IRS Releases Information Letter on Employer Shared Responsibility Penalties under the ACA

An informational letter was just released by the Internal Revenue Services (IRS) in response to an inquiry of whether employer shared responsibility penalties (ESRPs) may be waived or reduced based on hardship or other factors. Read this blog post to learn more.


The Internal Revenue Services (IRS) released an information letter responding to an inquiry of whether employer shared responsibility penalties (ESRPs) may be waived or reduced based on hardship or other factors and whether the IRS will extend the transition relief for employers with fewer than 100 employees.

The letter notes that the law does not provide for waiver of ESRPs. While the IRS provided several forms of transition relief in 2015 and 2016, no transition relief is available for 2017 and future years. Although the January 20, 2017, executive order Minimizing the Economic Burden of the ACA Pending Repeal directs federal agencies to exercise authority and discretion to waive, defer, and grant exemptions from the ACA provisions, the ACA’s legislative provisions are still in force until Congress changes them.

SOURCE: Hsu, K. (7 November 2019) "IRS Releases Information Letter on Employer Shared Responsibility Penalties under the ACA" (Web Blog Post). Retrieved from http://blog.ubabenefits.com/irs-releases-information-letter-on-employer-shared-responsibility-penalties-under-the-aca


IRS Announces Health Insurance Providers Fee to Resume in 2020

Recently, the Internal Revenue Services (IRS) announced that the health insurance providers fee will resume in 2020. This fee is imposed by the Patient Protection and Affordable Care Act (ACA) and was suspended for 2019. Read this blog post from UBA to learn more.


As background, the Patient Protection and Affordable Care Act (ACA) imposes a fee on each covered entity (for example, health insurers or a non-fully insured MEWA) engaged in the business of providing health insurance for United States health risks.

There was a moratorium on the fee for 2017 and there is a suspension on the fee for 2019. Under IRS Notice 2019-50, absent legislative action, the fee will resume for 2020. According to an estimate by the American Academy of Actuaries, the fee will increase premiums by one to three percent in 2020.

SOURCE: Hsu, K. (29 October 2019) "IRS Announces Health Insurance Providers Fee to Resume in 2020" (Web Blog Post). Retrieved from http://blog.ubabenefits.com/irs-announces-health-insurance-providers-fee-to-resume-in-2020


Employers shouldn’t fear expansion of Medicare

A new survey from the National Business Group on Health found that 55 percent of large employers support a Medicare expansion that's limited to older Americans. In this article from Employee Benefit Advisor, Nison discusses the potential benefits and downfalls of an expansion to Medicare.


Like a significant chunk of American voters, a majority of large employers want to expand Medicare. Just not too much.

A new survey of 147 large employers from the National Business Group on Health found that 55% of them support a Medicare expansion that’s limited to older Americans. Only 23% think eligibility should drop to age 50, however, and 45% don’t think it should expand at all. A majority believe that a broader “Medicare for All” plan would increase health costs.

The same survey also highlights why employers should consider coming around on health reform that reduces their role in the system. The growth in health costs has outpaced inflation and wage growth for years, and the surveyed businesses expect it to rise 5% to $15,375 for each employee next year.

About 70% of those costs will fall on the companies, which plan to try everything from boosting virtual health services to investing in health concierges to rein them in, according to the survey.

History suggests that their best efforts might not amount to much.

Employer-sponsored insurance is America’s single largest source of health coverage. That’s mostly true because the IRS exempted employer health benefits from taxes in 1943, a move that created the federal government’s single biggest tax expenditure. Large companies derive some benefit from the current system because they can provide a significant tax-free benefit that helps them compete for talent and pay people less. But it comes with significant drawbacks. Employers have to devote substantial resources to providing healthcare and controlling costs. Many of them have no particular expertise or advantage in doing so.

The results are mixed. Yes, individuals with private insurance are generally satisfied with the quality of their coverage. They’re not nearly as happy about the cost as deductibles rise. The U.S. pays more than any other developed country for healthcare and medicines and receives worse results on a variety of metrics.

Employers pay particularly high prices and spend heavily on plans that have higher overhead than public alternatives. A recent RAND study found that employer-sponsored plans paid hospitals at 241% of Medicare rates in 2017. Employers are already effectively subsidizing public programs, not to mention the profitability of insurers, health care providers and drugmakers.

It’s not entirely their fault. The American system inherently fragments negotiating power, which gives providers a significant advantage and makes it difficult for even the largest employers to get a good deal. Turning a larger piece of healthcare over to the government would free companies to focus more time and resources on their actual business instead of on navigating the world’s most expensive and convoluted healthcare market.

Big businesses most likely fear big Medicare expansion in large part because it would lead to a significant tax increase. But looking at any tax increase as an enemy is a mistake. Those taxes represent a trade-off; they would replace some or all of the billions of dollars that employers are currently spending on care. Depending on what taxes are imposed and whether the public plan is able to control costs better than the current system — and it could hardly do worse — many employers could come out ahead.

There are a lot of unknowns when it comes to Medicare for All and plans that move the country in that direction. Employers are right to be skeptical until they know more, but the results could well shake out in their favor, and they shouldn’t be so quick to discount the approach.

SOURCE: Nisen, M. (15 August 2019)"Employers shouldn’t fear expansion of Medicare" (Web Blog Post). Retrieved from https://www.employeebenefitadviser.com/articles/employers-shouldnt-fear-expansion-of-medicare

 


PCORI Fee Is Due by July 31 for Self-Insured Health Plans

Patient-Centered Outcomes Research Institute (PCORI) annual fees are due by July 31, 2019. Plans with terms ending after September 30, 2012, and before October 1, 2019, are required to pay an annual PCORI fee. Read this article from SHRM to learn more.


An earlier version of this article was posted on November 6, 2018

The next annual fee that sponsors of self-insured health plans must pay to fund the federal Patient-Centered Outcomes Research Institute (PCORI) is due July 31, 2019.

The Affordable Care Act mandated payment of an annual PCORI fee by plans with terms ending after Sept. 30, 2012, and before Oct. 1, 2019, to provide initial funding for the Washington, D.C.-based institute, which funds research on the comparative effectiveness of medical treatments. Self-insured plans pay the fee themselves, while insurance companies pay the fee for fully insured plans but may pass the cost along to employers through higher premiums.

The IRS treats the fee like an excise tax.

The PCORI fee is due by the July 31 following the last day of the plan year. The final PCORI payment for sponsors of 2018 calendar-year plans is due by July 31, 2019. The final PCORI fee for plan years ending from Jan. 1, 2019 to Sept. 30, 2019, will be due by July 31, 2020.

In Notice 2018-85, the IRS set the amount used to calculate the PCORI fee at $2.45 per person covered by plan years ending Oct. 1, 2018, through Sept. 30, 2019.

The chart below shows the fees to be paid in 2019, which are slightly higher than the fees owed in 2018. The per-enrollee amount depends on when the plan year ended, as in previous years.

Fee per Plan Enrollee for Payment Due
July 31, 2019
Plan years ending from Oct. 1, 2018, through Sept. 30, 2019. $2.45
Fee per Plan Enrollee for Payment Due
July 31, 2018
Plan years ending from Oct. 1, 2017, through Dec. 31, 2017, including calendar-year plans. $2.39
Plan years ending from Jan. 1, 2017, through Sept. 30, 2017 $2.26
Source: IRS.

Nearing the End

The PCORI fee will not be assessed for plan years ending after Sept. 30, 2019, "which means that for a calendar-year plan, the last year for assessment is the 2018 calendar year," wrote Richard Stover, a New York City-based principal at HR consultancy Buck Global, and Amy Dunn, a principal in Buck's Knowledge Resource Center.

For noncalendar-year plans that end between Jan. 1, 2019 and Sept. 30, 3019, however, there will be one last PCORI payment due by July 31, 2020.

"There will not be any PCORI fee for plan years that end on October 1, 2019 or later," according to 360 Corporate Benefit Advisors.

The PCORI fee was first assessed for plan years ending after Sept. 30, 2012. The fee for the first plan year was $1 per plan enrollee, which increased to $2 per enrollee in the second year and was then indexed in subsequent years based on the increase in national health expenditures.

FSAs and HRAs

In addition to self-insured medical plans, health flexible spending accounts (health FSAs) and health reimbursement arrangements (HRAs) that fail to qualify as “excepted benefits” would be required to pay the per-enrollee fee, wrote Gary Kushner, president and CEO of Kushner & Co., a benefits advisory firm based in Portage, Mich.

As set forth in the Department of Labor's Technical Release 2013-03:

  • health FSA is an excepted benefit if the employer does not contribute more than $500 a year to any employee accounts and also offers a group health plan with nonexcepted benefits.
  • An HRA is an excepted benefit if it only reimburses for limited-scope dental and vision expenses or long-term care coverage and is not integrated with a group health plan.

Kushner explained that:

  • If the employer sponsors a fully insured group health plan for which the insurance carrier is filing and paying the PCORI fee and the same employer sponsors an employer-funded health care FSA or an HRA not exempted from the fee, employers should only count the employees participating in the FSA or HRA, and not spouses or dependents, when paying the fee.
  • If the employer sponsors a self-funded group health plan, then the employer needs to file the form and pay the PCORI fee only on the number of individuals enrolled in the group health plan, and not in the employer-funded health care FSA or HRA.

An employer that sponsors a self-insured HRA along with a fully insured medical plan "must pay PCORI fees based on the number of employees (dependents are not included in this count) participating in the HRA, while the insurer pays the PCORI fee on the individuals (including dependents) covered under the insured plan," wrote Mark Holloway, senior vice president and director of compliance services at Lockton Companies, a benefits broker and services firm based in Kansas City, Mo. Where an employer maintains an HRA along with a self-funded medical plan and both have the same plan year, "the employer pays a single PCORI fee based on the number of covered lives in the self-funded medical plan (the HRA is disregarded)."

Paying PCORI Fees

Self-insured employers are responsible for submitting the fee and accompanying paperwork to the IRS, as "third-party reporting and payment of the fee is not permitted for self-funded plans," Holloway noted.

For the coming year, self-insured health plan sponsors should use Form 720 for the second calendar quarter to report and pay the PCORI fee by July 31, 2019.

"On p. 2 of Form 720, under Part II, the employer needs to designate the average number of covered lives under its applicable self-insured plan," Holloway explained. The number of covered lives will be multiplied by $2.45 for plan years ending on or after Oct. 1, 2018, to determine the total fee owed to the IRS next July.

To calculate "the average number of lives covered" or plan enrollees, employers should use one of three methods listed on pages 8 and 9 of the Instructions for Form 720. A white paper by Keller Benefit Services describes these methods in greater detail.

Although the fee is paid annually, employers should indicate on the Payment Voucher (720-V), located at the end of Form 720, that the tax period for the fee is the second quarter of the year. "Failure to properly designate 'second quarter' on the voucher will result in the IRS's software generating a tardy filing notice, with all the incumbent aggravation on the employer to correct the matter with the IRS," Holloway warned.

A few other points to keep in mind: "The U.S. Department of Labor believes the fee cannot be paid from plan assets," he said. In other words, for self-insured health plans, "the PCORI fee must be paid by the plan sponsor. It is not a permissible expense of a self-funded plan and cannot be paid in whole or part by participant contributions."

In addition, PCORI fees "should not be included in the plan's cost when computing the plan's COBRA premium," Holloway noted. But "the IRS has indicated the fee is, however, a tax-deductible business expense for employers with self-funded plans," he added, citing a May 2013 IRS memorandum.

SOURCE: Miller, S. (2 July 2019) "PCORI Fee Is Due by July 31 for Self-Insured Health Plans" (Web Blog Post). Retrieved from https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/2019-pcori-fees.aspx


Compliance Recap - June 2019

June was a relatively busy month in the employee benefits world. The Department of Labor (DOL), the Department of Health and Human Services (HHS), and the Department of Treasury published final rules that removed the prohibition against integrating a health reimbursement arrangement (HRA) with individual health insurance coverage and recognized certain HRAs as limited excepted benefits.

A U.S. District Court issued a permanent injunction against the Patient Protection and Affordable Care Act contraception mandate. The President signed an executive order directing federal agencies to issue guidance and regulations regarding high deductible health plans with health savings accounts, Section 213 medical care expenses, flexible spending arrangements, health plan communication of out-of-pocket costs, and surprise billing.

The Department of Health and Human Services’ Office for Civil Rights (OCR) issued frequently asked questions (FAQs) regarding HIPAA compliance for health plans during care coordination and continuity.

UBA Updates

UBA released a new Advisor: Tri-Agency Final Rules on Health Reimbursement Arrangements

UBA updated or revised existing guidance: Contraception Mandate Rolled Back for Employers

DOL, HHS, and Treasury Publish Final Rules on Health Reimbursement Arrangements

On June 20, 2019, the Department of Labor (DOL), Department of Health and Human Services (HHS), and the Department of Treasury (Treasury) (collectively, the Departments) published their final rules regarding health reimbursement arrangements (HRAs) and other account-based group health plans. The DOL also issued a news release, frequently asked questions, model notice, and model attestations.

The final rules’ goal is to expand the flexibility and use of HRAs to provide individuals with additional options to obtain quality, affordable healthcare. According to the Departments, these changes will facilitate a more efficient healthcare system by increasing employees’ consumer choice and promoting healthcare market competition by adding employer options.

To do so, the final rules expand the use of HRAs by:

  • Removing the prohibition against integrating an HRA with individual health insurance coverage (individual coverage HRA)
  • Expanding the definition of limited excepted benefits to recognize certain HRAs as limited excepted benefits if certain conditions are met (excepted benefit HRA)
  • Providing premium tax credit (PTC) eligibility rules for people who are offered an HRA integrated with individual coverage
  • Assuring HRA and Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) plan sponsors that reimbursement of individual coverage by the HRA or QSEHRA does not become part of an ERISA plan when certain conditions are met
  • Changing individual market special enrollment periods for individuals who gain access to HRAs integrated with individual coverage or who are provided QSEHRAs

The final rules will be effective on August 19, 2019, and generally apply for plan years beginning on or after January 1, 2020.

However, the final rules under Section 36B (regarding PTCs) apply for taxable years beginning on or after January 1, 2020, and the final rules providing a new special enrollment period in the individual market apply January 1, 2020.

Read more about the final rules.

District Court Issues Permanent Injunction against ACA’s Contraception Mandate

On June 5, 2019, the U.S. District Court for the Northern District of Texas issued a permanent injunction against the Patient Protection and Affordable Care Act (ACA) contraception mandate. The injunction prohibits the federal government from enforcing the contraception mandate against an employer, group health plan, or health insurer that objects, based on sincerely held religious beliefs, to establishing, maintaining, providing, offering, or arranging for coverage or payment for some or all contraceptive services. The injunction also exempts objecting entities from the accommodations process.

The permanent injunction also prohibits enforcement of the contraception mandate for individuals who object to coverage or payments for some or all contraceptive services based on sincerely held religious beliefs and who are willing to obtain health insurance that excludes coverage for payments for some or all contraceptive services.

Employers who object to contraceptive coverage based on sincerely held religious beliefs are no longer required to comply with the ACA’s contraception mandate for those contraceptives to which they object.

Read more about the contraception mandate and court case.

Executive Order on Improving Healthcare Price and Quality Transparency

On June 24, 2019 President Trump signed an executive order directing federal agencies to increase healthcare quality and price transparency. The executive order does not create any new laws or regulations.

The executive order directs the Department of Treasury to:

  • Issue guidance that would expand individuals’ ability to enroll in high deductible health plans that can be used with a health savings account to cover low-cost preventive care before the deductible is met
  • Propose regulations that would treat certain expenses associated with direct primary care arrangements and healthcare sharing ministries as Section 213 medical care expenses
  • Issue guidance that would increase the amount of flexible spending arrangement funds that can be carried over to the next plan year without penalty

The executive order directs the Department of Health and Human Services to:

  • Seek comments on a proposal to require health insurance issuers and self-insured group health plans to provide or give patients access to expected health care out-of-pocket costs before receiving care
  • Report steps that can be taken to implement principles announced in a fact sheet on protecting patients from surprise billing

HHS Issues HIPAA FAQs

The Department of Health and Human Services’ Office for Civil Rights (OCR) issued two frequently asked questions (FAQs) clarifying how the Health Insurance Portability and Accountability Act (HIPAA) privacy rules permit health plans to share protected health information (PHI) for care coordination and continuity.

If certain conditions apply, a health plan may disclose PHI, without an individual’s written authorization and subject to the minimum necessary standard, to another health plan for its own health care operations purposes, or for the other health plan’s health care operations. OCR provides two examples:

  • If Covered Entity A provides health insurance to a person who receives access to the provider network of another plan provided by Covered Entity B, Covered Entity A is permitted to disclose the person’s PHI to Covered Entity B for care coordination.
  • If a person was enrolled in a health plan of Covered Entity A and switches to a health plan of Covered Entity B, Covered Entity A can disclose PHI to Covered Entity B to coordinate the person’s care.

If certain conditions are met, HIPAA permits a covered entity to use PHI in its possession about individuals to inform them about the availability of other health plans it offers, without the person’s authorization. For example, when Plan A discloses a person’s PHI to Plan B, Plan B is permitted to send communications to the person about Plan B’s health plan options that may replace the person’s current plan, if Plan B receives no remuneration for sending the communication and complies with applicable business associate agreements. 

Question of the Month

  1. Which group health plans must file a Form 5500 and when is it due?
  2. Currently, group welfare plans generally must file Form 5500 if:
  • The plan is fully insured and had 100 or more participants on the first day of the plan year (dependents are not considered “participants” for this purpose unless they are covered because of a qualified medical child support order).
  • The plan is self-funded and it uses a trust, no matter how many participants it has.
  • The plan is self-funded and it relies on the Section 125 plan exemption, if it had 100 or more participants on the first day of the plan year.

There are several exemptions to Form 5500 filing. The most notable are:

  • Church plans defined under ERISA 3(33)
  • Governmental plans, including tribal governmental plans
  • Top hat plans which are unfunded or insured and benefit only a select group of management or highly compensated employees
  • Small insured or unfunded welfare plans. A welfare plan with fewer than 100 participants at the beginning of the plan year is not required to file an annual report if the plan is fully insured, entirely unfunded, or a combination of both.

A plan is considered unfunded if the employer pays the entire cost of the plan from its general accounts. A plan with a trust is considered funded.

A plan’s Form 5500 must be filed electronically by the last day of the seventh month after the close of the plan year. The filing date is based on the “plan year,” which is designated in the Summary Plan Description (SPD) or other governing document. If a plan does not have an SPD, the plan year defaults to the policy year.

For calendar year plans, the due date for Form 5500 is July 31. Employers may obtain an automatic  2-1/2 month extension by filing Form 5558 by the due date of the Form 5500.

7/3/2019


Status of Court Case Challenging ACA Constitutionality

Twenty states filed a lawsuit back in February of last year that asked the U.S. District Court for the Northern District of Texas to strike down the Patient Protection and Affordable Care Act. Continue reading this blog post for an update on the status of this court case.


As background, in February 2018, twenty states filed a lawsuit asking the U.S. District Court for the Northern District of Texas (Court) to strike down the Patient Protection and Affordable Care Act (ACA) entirely. The lawsuit came after the U.S. Congress passed the Tax Cuts and Jobs Act in December 2017 that reduced the individual mandate penalty to $0, starting in 2019.

On December 14, 2018, the Court issued a declaratory order that the individual mandate is unconstitutional and that the rest of the ACA is unconstitutional. The Court granted a stay of its December 2018 order, which prohibits the order from taking effect while it is being appealed in the Fifth Circuit Court of Appeals (appeals court).

On March 25, 2019, the DOJ submitted a letter to the appeals court clerk stating the Court’s ruling should be affirmed and that the entire ACA should be struck down as unconstitutional. The DOJ intends to file an appellate brief to defend the Court’s ruling.

SOURCE: Olson, B. (16 April 2019) "Status of Court Case Challenging ACA Constitutionality" (Web Blog Post). Retrieved from http://blog.ubabenefits.com/status-of-court-case-challenging-aca-constitutionality


Advance Informational Copies of 2018 Form 5500 Annual Return/Report

Recently, the IRS, EBSA and PBGC released informational copies of the 2018 Form 5500 annual return/report. Continue reading this blog post for more information and some highlighted changes.


The U.S. Department of Labor’s Employee Benefits Security Administration (EBSA), the Internal Revenue Service (IRS), and the Pension Benefit Guaranty Corporation (PBGC) released advance informational copies of the 2018 Form 5500 annual return/report and related instructions.

Here are some of the changes that the instructions highlight:

  • Principal Business Activity Codes. Principal Business Activity Codes have been updated to reflect updates to the North American Industry Classification System (NAICS). For Line 2d, a plan administrator would enter the six-digit Principal Business Activity Code that best describes the nature of the plan sponsor’s business from the list of codes on pages 78-80 of the Form 5500 Instructions.
  • Administrative Penalties. The instructions have been updated to reflect that the new maximum penalty for a plan administrator who fails or refuses to file a complete or accurate Form 5500 report has been increased to up to $2,140 a day for penalties assessed after January 2, 2018, whose associated violations occurred after November 2, 2015.

Because the Federal Civil Penalties Inflation Adjustment Improvements Act of 2015 requires the penalty amount to be adjusted annually after the Form 5500 and its schedules, attachments, and instructions are published for filing, be sure to check for any possible required inflation adjustments of the maximum penalty amount that are published in the Federal Register after the instructions have been posted.

  • Form 5500-Participant Count. The instructions for Lines 5 and 6 have been enhanced to make clearer that welfare plans complete only Line 5 and elements 6a(1), 6a(2), 6b, 6c, and 6d in Line 6.

Be aware that the advance copies of the 2018 Form 5500 are for informational purposes only and cannot be used to file a 2018 Form 5500 annual return/report.

ERISA imposes the Form 5500 reporting obligation on the plan administrator. Form 5500 is normally due on the last day of the seventh month after the close of the plan year. For example, a plan administrator would file Form 5500 by July 31, 2019, for a 2018 calendar year plan.

SOURCE: Hsu, K. (25 January 2019) "Advance Informational Copies of 2018 Form 5500 Annual Return/Report" (Web Blog Post). Retrieved from http://blog.ubabenefits.com/advance-informational-copies-of-2018-form-5500-annual-return/report


Compliance Recap - December 2018

December was a relatively quiet month in the employee benefits world.

A U.S. District Court issued an order declaring that the Patient Protection and Affordable Care Act (ACA) is unconstitutional. The Equal Employment Opportunity Commission (EEOC) issued two final rules to remove certain wellness program incentives. The Department of Labor (DOL) updated its Form M-1 filing guidance for association health plans.

UBA Updates

UBA updated or revised existing guidance:

U.S. District Court Declares ACA Unconstitutional

On December 14, 2018, the U.S. District Court for the Northern District of Texas (Court) issued a declaratory order in ongoing litigation regarding the individual mandate and the Patient Protection and Affordable Care Act (ACA). The Court declared that the individual mandate is unconstitutional and declared that the rest of the ACA – including its guaranteed issue and community rating provisions – is unconstitutional.

The Court did not grant the plaintiffs’ request for a nationwide injunction to prohibit the ACA’s continued implementation and enforcement. The Court’s declaratory judgment simply defined the parties’ legal relationship and rights under the case at this relatively early stage in the case.

On December 16, 2018, the Court issued an order that requires the parties to meet and discuss the case by December 21, 2018, and to jointly submit a proposed schedule for resolving the plaintiffs’ remaining claims.

On December 30, 2018, the Court issued two orders. The first order grants a stay of its December 14 order. This means that the court’s order regarding the ACA’s unconstitutionality will not take effect while it is being appealed. The second order enters the December 14 order as a final judgment so the parties may immediately appeal the order.

On December 31, 2018, the Court issued an order that stays the remainder of the case. This means that the Court will not be proceeding with the remaining claims in the case while its December 14 order is being appealed. After the appeal process is complete, the parties are to alert the Court and submit additional court documents if they want to continue with any remaining claims in the case.

At this time, the case’s status does not impact employers’ group health plans. However, employers should stay informed for the final decision in this case.

Read more about the court case.

EEOC Issue Final Rules to Remove Wellness Program Incentive Limits Vacated by Court

On December 20, 2018, the Equal Employment Opportunity Commission (EEOC) issued two final rules to remove wellness program incentives.

As background, in August 2017, the United States District Court for the District of Columbia held that the U.S. Equal Employment Opportunity Commission (EEOC) failed to provide a reasoned explanation for its decision to allow an incentive for spousal medical history under the Genetic Information Nondiscrimination Act (GINA) rules and adopt 30 percent incentive levels for employer-sponsored wellness programs under both the Americans with Disabilities Act (ADA) rules and GINA rules.

In December 2017, the court vacated the EEOC rules under the ADA and GINA effective January 1, 2019. The EEOC issued the following two final rules in response to the court’s order.

The first rule removes the section of the wellness regulations that provided incentive limits for wellness programs regulated by the ADA. Specifically, the rule removes guidance on the extent to which employers may use incentives to encourage employees to participate in wellness programs that ask them to respond to disability-related inquiries or undergo medical examinations.

The second rule removes the section of the wellness regulations that provided incentive limits for wellness programs regulated by GINA. Specifically, the rule removes guidance that addressed the extent to which an employer may offer an inducement to an employee for the employee’s spouse to provide current health status information as part of a health risk assessment (HRA) administered in connection with an employee-sponsored wellness program.

Both rules will be effective on January 1, 2019.

Read more about the EEOC’s final rules.

DOL Updates Form M-1 Filing Guidance for Association Health Plans

On December 3, 2018, the Department of Labor (DOL) published its “10 Tips for Filing Form M-1 For Association Health Plans And Other MEWAs That Provide Medical Benefits” that provides plan administrators with information on when to file and how to complete portions of Form M-1.

The DOL emphasizes that all multiple employer welfare arrangements (MEWAs) that provide medical benefits, including association health plans (AHPs) that intend to begin operating under the DOL’s new AHP rule, are required to file an initial registration Form M-1 at least 30 days before any activity including, but not limited to, marketing, soliciting, providing, or offering to provide medical care benefits to employers or employees who may participate in an AHP.

Read more about the DOL guidance.

Question of the Month

Q: If an employee must increase the hours of childcare needed because the employee changes work schedules, may the employee increase the DCAP amount that the employee elects?

A: Yes, increasing the hours of childcare is a permitted election change event that would allow an employee to increase the employee’s DCAP election amount consistent with the change in childcare cost.

**This information is general and is provided for educational purposes only. It is not intended to provide legal advice. You should not act on this information without consulting legal counsel or other knowledgeable advisors.


The ACA Remains In Place After Being Struck Down By Federal Court

Overview

On Dec. 14, 2018, a federal judge ruled in Texas v. United States that the entire Affordable Care Act (ACA) is invalid due to the elimination of the individual mandate penalty in 2019. The decision was not stayed, but the White House announced that the ACA will remain in place pending appeal.

This lawsuit was filed by 20 states as a result of the 2017 tax reform law that eliminates the individual mandate penalty. In 2012, the U.S. Supreme Court upheld the ACA on the basis that the individual mandate is a valid tax. With the penalty’s elimination, the court, in this case, ruled that the ACA is no longer valid under the U.S. Constitution.

Action Steps

This ruling is expected to be appealed and will likely be taken up by the Supreme Court. As a result, a final decision is not expected to be made until that time. The federal judge’s ruling left many questions as to the current state of the ACA; however, the White House announced that the ACA will remain in place pending appeal.

Background

The ACA imposes an “individual mandate” beginning in 2014, which requires most individuals to obtain acceptable health insurance coverage for themselves and their family members or pay a penalty. In 2011, a number of lawsuits were filed challenging the constitutionality of this individual mandate provision.

In 2012, the U.S. Supreme Court upheld the constitutionality of the ACA in its entirety, ruling that Congress acted within its constitutional authority when enacting the individual mandate. The Court agreed that, while Congress could not use its power to regulate commerce between states to require individuals to buy health insurance, it could impose a tax penalty using its tax power for individuals who refuse to buy health insurance.

Highlights

  • A federal judge ruled that the entire ACA is invalid due to the elimination of the individual mandate penalty.
  • This ruling is expected to be appealed and will likely be taken up by the Supreme Court.
  • The ACA will remain in place pending appeal.

Important Dates

December 14, 2018

A federal judge ruled that the entire ACA is invalid due to the elimination of the individual mandate penalty

January 1, 2019

Individuals will no longer be penalized under the ACA for failing to obtain acceptable health insurance coverage

However, a 2017 tax reform bill, called the Tax Cuts and Jobs Act, reduced the ACA’s individual mandate penalty to zero, effective beginning in 2019. As a result, beginning in 2019, individuals will no longer be penalized for failing to obtain acceptable health insurance coverage.

Texas v. United States

Following the tax reform law’s enactment, 20 Republican-controlled states filed a lawsuit again challenging the ACA’s constitutionality. The plaintiffs, first, argued that the individual mandate can no longer be considered a valid tax, since there will no longer be any revenue generated by the provision.

In addition, in its 2012 ruling, the Supreme Court indicated (and both parties agreed) that the individual mandate is an essential element of the ACA, and that the remainder of the law could not stand without it. As a result, the plaintiffs argued that the elimination of the individual mandate penalty rendered the remainder of the ACA unconstitutional.

The U.S. Justice Department chose not to fully defend the ACA in court and, instead, 16 Democratic-controlled states intervened to defend the law.

Because the court determined that the individual mandate is no longer a valid tax, but is an essential element of the ACA, it ultimately ruled that the ACA is invalid in its entirety.

Federal Court Ruling

In his ruling, Judge Reed O’Connor ultimately agreed with the plaintiffs, determining that the individual mandate can no longer be considered a valid exercise of Congressional tax power. According to the court, “[u]nder the law as it now stands, the individual mandate no longer ‘triggers a tax’ beginning in 2019.” As a result, the court ruled that “the individual mandate, unmoored from a tax, is unconstitutional.”

Because the court determined that the individual mandate is no longer valid, it now had to determine whether the provision is “severable” from the remainder of the law (meaning whether other portions of the ACA can remain in place or whether the entire law is invalid without the individual mandate).

In determining whether the remainder of the law could stand without the individual mandate, the court pointed out that “Congress stated three separate times that the individual mandate is essential to the ACA … [and that] the absence of the individual mandate would ‘undercut’ its ‘regulation of the health insurance market.’ Thirteen different times, Congress explained how the individual mandate stood as the keystone of the ACA … [and,] ‘together with the other provisions’ [the individual mandate] allowed the ACA to function as Congress intended.” As a result, the court determined that the individual mandate could not be severed, making the ACA invalid in its entirety.

Impact of the Federal Court Ruling

Judge O’Conner’s ruling left many questions as to the current state of the ACA, because it did not order for anything to be done or stay the ruling pending appeal. However, this ruling is expected to be appealed, and the White House announced that the ACA will remain in place until a final decision is made. Many industry experts anticipate that the Supreme Court will likely take up the case, which means that a final decision will not be made until that time.

While these appeals are pending, all existing ACA provisions will continue to be applicable and enforced. Although the individual mandate penalty will be reduced to zero beginning in 2019, employers and individuals must continue to comply with all other applicable ACA requirements. This ruling does not impact the 2019 Exchange enrollment, the ACA’s employer shared responsibility (pay or play) penalties and related reporting requirements, or any other applicable ACA requirement.

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Two opportunities created by association health plans

The new regulations around association health plans (AHPs) — which loosen restrictions for small businesses, franchises and associations — create two distinct opportunities in the benefits industry.

The first is for brokers, who will be crucial advisors to employers eligible for the new coverage options now available.

The second opportunity is for benefits and HR tech vendors, who will be instrumental in managing the transactional and administrative challenges that would otherwise hinder AHP success.

What challenges do association health plans represent? Let’s consider an example — the Nashville Hot Chicken restaurant franchise.

Let’s say Nashville Hot Chicken has 1,000 franchisees, each with five full-time employees. Before AHP options became available to this organization, these five-employee groups would either have had to pursue small group coverage, or employees would have had to find individual plans.

Both options likely would have been prohibitively expensive for the organization or the employees. With the new AHP regulations, however, these 1,000 franchisees may be able to pull all 5,000 workers together and create a large group benefits plan.

In doing so, they would reap the advantages of collective purchasing, just like large groups do. However, this AHP would not work like a regular group plan.

If a regular group has 5,000 employees, they would all be part of a centrally-operated payroll system and the insurance companies would receive just one check for all of the employees enrolled at the group. But under an AHP of franchisees, all the payroll systems would operate independently, and there is no clear, centralized entity to pay carriers.

This creates a massive administrative headache for Nashville Hot Chicken corporate, as well as all the individual franchise owners. In other words, who is going to manage the AHP?

Here’s where the brokers come in. Employers need brokers to walk them through all the complexities of AHPs, including sourcing carriers, third-party vendors, and compliance needs.

It would also be incredibly impractical to manage 5,000 employees through 1,000 separate businesses without a benefits and HR platform.

But brokers can provide a solution to this challenge by adopting a platform. With a benefits and HR system, the various administrative differences from franchisee to franchisee can be accounted for, while still allowing the 5,000-life group to enroll in the group offering.

By removing the administrative headache, benefits tech makes AHPs a real option for Nashville Hot Chicken. But it also gives the tech-savvy broker a clear leg up on the competition. A broker without a tech solution will be at a severe disadvantage for Nashville Hot Chicken’s business compared to a broker who has a platform.

So as small employers, franchisees and industry associations band together for group coverage, benefits tech can give brokers a competitive differentiator for this new business segment.

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Source:
Tolbert A. (1 March 2018). "Two opportunities created by association health plans" [Web Blog Post]. Retrieved from address https://www.benefitspro.com/2018/03/01/two-opportunities-created-by-association-health-pl/