ACA UPDATES AND 1095C REPORTING FOR 2016

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1 ACA UPDATES AND 1095C REPORTING FOR 2016 Presented By: Bill Heinz Suzie Kaiser Benefit Consultants 10/6/2016

2 TODAY S FOCUS 1094C/1095C REPORTING OVERVIEW 2016 CHANGES COBRA NON-CALENDAR YEAR PLANS IRS PROPOSED RULES: CASH-IN-LIEU TECHNOLOGY & VENDER ISSUES

3 AFFORDABLE CARE ACT 2

4 REVIEW: 2015 ACA REPORTING PROCESS What worked? What didn t work? Where did complications arise? Collect Data Work with Vendor Effectiveness Create Forms File and Distribute

5 REVIEW: ACA REPORTING PROCESS 1. Tracking & Identification 2. Generate Codes / Data 3. Populate Forms 4. Print & Distribute 5. File with IRS ACA-FT employees Individuals enrolled in SF coverage 1094C Part II 1095C Part II, Lines Transfer codes & data to paper forms and/or generate electronic files ACA-FT employees Individuals enrolled in SF coverage Paper (< Cs) Electronic ( Cs) 4

6 DRAFT FORM 1094C PARTS I AND II

7 FORM 1094C PART II Definition: Two types of H Transition Relief FTEs Transition Relief: Employer qualifies as a medium employer, not subject to play or pay penalties until the first month of the plan year beginning on/after 1/1/ FTEs Transition Relief: Employer does not qualify as a medium employer but for 4980H(a) no coverage penalty ALE receives a total of 80 (rather than 30) free ACA-FTs. For the 2016 reporting year, this relief is only applicable if the employer offers coverage under a health plan with a plan year beginning on a date other than January 1 (in other words, a non-calendar year plan year). Corresponds with code entered for the applicable month in column (e) of Part III. 6

8 DRAFT FORM 1094C PART III 7

9 FILING DEADLINES (FOR 2016 REPORTING YEAR) Delayed: March 2, 2017 Action Distribute 1095Cs to employees & participants File 1094C/1095Cs with IRS (paper filing) File 1094C/1095Cs with IRS (electronic filing) Due Date January 31, 2017 (same as W-2) February 28, 2017 March 31, 2017 Late Penalties: Failure to file complete and accurate Forms C by the form deadline will result in penalties equal to $250 per form, not to exceed $3 million per year. Failure to file and furnish correct information on Form 1095-C could result in a $500 per form penalty for employers.

10 DRAFT FORM 1095C

11 FORM 1095C PART II MEC / MV Offer Codes: MEC / MV coverage was offered to the employee, spouse, and/or dependents each day of the calendar month. Do not use these codes if using a Qualify Offer method (Form 1094C Box 22 A). 1B. 1C. 1D. 1E. (Most Used Code) MEC / MV coverage offered to employee only (not spouse or dependents) MEC / MV coverage offered to employee; MEC offered to dependents (not spouse) MEC / MV coverage offered to employee; MEC offered to spouse (not dependents) MEC / MV coverage to employee; MEC offered to spouse and dependents

12 FORM 1095C PART II (NEW LINE 14 CODES) Conditional Offer of Spousal Coverage: A conditional offer is an offer of coverage that is subject to one or more reasonable, objective conditions (ex: offer to cover employee s spouse only if spouse is not eligible for coverage under another employer s group health plan). Code 1J. is entered for months in which the employee is offered MEC/MV coverage, and spouse is conditionally offered at least MEC coverage; MEC coverage not offered to dependents. Code 1K. is entered for months in which the employee is offered MEC/MV coverage, and spouse is conditionally offered at least MEC coverage; MEC coverage is also offered to dependents. 1J. 1K. MEC / MV coverage offered to employee; MEC conditionally offered to spouse (not dependents) MEC / MV coverage offered to employee; MEC coverage offered to dependents; MEC coverage conditionally offered to spouse

13 FORM 1095C PART II Other Codes: 1H. 1A. 1I. 1F. 1G. No offer of MEC Employee received a qualifying offer for the month. Reserved DO NOT USE. MEC that is NOT MV offered to employee, spouse and/or dependents (Skinny plans only) Individual enrolled in self-funded MEC at least one month during the year but is not ACA-FT or not an employee during any month of the year.

14 FORM 1095C PART II Line 14: Review Codes 1A-1F (offer of coverage) Code 1G (self-funded coverage only when employee is not ACA-FT for any month) Code 1H (no coverage offered) COBRA Terminated employee Not reported as an offer of coverage (use 1H) Employee still employed who loses coverage Reported as an offer of coverage Use code that reflects the type of offer Ex 1: Employee elects coverage for self/spouse/dependents at start of year: 1E Ex 2: Employee elects coverage for self/dependents at start of year: 1C Ex 3: Employee waives coverage at start of year: 1H 13

15 FORM 1095C PART II Line 15: If code 1B, 1C, 1D, 1E, 1J or 1K (MEC/MV offer codes) entered on Line 14 for a given month, enter employee cost for single coverage on lowest cost MV plan available to the employee for that month on Line 15. Skip Line 15 if Line 14 code is 1A (Qualifying Offer); 1F (skinny plan offer); 1G (self-funded coverage/not FT);or 1H (no coverage offered) If employee pays nothing for single coverage on lowest cost MV plan available enter 0.00, i.e. do not leave Line 15 blank if there is no employee cost. If the cost is the same for all 12 months, enter this amount in All 12 Months box and leave the monthly boxes blank. A non-calendar year plan will rarely be able to use the All 12 Months box as contribution rates typically change mid-calendar year at renewal. 14

16 FORM 1095C PART II Line 16: Line 16 codes indicate the reason, if any, the employer is not subject to a play or pay penalty with respect to the employee for that month, E.g. Employee enrolled in employer coverage that month; Employee was not employed, not ACA-FT, or in a limited non-assessment period that month; Affordability safe harbor applied for that month. Only one code must appear in each of the 12 calendar month boxes (or the All 12 Months box if the same code applies for the entire year) If more than one code applies for a given month, enter the code in the following order of precedence: 2C 2A 2E 2D 2B 2F/2G/2H Enrolled Not Employed Probation Not ACA-FT If no code applies for a given month, leave that month s box blank 2F = W-2 2G = FPL 2H = Rate of Pay

17 FORM 1095C PART III Self-Funded Coverage Enter the name of the primary insured in column (a). Enter the person s SSN in column (b) or Date of Birth in column (c). If the individual was enrolled on a self-funded health plan for at least one day during each calendar month, check the Covered all 12 months box in column (d). If the individual was enrolled on a self-funded health plan for only some months, check the box for each calendar month in which the individual was enrolled for at least one day during that month in column (e). Remember: retiree coverage, stand-alone HRAs, COBRA participants 16

18 TODAY S FOCUS: COMPLIANCE 1094C/1095C REPORTING 2016 CHANGES REMINDER: PREMIUM SUBSIDY APPEAL IRS PROPOSED RULES: CASH-IN-LIEU

19 PLAY OR PAY PENALTY ASSESSMENT PROCESS Premium Subsidy Employer Notice ACA Reporting (Forms 1094C/1095C) Initial IRS Contact Demand for Payment

20 EMPLOYER PREMIUM SUBSIDY NOTICE Employer Premium Subsidy Notice Notice from a health insurance exchange informing an employer that one of its employees has been approved to receive a premium subsidy Also provides directions how to appeal the employee s eligibility to receive that subsidy WI = Healthcare.gov

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22 EMPLOYER PREMIUM SUBSIDY NOTICE Why does it matter? If the employer is an ALE and the employee is ACA- FT, the employer will owe a play or pay penalty. Generally in the employer s best interest to appeal If employee should not be eligible for premium subsidy. Not ALE / Not ACA-FT Exchange does not know who is an ALE or ACA-FT so all employers will receive employer premium subsidy notice for all employees. No need to appeal if employer is not ALE / employee not ACA-FT, other than to preserve tax dollars.

23 EMPLOYER PREMIUM SUBSIDY NOTICE What happens if employer does not appeal? Probably have the opportunity to challenge subsidy eligibility again when IRS actually assesses play or pay penalties. But not clear how that will work - better off appealing now when they know they can. If employee determined to be ineligible for subsidy at time of play or pay assessment, employee could be forced to repay all of the improperly received subsidy.

24 TODAY S FOCUS: COMPLIANCE 1094C/1095C REPORTING 2016 CHANGES REMINDER: PREMIUM SUBSIDY APPEAL IRS PROPOSED RULES: CASH-IN-LIEU

25 CASH-IN-LIEU: OPT OUT ARRANGEMENTS What is an opt out arrangement? An employer gives an employee more taxable wages if the employee declines (i.e., opts out of) coverage under the employer s group health plan. Also called cash in lieu programs

26 CASH-IN-LIEU: OPT OUT ARRANGEMENTS Why you should care IRS proposed new regulations that will affect opt out arrangements; short comment period (60 days) means that the regulations may become effective 1/1/17 When the regulations are finalized and go into effect, opt out payments that are not part of an eligible opt out arrangement will count towards the cost of coverage for purposes of determining affordability under play or pay rule. Example: Cost to employee for employee self-only coverage is $100/month. But, employer offers employee $150/month in cash wages not to take the employer s coverage. IRS says cost of coverage in this situation is $250/month unless the cash is offered under an eligible opt out arrangement

27 CASH-IN-LIEU: OPT OUT ARRANGEMENTS Eligible opt out arrangement must do all of the following: Must condition eligibility for the opt out payment on the employee and the employee s family being enrolled in minimum essential coverage (MEC) from some other source, but not under individual health insurance. Each year, must obtain reasonable evidence from employee that employee and the employee s family have MEC other than individual health insurance. An employee s attestation is sufficient reasonable evidence as long as employer has no reason to doubt the attestation. Evidence must be provided in advance of the coverage period to which the opt out applies.

28 CASH-IN-LIEU: OPT OUT ARRANGEMENTS Is it a good idea to make sure all cash-in-lieu benefits meet the requirements of eligible opt out arrangements? What about negative elections? What kind of attestation will suffice?

29 IMMEDIATE CHANGE: OVERTIME RULE FLSA NEWS FLASH: Federal Judge Halts Overtime Rule The preliminary injunction isn t permanent, it simply preserves the existing overtime rule until the court has a chance to review the merits of the case objecting to the revisions to the regulation. The overtime rule was scheduled to take effect Dec. 1 and would have raised the salary threshold from $23,660 to $47,476.

30 WHAT MIGHT HAPPEN JUST GUESSING!!

31 REPEAL OF THE ACA Will the ACA be repealed? With Republicans in control of the White House and both houses of Congress significant changes to the ACA seem inevitable. But a repeal of the ACA could take many forms, which may have different implications for employers and their health plans.

32 HOW TO REPEAL THE ACA Executive Order / Non- Enforcement Legislative Changes need congressional votes Regulatory new rules

33 HOW TO REPEAL THE ACA State Law Many states changed portions of their insurance laws to conform to the ACA. Repeal of the ACA would not automatically repeal those state laws. Fully insured plans would still be subject to any such state law mandates unless/until state law is changed.

34 FULL V. PARTIAL REPEAL It s possible Congress could simply immediately repeal the ACA in its entirety. Federal law would revert to pre March 2010 status before ACA was passed But most commentators think a full repeal is unlikely Too disruptive to insurance markets How to cover lost revenue generated by the ACA What to do with individuals who purchased policies assuming subsidies would be available. Some parts of the law are popular, e.g. no PCEs, adult child coverage

35 FULL V. PARTIAL REPEAL What (Probably) Goes Play or pay penalties and 1094C/1095C reporting Individual mandate penalties Taxes and fees (Cadillac tax, PCORI, health insurer fee) Subsidies and exchanges (phased out over time) Medicaid expansion funding (block grants) Medical Loss Ratios & Rate Disclosures Essential Health Benefits (individual & small group market) Community rating (individual & small group market) SBCs / Notice of Exchange W-2 reporting

36 FULL V. PARTIAL REPEAL What (Probably) Stays Adult child mandate No rescission (but what does this mean in practice?) Expanded HIPAA wellness plan rewards

37 FULL V. PARTIAL REPEAL Who knows? No PCEs (How to avoid free rider problem, e.g. old HIPAA creditable coverage process?) Lifetime/annual limits (including HRA integration rules and employer contributions to individual policies) 90 day waiting periods Preventive care mandate Miscellaneous patient protections Clinical trial coverage Nondiscrimination provisions ( 1557 and provider nondiscrimination rules) OOP Max Limits Guaranteed availability & renewability in fully-insured market Expanded appeal procedures and external review Health FSA deduction limits No reimbursement of OTC drugs from FSAs, HRAs and HSAs

38 IMPACT ON EMPLOYERS Employer Mandate No penalty for not offering affordable coverage to 30+ hour per week employees But is employer going to take away coverage from those employees? MEC-only and MV-only plans. No need to perform look-back measurement calculations. But still leaves the question how does employer determine who is a 20/30/40 hour per week employee eligible for coverage?

39 IMPACT ON EMPLOYERS Other Mandates Annual/lifetime limits Does employer/carrier re-impose annual/lifetime limits? Health FSA deduction limits Employer must decide maximum deduction limits Community Rating Does funding individual policies become more attractive, especially for older/sicker groups? Do carriers continue to offer level funding products? Do employers stick with them?

40 IMMEDIATE ISSUES C/1095C Reporting Employer premium subsidy notices Reporting for 2016 employer and individual mandate penalties. Penalties are not repealed yet may or may not be repealed retroactively unlikely to ever be collected but don t know for sure at this point Conservative approach is to continue to file for this year These relate to whether employer will owe a play or pay penalty in 2016 or Penalties are not repealed yet may or may not be repealed retroactively unlikely to ever be collected but don t know for sure at this point Conservative approach is to continue to appeal where appropriate although likely less urgent now. TRP Fees Reports due by November 15, 2016 with fees due in January Given that this is last year of fee and fees are used to prop up individual insurance markets, not safe to assume this is going away or won t be enforced Self-funded plans should plan to file and pay fee Gender Transition Services Two sources of law rules (ACA) and federal contractor rules (Executive Order) Both sources of law are likely to go away and/or be modified. But doesn t eliminate risk of Title VII claim, either by EEOC or private lawsuit by plan participant Risk is certainly lower if employer chooses not to include in plan but not zero.

41 REPLACEMENT STRATEGIES Greater focus on HSAs Increased contribution limits? Loosening of QHDHP rules and non-qhdhp disqualification rules, e.g. telemedicine, onsite clinics, OTCs?

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43 HEALTH SAVINGS ACCOUNTS

44 MEETING AGENDA Learn about Health Savings Accounts (HSA) IRS rules and regulations Advantages How they work Identify the bank s role in administering your Health Savings Account Clarify your role as an HSA account holder Review Associated Bank s HSA features Preview on-line resources

45 HSA OVERVIEW The Health Savings Account was created by Medicare legislation signed into federal law in late A marriage between an IRA account and the interestbearing bank account. Tax-sheltered savings Transaction account Earmarked for medical expenses

46 ADVANTAGES OF AN HSA Ownership Tax-free Portable No use it or lose it Interest-bearing Typically lower premiums on HSA Preferred Provider Organization (PPO Plan) compared to traditional PPO plans

47 PLAN TO SAVE Traditional Plan Lower deductible, higher monthly premiums High Deductible Health Plan (HDHP) High deductible, lower monthly premiums HEALTH SAVINGS ACCOUNT

48 HSA ELIGIBILITY Any individual that Is covered by a qualified HDHP Minimum deductible (adjusted annually) Single coverage $1,300 (2016 and 2017) Family coverage $2,600 (2016 and 2017) Maximum out-of-pocket expenses (adjusted annually) Single coverage $6,550 (2016 and 2017) Family coverage $13,100 (2016 and 2017) Is not covered by other health insurance Is not enrolled in Medicare Cannot be claimed as a dependent on someone else s tax return

49 HSA AND FLEX SPENDING ACCOUNTS With HSAs you may have a limited use Flex Spending Accounts (FSA). This means: Before deductible is met Can use FSA for qualified vision and dental expenses After deductible is met Can use FSA funds for all qualified medical expenses

50 HSA CONTRIBUTIONS Maximum Contribution Limit (adjusted annually) Single coverage $3,350 (2016) / $3,400 (2017) Family coverage $6,750 (2016) / $6,750 (2017) Catch-up contributions (adjusted annually) Additional annual contributions allowed for account owners 55 and older 2016 = $1, = $1,000 1/12 th Rule may apply for mid-year plan enrollees

51 REIMBURSABLE EXPENSES Most qualified medical expenses are similar to FSAs without paying taxes or penalties. Examples include: Prescription drugs Medical payments that go towards the insurance deductible Vision, dental, and orthodontics A list is provided on the website: HSA.AssociatedBank.com or by visiting IRS.Gov/IRS-df/p502.pdf

52 HSA DISTRIBUTIONS Distributions are income tax-free if taken for qualified medical expenses incurred by: Individual covered by the High Deductible Health Plan Spouse of the individual Any IRS defined dependent of the individual Spouse and dependents do not need to be covered by the HDHP.

53 HSA DISTRIBUTIONS HSA s cannot be used to pay for other health insurance premiums except for COBRA continuation coverage Health plan coverage while receiving unemployment compensation Long-term care insurance premiums For those individuals receiving Medicare benefits and no longer contributing to an HSA: Reimbursement of Medicare premiums deducted from Social Security payments and out-of-pocket expenses (Part A, Part B, Medicare HMOs, new prescription drug coverage) Cannot pay Medi-gap premiums

54 TAX TREATMENT OF HSA DISTRIBUTIONS Tax treatment of funds used: Expense Type Age Tax Treatment Qualified Medical Expense Any Tax Free Non-qualified Medical Expense Non-qualified Medical Expense 65 and Over Ordinary Tax Under 65 Ordinary Tax + 20% Penalty Additional 20% tax taken for non-qualified medical expenses is avoided if taken after: Individual becomes disabled Individual is eligible for Medicare State taxes may vary see your tax advisor

55 PRESERVE YOUR HSA DOLLARS STAY HEALTHY or GET HEALTHY Use In-Network doctors/hospitals shop around Know your benefits Consider generic or mail order prescriptions Ask doctors and pharmacists questions Most effective treatment Cost of treatment Alternatives to treatment 54

56 PROCESSING CLAIMS Don t pay your doctor immediately after your office visit. Your insurance carrier will review your health insurance plan, and apply applicable discounts to your bill. After the insurance company has reviewed your bill and health plan, you will receive an updated billing statement showing the true cost due. All discounts have been applied, now is the time to pay your bill Explanation of Benefits (EOB) Pay for your prescriptions at purchase 55

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