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.

Download the PDF


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.

Read the article.

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/


Pay-to-shop health care incentives gaining traction

Laurie Cook went shopping recently for a mammogram near her home in New Hampshire. Using an online tool provided through her insurer, she plugged in her ZIP code. Up popped facilities in her network, each with an incentive amount she would be paid if she chose it.

Paid? To get a test? It’s part of a strategy to rein in health care spending by steering patients to the most cost-effective providers for non-emergency care.

State public employee insurance programs were among the early adopters of this approach. It is now finding a foothold among policymakers and in the private sector.

Scrolling through her options, Cook, a school nurse who is covered through New Hampshire’s state employee health plan, found that choosing a certain facility scored her a $50 check in the mail.

She then used the website again to shop for a series of lab tests. “For a while there, I was getting a $25 check every few weeks,” said Cook. The checks represented a share of the cost savings that resulted from her selections.

Lawmakers in nearby Maine took the idea further, recently enacting legislation that requires some private insurers to offer pay-to-shop incentives, part of a movement backed by a conservative foundation to get similar measures passed nationally.

Similar proposals are pending in a handful of other statehouses, including Virginia, West Virginia and Ohio.

“If insurance plans were serious about saving money, they would have been doing this stuff years ago,” said Josh Archambault, a senior fellow at the Foundation for Government Accountability, a limited-government advocacy group based in Naples, Fla., that promotes such “right-to-shop” laws. “This starts to peel back the black box in health care and make the conversation about value.”

Still, some economists caution that shop-around initiatives alone cannot force the level of market-based change needed. While such shopping may make a difference for individual employers, they note it represents a tiny drop of the $3.3 trillion spent on health care in the U.S. each year.

“These are not crazy ideas,” said David Asch, professor of medicine, medical ethics and health policy at the Penn Medicine Center for Health Care Innovation in Philadelphia. But it’s hard to get consumers to change behavior — and curbing health care spending is an even bigger task. Shopping incentives, he warned, “might be less effective than you think.”

If they achieve nothing else, though, such efforts could help remove barriers to price transparency, said Francois de Brantes, vice president and director of the Center for Value in Health Care at Altarum, a nonprofit that studies the health economy.

“I think this could be quite the breakthrough,” he said.

Yet de Brantes predicts only modest savings if shopping simply results in narrowing the price variation between high- and low-cost providers: “Ideally, transparency is about stopping folks from continuously charging more.”

Among the programs in use, only a few show consumers the price differences among facilities. Many, like the one Cook used, merely display the financial incentives attached to each facility based on the underlying price.

 

Advocates say both approaches can work.

“When your plan members have ‘skin in the game,’ they have an incentive to consider the overall cost to the plan,” said Catherine Keane, deputy commissioner of administrative services in New Hampshire. She credits the incentives with leading to millions of dollars in savings each year.

Several states require insurers or medical providers to provide cost estimates upon patients’ requests, although studies have found that information can still be hard to access.

Now, private firms are marketing ways to make this information more available by incorporating it into incentive programs.

For example, Vitals, the New Hampshire-based company that runs the program Cook uses, and Healthcare Bluebook in Nashville offer employers — for a fee — comparative shopping gizmos that harness medical cost information from claims data. This information becomes the basis by which consumers shop around.

Crossing Network Lines

Maine’s law, adopted last year, requires insurers that sell coverage to small businesses to offer financial incentives — such as gift cards, discounts on deductibles or direct payments — to encourage patients, starting in 2019, to shop around.

A second and possibly more controversial provision also kicks in next year, requiring insurers, except HMOs, to allow patients to go out-of-network for care if they can find comparable services for less than the average price insurers pay in network.

Similar provisions are included in a West Virginia bill now under debate.

Touted by proponents as a way to promote health care choice, it nonetheless raises questions about how the out-of-network price would be calculated, what information would be publicly disclosed about how much insurers actually pay different hospitals, doctors or clinics for care and whether patients can find charges lower than in-network negotiated rates.

“Mathematically, that just doesn’t work” because out-of-network charges are likely to be far higher than negotiated in-network rates, said Joe Letnaunchyn, president and CEO of the West Virginia Hospital Association.

Not necessarily, counters the bill’s sponsor, Del. Eric Householder, who said he introduced the measure after speaking with the Foundation for Government Accountability. The Republican from the Martinsburg area said “the biggest thing lacking right now is health care choice because we’re limited to our in-network providers.”

Shopping for health care faces other challenges. For one thing, much of medical care is not “shoppable,” meaning it falls in the category of emergency services. But things such as blood tests, imaging exams, cancer screening tests and some drugs that are administered in doctor’s offices are fair game.

Less than half of the more than $500 billion spent on health care by people with job-based insurance falls into this category, according to a 2016 study by the Health Care Cost Institute, a nonprofit organization that analyzes payment data from four large national insurers. The report also noted there must be variation in price between providers in a region for these programs to make sense.

Increasingly, though, evidence is mounting that large price differences for medical care exist — even among rates negotiated by the same insurer.

“The price differences are so substantial it’s actually scary,” said Heyward Donigan, CEO of Vitals.

At the request of Kaiser Health News, Healthcare Bluebook ran some sample numbers for a Northern Virginia ZIP code, finding the cost of a colonoscopy ranged from $670 to $6,240, while a knee arthroscopy ranged from $1,959 to $20,241.

Another challenge is the belief by some consumers that higher prices mean higher quality, which studies don’t bear out.

Even with incentives, the programs face what may be their biggest challenge: simply getting people to use a shopping tool.

Kentucky state spokeswoman Jenny Goins said only 52 percent of eligible employees looked at the shopping site last year — and, of those, slightly more than half chose a less expensive option.

“That’s not as high as we would like,” she said.

Still, state workers in Kentucky have pocketed more than $1.6 million in incentives — and the state said it has saved $11 million — since the program began in mid-2013.

Deductibles, the annual amounts consumers must pay before their insurance kicks in and are usually $1,000 or more, are more effective than smaller shopping incentives, say some policy experts.

In New Hampshire, it took a combination of the two.

The state rolled out the payments for shopping around — and a website to look for best prices — in 2010. But participation didn’t really start to take off until 2014, when state employees began facing an annual deductible, said Deputy Commissioner Keane.

Still, the biggest question is whether these programs ultimately cause providers to lower prices.

Anecdotally, administrators think so.

Kentucky officials report they already are witnessing a market response because providers want patients to have an incentive to choose them.

“We do know providers are calling and asking, ‘How do I get my name on that list’ [of cost-effective providers]?” said Kentucky spokeswoman Goins. “The only way they can do that is to negotiate.”

Read the article.

Source:
Appleby J., Kaiser Health News (5 March 2018). "Pay-to-shop health care incentives gaining traction" [Web blog Post]. Retrieved from address https://www.benefitspro.com/2018/03/05/pay-to-shop-health-care-incentives-gaining-tractio/


Ahead of the Midterms, Voters across Parties See Costs as their Top Health Care Concern

From Kaiser Health News is this poll deciphering where the public sits ahead of Midterms. What is there top healthcare concern? Costs. Get all the information in this article.


At a time when the Trump Administration is encouraging state efforts to revamp their Medicaid programs through waivers, the latest Kaiser Family Foundation tracking poll finds the public splits on whether the reason behind proposals to impose work requirements on some low-income Medicaid beneficiaries is to lift people out of poverty or to reduce spending.

The Centers for Medicare and Medicaid Services in January provided new guidance to states and has since approved such waivers in two states (Kentucky and Indiana). Eight other states have pending requests

When asked the goal of work requirements, four in 10 (41%)  say it is to reduce government spending by limiting the people enrolled in the program, while a third (33%) say it is to lift people out of poverty as proponents say.

While larger shares of Democrats and independents say the reason is to cut costs, Republicans are more divided, with roughly equal shares saying it is to lift people out of poverty (42%) as to reduce government spending (40%). People living in the 10 states that have approved or pending work requirement waivers are similarly divided, with near-equal shares saying the goal is to lift people out of poverty (37%) as to reduce government spending (36%). This holds true even when controlling for other demographic variables including party identification and income.

feb-poll-chart-1.png

In addition to work requirements, five states are currently seeking Medicaid waivers to impose lifetime limits on the benefits that non-disabled adults could receive under the Medicaid program. The poll finds the public skeptical of such a shift, with two thirds (66%) saying Medicaid should be available to low-income people as long as they qualify, twice the share (33%) as say it should only provide temporary help for a limited time.

Substantial majorities of Democrats (84%) and independents (64%) say Medicaid should be available without lifetime limits, while Republicans are divided with similar shares favoring time limits (51%) and opposing them (47%).

These views may reflect people’s personal experiences with Medicaid and the generally positive views the public has toward the current program, which provides health coverage and long-term care to tens of millions of low-income adults and children nationally.

Seven in 10 Americans report a personal connection to Medicaid at some point in their lives – either directly through their own health insurance coverage (32%) or their child being covered (9%), or indirectly through a friend or other family member (29%).

Three in four (74%) hold favorable views of Medicaid, including significant majorities of Democrats (83%), independents (74%) and Republicans (65%). About half (52%) of the public say the current Medicaid program is working well for low-income enrollees, while about a third (32%) say it is not working well.

Most Residents of Non-Expansion States Favor Medicaid Expansion to Cover More Low-Income People

Under the Affordable Care Act, most states expanded their Medicaid programs to cover more low-income adults. In the 18 states that have not done so, a majority (56%) say that their state should expand Medicaid to cover more low-income adults, while nearly four in 10 (37%) say their state should keep Medicaid as it is today.

Slightly more than half of Republicans living in the 18 non-expansion states (all of which have either Republican governors, Republican-controlled legislatures or both) say their state should keep Medicaid as it is today (54%) while four in 10 (39%) say their state should expand their Medicaid program.

Favorable Views of the ACA Reach New High in More Than 80 KFF Polls

The poll finds 54 percent of the public now holds a favorable view of the Affordable Care Act, the highest share recorded in more than 80 KFF polls since the law’s enactment in 2010. This reflects a slight increase in favorable views since January (50%), while unfavorable views held steady at 42 percent.

The shift toward more positive views comes primarily from independents (55% view the ACA favorably this month, up slightly from 48% in January).

feb-poll-chart-2.png

Public Remains Confused about Repeal of the ACA’s Individual Mandate

The poll also probes the public’s awareness about the repeal of the ACA’s requirement that nearly all Americans have health insurance or pay a fine, commonly known as the individual mandate. The tax legislation enacted in December 2017 eliminated this requirement beginning in 2019.

About four in 10 people (41%) are aware that Congress repealed the individual mandate, a slight increase from January, when 36 percent were aware of the provision’s repeal.

However, misunderstandings persist. Most (61%) of the public is either unaware that the requirement has been repealed (40%) or is aware of its repeal but mistakenly believes the requirement will not be in effect during 2018 (21%). Few (13%) are both aware that it has been repealed and that it remains in effect for this year.

Costs are Voters’ Top Health Care Concern ahead of the 2018 Midterm Elections

Looking ahead to this year’s midterm elections, the poll finds Democratic, Republican and independent voters most often cite costs as the health care issue that they most want candidates to address.

When asked to say in their own words what health care issue that they most want candidates to discuss, more than twice as many voters mention health care costs (22%) as any other issue, including repealing or opposing the Affordable Care Act (7%).  Costs are the clear top issue for Democrats (16%) and independents (25%), and one of the top issues for Republicans (22%) followed by repealing or opposing the ACA (17%).

Designed and analyzed by public opinion researchers at the Kaiser Family Foundation, the poll was conducted from February 15-20, 2018 among a nationally representative random digit dial telephone sample of 1,193 adults. Interviews were conducted in English and Spanish by landline (422) and cell phone (771). The margin of sampling error is plus or minus 3 percentage points for the full sample. For results based on subgroups, the margin of sampling error may be higher.

Read the article.

Source:
 Kaiser Family Foundation (1 March 2018). "Poll: Public Mixed on Whether Medicaid Work Requirements Are More to Cut Spending or to Lift People Up; Most Do Not Support Lifetime Limits on Benefits" [Web Poll Post]. Retrieved from address https://www.kff.org/medicaid/press-release/poll-public-mixed-medicaid-work-requirements-more-to-cut-spending-lift-people-up-most-do-not-support-lifetime-limits/

Health prices to outpace inflation for first time since 2010

Since 2010, our health prices have stayed in pace or below inflation. For the first time since then, they're expected be much, much more. Get the details in this article from Employee Benefit Advisor.


The growth in U.S. healthcare prices is projected to outpace economy-wide inflation for the first time since 2010, the second report in a week to signal the end of a long stretch of restrained medical increases.

This year, price increases for personal health expenditures are projected to rise 2.2%, compared with 1.9% for overall inflation, according to a report released Wednesday by the Centers for Medicare and Medicaid Services. The findings confirmed a recent analysis warning that the U.S. could be at the cusp of a return to higher medical inflation.

Health spending is determined by the price of goods and services, as well as how much health care people use. In recent years, increases in health spending have been driven by volume, as millions more people gained insurance coverage under the Affordable Care Act. While high-cost drugs have made headlines, overall price hikes have been historically low, increasing by an average of 1.1% annually between 2014 and 2016.

Those trends are projected to reverse. Government actuaries expect the number of people without health insurance to increase slightly after Republicans lifted the ACA’s penalty for going uninsured late last year. Medical price growth, meanwhile, will rebound, “in part reflecting more rapid growth in healthcare workers’ wages,” the report said.

 
Bloomberg

Healthcare inflation has been partly restrained by limits on how much Medicare pays hospitals and physicians under the ACA and other legislation, combined with overall slow growth in prices throughout the economy.

In recent days, concerns about higher-than-expected inflation have rattled stock markets and pushed up Treasury yields. Investors feared that a tightening labor market and rising wages could push up prices and spur the Federal Reserve to raise interest rates faster than anticipated to keep the economy from overheating.

Total health spending is projected to increase by 5.3% to about $3.7 trillion in 2018, according to the CMS report, and the growth will average 5.5% per year over the next decade. While that’s still faster than the overall rate of economic growth, it’s an improvement from past decades. Between 1990 and 2007, annual health spending increased by 7.3% per year.

Read the original article here.

Source:
Bloomberg News (20 February 2018). "Health prices to outpace inflation for first time since 2010" [Web Blog Post].Retrieved from address https://www.employeebenefitadviser.com/articles/health-prices-to-outpace-inflation-for-first-time-since-2010?feed=00000152-175f-d933-a573-ff5f3f230000