAs will be able to reimburse over-the-counter medications and allow spouses to make catch-up contributions to the same HSA. Of course, with this added flexibility comes increased responsibility — there will be a greater need for employees to understand their insurance.
There will be more flexibility in choosing a benchmark plan
For larger employers not in the small group market, the AHCA creates an opportunity to choose a benchmark plan that offers a significantly lower level of benefits to employees.
Currently, the ACA provides that employer-sponsored self-insured health plans, fully-insured large group health plans, and grandfathered health plans are not required to offer EHBs. However, these plans are prohibited from imposing annual and lifetime dollar limits on any EHBs they do offer. For purposes of determining which benefits are EHBs subject to the annual and lifetime dollar limits, the ACA currently permits employers sponsoring these types of plans to define their EHBs using any state benchmark plan. In other words, employers are not bound by the essential health benefits mandated by their state and can pick from another state’s list of required benefits.
Under the AHCA, we may see a big change to how the rules on annual and lifetime limits work. Notably, nothing in the AHCA would prohibit employers from choosing a state benchmark plan from a state that had obtained an AHCA waiver, which would allow the state to put annual and lifetime limits on its EHBs. This means that, if one state decides to waive these EHB requirements, many employers could decide to use that lower-standard plan as their benchmark plan. Of course, while choosing such a benchmark plan may benefit an organization by lowering its costs, such a move may have a negative impact on its ability to recruit and retain the best talent.
There will be a greater need to help employees make smart benefits decisions
The most important aspect of this for employers is to understand the trend in health insurance, which is undeniably moving in the direction of consumerism.
The driving philosophy behind this new Republican plan is to place more responsibility on individuals. However, this doesn’t mean employers can throw a party and simply wish their workers “good luck” — employers need to think at a macro level about what’s good for business. In a tightening labor market in which so many talented people consider themselves free agents, smart employers will focus on helping employees to make smart decisions about their health insurance.
Kuperstein D. (2017 May 5). 3 aspects of the GOP healthcare plan that demand employers attention [Web blog post]. Retrieved from address https://www.employeebenefitadviser.com/opinion/3-aspects-of-the-gop-healthcare-plan-that-demand-employers-attention
Find out more about the passing of the AHCA in this article from The Hill by Peter Sullivan.
House Republicans on Thursday passed legislation aimed at repealing and replacing ObamaCare, taking a major step toward a long-held goal and setting in motion an overhaul of the nation’s health system.
The narrow 217-213 vote is a victory for GOP leaders, who faced a tumultuous path to getting the bill to the floor. The measure had to be pulled in March because of a lack of votes, but a series of deals since then brought on board the conservative Freedom Caucus and then wavering moderates.
The bill, known as the American Health Care Act, repeals the core elements of ObamaCare, including its subsidies to help people get coverage, expansion of Medicaid, taxes and mandates for people to get coverage.
In its place, the bill provides a new tax credit aimed at helping people buy insurance, though it would provide less help than ObamaCare to low-income people.
The Congressional Budget Office found that 24 million more people will become uninsured over the next decade because of the bill. While some of that loss is because of people choosing not to get coverage when the mandate is repealed, much of it would come from Medicaid cuts and the smaller tax credit as well.
Republicans brought the measure to a vote without an analysis from the Congressional Budget Office on the updated bill, meaning lawmakers did not have the full nonpartisan analysis of what the bill would do.
In addition, while Republicans have long argued that Democrats rammed through ObamaCare in 2010, the final changes to the Republican bill were only released the night before the vote.
Republicans’ main argument is that ObamaCare is failing and needs to be replaced. They point to insurers pulling out of certain markets, while Democrats counter that uncertainty from Republican efforts to weaken the law are to blame.
“It’s been a winding road to this point but we’re here today to fulfill the promise that we made to the American people,” said Rep. Diane Black (R-Tenn.) who led GOP floor debate on the measure.
“Under ObamaCare, the situation is getting worse every day,” she said. “We can’t wait a moment longer than necessary to provide relief for the American people by repealing and replacing ObamaCare.”
House Democratic Leader Nancy Pelosi (Calif.), meanwhile, called the measure a “very sad, deadly joke.”
Pointing to the hundreds of billions of dollars in tax cuts, she said the bill “will have the biggest transfer of wealth in the history of our country — Robin Hood in reverse.”
The measure has deep cuts to Medicaid, the government healthcare program for low income people, including putting a new cap on payments and ending ObamaCare’s expansion of the program after 2020.
The bill was a tough vote for some electorally vulnerable members of Congress. Many remained publicly undecided until the last moment as leaders furiously whipped lawmakers over the last several days.
Rep. Mike Coffman (R-Colo.), for example, came out as a “no” hours before the vote. He cited the lack of a CBO analysis as well as weakening protections for people with pre-existing conditions.
The key move to bring the Freedom Caucus on board was an amendment that allows states to repeal one of ObamaCare’s key protections for people with pre-existing conditions, known as community rating. If that were repealed in a state, insurers could go back to charging exorbitant premiums to sick people, which could put coverage out of reach for many.
Republicans counter by pointing to money for high risk pools. A last-minute addition of $8 billion more in funding for people with pre-existing conditions was key to winning over several wavering moderates, though many experts doubt whether that will be close to enough funding.
The measure is expected to undergo a major overhaul in the Senate, especially on the Medicaid front, where several Republican senators from states that accepted the expansion are wary of cutting it off.
The path in the Senate is also even tougher, given that Republicans can lose only two votes and still pass the bill.
See the original article Here.
Sullivan P. (2017 May 4). House passes obamacare repeal [Web blog post]. Retrieved from address http://thehill.com/policy/healthcare/331937-house-passes-obamacare-repeal
Have to the cost of pharmaceuticals caused an increase in your health care costs? Find out how other employers are trying to combat rising costs in the great article from Employee Benefits News by Nick Otto.
A majority of employers say they were relieved to see the GOP’s repeal and replace plan fizzle out last month, and instead have their own ideas on how to best reform healthcare and how to rein in costs.
In a poll conducted by Mercer days following the crumbling of the American Health Care Act, more than half who invest in employer-sponsored healthcare said they were happy to see the GOP plan fail.
Nearly a quarter (24%) of employers told the consulting firm they “very relieved” of the legislation’s failure, while 32% said they were “relieved.”
Meanwhile, 16% said they were disappointed the legislation didn’t pass, 5% were “very disappointed” it didn’t pass, and the remainder of employers had no opinion. A planned vote on the ACHA was scrapped in late March at President Donald Trump’s request after a number of Republicans said they opposed the bill.
With more than 61% of covered Americans getting health coverage through employer plans, Mercer says businesses should help play a key role in recognizing and addressing the underlying cost concerns plaguing the healthcare market.
“Cost-shifting does not address the underlying causes of healthcare cost growth, and increasing burdens on employers will simply make it harder for them to provide affordable coverage to their employees,” Mercer says.
So what do employers say are the top issues lawmakers should address?
Topping the employer wish list, according to the Mercer poll, is help with controlling the climbing cost of pharmaceuticals with a score of 4.4/5 (employers ranked policymaker priorities 1-5, 5 being “top priority).
The following improvements also made the list of employer desires: improving price transparency (4.1), stabilizing the individual markets (4), maintaining Medicaid funding (4) and investing more in population health and education (3.7).
While neither the ACA nor the AHCA had any significant impact to how employers offer healthcare, there are aspects of both legislations that would still influence some employer plans.
Maintaining Medicaid funding and having a stabilized individual market will lower hikes to private payers by allowing people not in employer-sponsored plans have access to affordable coverage and avoid a rise in the number of uninsured.
Otto N. (2017 April 9). Employers want lawmakers to curb rising pharma costs [Web blog post]. Retrieved from address https://www.benefitnews.com/news/employers-want-lawmakers-to-curb-rising-pharma-costs?brief=00000152-14a7-d1cc-a5fa-7cffccf00000
Under Internal Revenue Code Section 105(h), a self-insured medical reimbursement plan must pass two nondiscrimination tests. Failure to pass either test means that the favorable tax treatment for highly compensated individuals who participate in the plan will be lost. The Section 105(h) rules only affect whether reimbursement (including payments to health care providers) under a self-insured plan is taxable.
When Section 105(h) was enacted, its nondiscrimination testing applied solely to self-insured plans. Under the Patient Protection and Affordable Care Act (ACA), Section 105(h) also applies to fully-insured, non-grandfathered plans. However, in late 2010, the government delayed enforcement of Section 105(h) against fully-insured, non-grandfathered plans until the first plan year beginning after regulations are issued. To date, no regulations have been issued so there is currently no penalty for noncompliance.
Practically speaking, if a plan treats all employees the same, then it is unlikely that the plan will fail Section 105(h) nondiscrimination testing.
What Is a Self-Insured Medical Reimbursement Plan?
Section 105(h) applies to a “self-insured medical reimbursement plan,” which is an employer plan to reimburse employees for medical care expenses listed under Code Section 213(d) for which reimbursement is not provided under a policy of accident or health insurance.
Common self-insured medical reimbursement plans are self-funded major medical plans, health reimbursement arrangements (HRAs), and medical expense reimbursement plans (MERPs). Many employers who sponsor an insured plan may also have a self-insured plan; that self-insured plan is subject to the Section 105 non-discrimination rules. For example, many employers offer a fully insured major medical plan that is integrated with an HRA to reimburse expenses incurred before a participant meets the plan deductible.
What If the Self-Insured Medical Reimbursement Plan Is Offered Under a Cafeteria Plan?
A self-insured medical reimbursement plan (self-insured plan) can be offered outside of a cafeteria plan or under a cafeteria plan. Section 105(h) nondiscrimination testing applies in both cases.
Regardless of grandfathered status, if the self-insured plan is offered under a cafeteria plan and allows employees to pay premiums on a pre-tax basis, then the plan is still subject to the Section 125
nondiscrimination rules. The cafeteria plan rules affect whether contributions are taxable; if contributions are taxable, then the Section 105(h) rules do not apply.
What Is the Purpose of Nondiscrimination Testing?
Congress permits self-insured medical reimbursement plans to provide tax-free benefits. However, Congress wanted employers to provide these tax-free benefits to their regular employees, not just to their executives. Nondiscrimination testing is designed to encourage employers to provide benefits to their employees in a way that does not discriminate in favor of employees who are highly paid or high ranking.
If a plan fails the nondiscrimination testing, the regular employees will not lose the tax benefits of the self-insured medical reimbursement plan and the plan will not be invalidated. However, highly paid or high ranking employees may be adversely affected if the plan fails testing.
What Are the Two Nondiscrimination Tests?
The two nondiscrimination tests are the Eligibility Test and Benefits Test.
The Eligibility Test answers the basic question of whether there are enough regular employees benefitting from the plan. Section 105(h) provides three ways of passing the Eligibility Test:
The Benefits Test answers the basic question of whether all participants are eligible for the same benefits.
Definition of Terms in the Nondiscrimination Tests
A highly compensated individual (HCI) is an individual who is:
Under Section 105(h), an employee’s compensation level is determined based on the employee’s compensation for the plan year. Fiscal year plans may determine employee compensation based on the calendar year ending within the plan year. Only current year compensation may be used to determine compensation levels.
For shareholder stock ownership, Section 318 constructive ownership rules apply. Per the attribution rules, a spouse is deemed to own the interest held by the other spouse. Also, an employee is deemed to own the ownership interest of the employee’s parents, children, and grandchildren. Further, a person with an option to buy stock is considered to own the stock subject to that option and a shareholder who owns 50 percent of more of a corporation is deemed to own a proportionate share of stock owned by the corporation.
Section 105(h) also defines excludable employees. The following employees may be excluded from the highest-paid 25 percent of all employees, unless they are eligible to participate in the plan:
Exclusions should be applied uniformly. Employees in excludable categories should not be excluded during testing if the employees are eligible under the plan.
How Are the Tests Applied?
The Eligibility Test
All three of the alternative eligibility tests discuss who benefits under the plan. Although the Eligibility Test’s name implies that it looks at eligibility, the more cautious interpretation is that an employee must have elected coverage or have been provided with free coverage by plan design for the employee to benefit under the plan. For purposes of Section 105(h), an employee benefits from the plan when the employee actually participates in the plan.
A self-insured plan must pass one of the following three tests to pass the Eligibility Test:
To determine whether a self-insured plan passes the Nondiscriminatory Classification Test, the IRS will look at the facts and circumstances of each case, applying the standards of Section 410(b)(1)(B) that apply to tax-preferred retirement plans. If an employer must rely on the Nondiscriminatory Classification Test to pass the Eligibility Test, then the employer should consult with its attorney or tax professional about running the nondiscriminatory classification test because it is complicated to apply.
then the employer should consult with its attorney or tax professional about running the nondiscriminatory classification test because it is complicated to apply.
Although Section 105(h) is not clear on the exact process for conducting the Nondiscriminatory Classification Test, the plan may rely on the Section 410(b) regulations’ current nondiscriminatory classification test. Under the test, a classification is not discriminatory if it satisfies either the Safe Harbor Percentage Test or the Facts and Circumstances Test.
Safe Harbor Percentage Test. To meet the Safe Harbor Percentage Test, a plan’s ratio percentage must be equal to or greater than the applicable safe harbor percentage. If the plan’s ratio percentage is 50 percent of more, then the plan passes the Safe Harbor Percentage Test. If the plan’s ratio percentage is less than 50 percent, the plan might pass if the ratio percentage exceeds the safe harbor percentage found in the IRS’ Nondiscriminatory Classification Table below.
The plan’s ratio percentage is determined by dividing the percentage of non-highly compensated individuals who benefit under the plan by the percentage of highly compensated individuals who benefit under the plan.
The plan’s non-highly compensated individuals concentration percentage is the percentage of all employees who are non-highly compensated individuals.
Nondiscriminatory Classification Table
If the plan’s ratio percentage is equal or greater than the safe harbor percentage, then the plan’s employee classification meets the safe harbor and is nondiscriminatory.
Facts and Circumstances Test. If the plan fails the Safe Harbor Percentage Test, then the plan would apply the Facts and Circumstances Test. To pass the Facts and Circumstances Test, the plan’s ratio percentage must be greater than or equal to the corresponding unsafe harbor percentage in the chart above.
Also, the IRS must find the classification to be nondiscriminatory based on all the relevant facts and circumstances. No one single factor will be dispositive; here are some of the facts that the IRS will consider:
The Benefits Test
To pass the Benefits Test, all benefits provided to highly compensated individuals who are participating in the plan must be provided to all other participants. Also, all benefits available for highly compensated individuals’ dependents must also be available on the same basis for all non-highly compensated participants’ dependents.
Essentially, the Benefits Test requires a plan to have no facial discrimination and no discrimination in its operation.
To have no discriminatory benefits on its face, the plan must have the following features:
To have no discriminatory benefits in operation, the plan must not discriminate in favor of highly compensated individuals in actual operation; this is a facts and circumstances determination that looks to see if “the duration of a particular benefit coincides with the period during which [a highly compensated individual] utilizes the benefit.”
When to Test
Section 105(h) and its regulations do not specify when nondiscrimination testing must be done. However, for highly compensated individuals to retain favorable tax treatment, the self-insured plan must satisfy the tests for a plan year.
As a best practice, the employer should test prior to the beginning of the plan year, several months before the end of the plan year, and after the close of the plan year. Testing before and during the plan year will allow the plan sponsor to potentially make election or plan design changes to correct testing problems. The nondiscrimination tests cannot be satisfied by corrections made after the end of the plan year. The employer should keep a record of its test results.
Consequences of Failing the Nondiscrimination Tests
If the plan fails the nondiscrimination tests, then highly compensated individuals’ excess reimbursements will be taxable. If the plan is discriminatory, then non-highly compensated individuals will not lose their tax benefits and the plan will not lose its status as a valid Section 105 plan.
Amounts that are excess reimbursement are includable in a highly compensated individual’s income; the excess reimbursement calculation varies based on whether the benefits were paid to highly compensated individuals due to either discriminatory coverage for failing to meet the Eligibility Test, or discriminatory benefits for failing to meet the Benefits Test.
If a self-insured plan fails to meet the Eligibility Test and provides discriminatory coverage, the amount of the excess reimbursement is calculated as:
If a self-insured plan fails to meet the Benefits Test and provides discriminatory benefits, the amount of the excess reimbursement is the amount reimbursed to that highly compensated individual for the discriminatory benefit.
If the benefit was only available to a highly compensated individual and not to other participants, then the total amount reimbursed to that highly compensated individual for that benefit will be included in that individual’s gross income.
If the benefit is available to non-highly compensated individuals but it is a lesser benefit, then the amount available to the highly compensated individual is offset by the amounts available to the non-highly compensated individuals.
A pro rata share of the discriminatory coverage or discriminatory benefit will be taxable when coverage is partially paid with employee after-tax contributions and partially paid with employer contributions.
If a self-insured plan fails to meet both the Eligibility Test and the Benefits Test, the excess reimbursement is calculated by first applying the Benefits Test. Then the amount of excess reimbursement under the Benefits Test is subtracted from the numerator and dominator when the Eligibility Test is calculated.
The regulations provide six excess reimbursement examples, found here in the Appendix to this Advisor.
Reporting Discriminatory Amounts
If a self-insured plan discriminates in favor of highly compensated individuals, the employer should include the excess reimbursement in the highly compensated individual’s gross income and report the income in Box 1 of Form W-2. The amounts should not be reported in Box 3 or Box 5 of Form W-2 because the amounts are not considered wages for FICA or FUTA withholding.
Plan Design Considerations
Plan sponsors should be cautious of plan designs that create separate plans for different employee groups or that do not cover all employees, create different eligibility requirements for different groups of employees, or base employer contributions or benefits on employees’ years of service or compensation level.
Appendix: Excess Reimbursement Examples
Corporation M maintains a self-insured medical reimbursement plan which covers all employees. The plan provides the following maximum limits on the amount of benefits subject to reimbursement: $5,000 for officers and $1,000 for all other participants. During a plan year Employee A, one of the 5 highest paid officers, received reimbursements in the amount of $4,000. Because the amount of benefits provided for highly compensated individuals is not provided for all other participants, the plan benefits are discriminatory. Accordingly, Employee A received an excess reimbursement of $3,000 ($4,000−$1,000) which constitutes a benefit available to highly compensated individuals, but not to all other participants.
Corporation N maintains a self-insured medical reimbursement plan which covers all employees. The plan provides a broad range of medical benefits subject to reimbursement for all participants. However, only the 5 highest paid officers are entitled to dental benefits. During the plan year Employee B, one of the 5 highest paid officers, received dental payments under the plan in the amount of $300. Because dental benefits are provided for highly compensated individuals, and not for all other participants, the plan discriminates as to benefits. Accordingly, Employee B received an excess reimbursement in the amount of $300.
Corporation O maintains a self-insured medical reimbursement plan which discriminates as to eligibility by covering only the highest paid 40% of all employees. Benefits subject to reimbursement under the plan are the same for all participants. During a plan year Employee C, a highly compensated individual, received benefits in the amount of $1,000. The amount of excess reimbursement paid Employee C during the plan year will be calculated by multiplying the $1,000 by a fraction determined under subparagraph (3) [of 26 CFR 1.105-11].
Corporation P maintains a self-insured medical reimbursement plan for its employees. Benefits subject to reimbursement under the plan are the same for all plan participants. However, the plan fails the eligibility tests of section 105(h)(3)(A) and thereby discriminates as to eligibility. During the 1980 plan year Employee D, a highly compensated individual, was hospitalized for surgery and incurred medical expenses of $4,500 which were reimbursed to D under the plan. During that plan year the Corporation P medical plan paid $50,000 in benefits under the plan, $30,000 of which constituted benefits paid to highly compensated individuals. The amount of excess reimbursement not excludable by D under section 105(b) is $2,700:
$4,500 x ($30,000 ¸ $50,000)
Corporation Q maintains a self-insured medical reimbursement plan for its employees. The plan provides a broad range of medical benefits subject to reimbursement for participants. However, only the five highest paid officers are entitled to dental benefits. In addition, the plan fails the eligibility test of section 105(h)(3)(A) and thereby discriminates as to eligibility. During the calendar 1981 plan year, Employee E, a highly compensated individual, received dental benefits under the plan in the amount of $300, and no other employee received dental benefits. In addition, Employee E was hospitalized for surgery and incurred medical expenses, reimbursement for which was available to all participants, of $4,500 which were reimbursed to E under the plan. Because dental benefits are only provided for highly compensated individuals, Employee E received an excess reimbursement under paragraph (e)(2) above in the amount of $300. For the 1981 plan year, the Corporation Q medical plan paid $50,300 in total benefits under the plan, $30,300 of which constituted benefits paid to highly compensated individuals. In computing the fraction under paragraph (e)(3) [of 26 CFR 1.105-11], discriminatory benefits described in paragraph (e)(2) are not taken into account. Therefore, the amount of excess reimbursement not excludable to Employee E with respect to the $4,500 of medical expenses incurred is $2,700:
and the total amount of excess reimbursements includable in E’s income for 1981 is $3,000.
(i) Corporation R maintains a calendar year self-insured medical reimbursement plan which covers all employees. The type of benefits subject to reimbursement under the plan include all medical care expenses as defined in section 213(e). The amount of reimbursement available to any employee for any calendar year is limited to 5 percent of the compensation paid to each employee during the calendar year. The amount of compensation and reimbursement paid to Employees A-F for the calendar year is as follows:
(ii) Because the amount of benefits subject to reimbursement under the plan is in proportion to employee compensation the plan discriminates as to benefits. In addition, Employees A and B are highly compensated individuals. The amount of excess reimbursement paid Employees A and B during the plan year will be determined under paragraph (e)(2) [of 26 CFR 1.105-11]. Because benefits in excess of $400 (Employee F’s maximum benefit) are provided for highly compensated individuals and not for all other participants, Employees A and B received, respectively, an excess reimbursement of $4,600 and $850.
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