Part II: Deep Dive: Pay or Play and Employer Reporting

Transcription

1 1 ACA Compliance Briefing for Self-Insured Employers Part 1 (The Impact of ACA on Employer Self-Funding) Atlanta Office One Atlantic Center 1201 West Peachtree Street Atlanta, Georgia (404) John Hickman, Esq. john.hickman@alston.com All Rights Reserved Alston & Bird, 2014 Part I: Current Landscape and Next Directions Part II: Deep Dive: Pay or Play and Employer Reporting 1

2 The ACA Health Care Coverage Landscape Changes in Effect Prior to 2014 Changes effective in 2010 Change in dependent definition for purposes of health plan tax exclusions ("child" through age 26) Coverage and Plan changes Small employer tax credit In 2014 restricted to exchange coverage Wave #1 of Health Reforms (n/a excepted benefits) Prohibitions on Lifetime and Annual Caps Coverage of Adult Dependent Children Up to 26 No Coverage Rescissions (i.e., retroactive termination) Mandatory Coverage of Preventive Care Updated Claims Procedures (incl. external review) 2 The ACA Health Care Coverage Landscape Changes in Effect Prior to 2014 Changes effective January 1, 2011 Limits on OTC benefits SIMPLE Cafeteria Plan Rules for Small employers W 2 reporting for coverage cost (first report in 2013). Transitional exceptions for most FSAs, small employers, and HRAs Small employer is less than 250 W 2s (by FEIN) in the prior year Some exceptions may be modified by future guidance 3 2

3 3 The ACA Health Care Coverage Landscape Changes in Effect Prior to 2014 Changes effective January 1, 2013 Loss of Medicare Part D retiree subsidy deduction $2500 PY cap on FSA salary reductions (Notice ) Amendment required by 12/31/2014 Significant Limitations on HRAs Announced in 2013 January 2013 FAQ Guidance Transition (spend down) rule for some pre existing HRAs Notice Curtails stand alone HRAs, prohibits pre tax individual policies Carryover Guidance for FSAs Notice Up to $500 Cannot be combined with FSA grace period 4 Changes in Effect 2014 and Beyond Changes Effective in 2014 Individual mandate no penalty imposed due to coverage gap if individual enrolls by end of open enrollment (March 31, 2014) Employer play or pay requirement NOW DELAYED UNTIL for employers with less than 100 FTE employees, with some limited Sledgehammer transition relief for larger employers Employer Coverage Reporting NOW DELAYED UNTIL 2015 (Final regs. March 2014) Required to report minimum essential coverage and premium costs Applies to insurers and self funded plans Exchanges First open enrollment for individual coverage commenced October 2013 October 1 st Exchange Notice Requirement; on going for new hires Changes Generally Effective First Plan Year On/After January 1, 2014 Wave #2 of Health Reforms (see later slides) Employer Quality of Care Coverage Reporting Delayed pending guidance Will require information on health care outcome, safety, and wellness Must make available to enrollees and on internet Changes Effective in 2018 Cadillac Plan excise tax 5

4 Court Decisions of Interest Hobby Lobby Decision Religious objections to providing contraceptives Supreme Court ruled in favor of for profit employers under RFRA But state contraceptive equity laws may still apply EEOC position under Title VII Other challenges working their way through the courts Halbig and King Availability of federal tax subsidies in state run exchanges 6 ACA REQUIREMENTS 2014 AND BEYOND 7 4

5 5 Reforms Effective Plan Years On/After 2014 (ALL) No preexisting condition exclusions or limitations are permitted First wave of reforms applied only to persons under age 19 (ALL) Prohibition on excessive waiting periods i.e. no waiting period in excess of 90 days Final Regulations issued February 2014 March 2013 Proposed Regulations substantially retained New 30 day orientation period Eliminates HIPAA Certificates After 12/31/14 (NGF) Fair Health Insurance Premiums (applicable only to health insurers of small group plans) Limitations on premium setting (e.g. limitations on premium setting based on age 3:1, tobacco use 1.5:1, geography) Final Regulations issued in February Reforms Effective Plan Years On/After 2014 (NGF) No discrimination based on health status is permitted Essentially, the same rules that currently exist under HIPAA The law raises maximum incentive amount for wellness programs that provide the incentive based on achieving a health standard from 20 to 30 percent of the COBRA cost of coverage Also gives the Secretaries of Labor, HHS, and the Treasury leeway to increase the percentage to 50 percent Final regulations published June 3, 2013» Some new requirements for standard based wellness plans (activity only vs. standard based distinction)» 50% limited to tobacco cessation (All) Coverage of dependent children to age 26 end of special rule for GF plans Under transition rule, GF plans could exclude adult children if the adult child is eligible to enroll in an eligible employer sponsored health plan other than a group health plan of a parent. This special rule for GF plans does not apply to plan years beginning on or after January 1,

6 6 Reforms Effective Plan Years On/After 2014 (NGF) Cost limitations ALL PLANS Out of pocket expenses do not exceed the amount applicable to coverage related to health savings accounts (HSAs) ($6350 single, $12700 family 2015 amounts $6600 and 13,200 differs from HSA amounts (6450, 12900) ACA compliance does not mean HSA eligible Small Fully Insured Plans Deductibles do not exceed $2,000 for single coverage and $4,000 for family coverage (as indexed) February 2013 final Regulations clarify that deductible requirement only applied to fully insured plans in small group market, but OOP applies to ALL» Transition OOP relief allowed where separate PBM administrator only for the 2014 plan year Medicare SGR Fix (Sec 213)» Eliminates deductible (but not OOP) limit Reopens door for integrated DRIP and HRA arrangements coupled with super high deductible coverage 10 Reforms Effective Plan Years On/After 2014 (NGF) Fully insured plans in small group market must provide essential health benefits (EHB) as determined by reference to a State benchmark plan Not applicable to fully insured plans in large group market or self funded plans For purposes of applying the prohibition on lifetime and annual limits, large group and self funded plans may use any single permissible benchmark plan Final regulations address MV for pay/play purposes and IRS issues MV calculator (NGF) Group and individual plans required to cover routine costs of participation in clinical trials by qualified individuals Agency FAQ says good faith compliance standard applies until guidance is issued 11

7 Reforms Effective Plan Years On/After 2014 (NGF) No discrimination against providers who act within the scope of their license Not an any willing provider statute Agency FAQ says good faith compliance standard applies until guidance is issued. (NGF) Additional preventive care requirements for PY beginning on/after 9/24/14 In accordance with new guidelines issued by the United States Preventive Services Task Force (USPSTF), non grandfathered plans will need to cover cancer medication preventive services without charge. The effective date is based on when the USPSTF added the new requirement. Sheets and FAQs/aca_implementation_faqs18.html. 12 Proposed Excepted Benefit Regulations Clarifies Limited Scope Vision/Dental Exception Not required to collect a premium Can exception apply to stand alone plans? Comment letter filed and awaiting clarification Comment letter requested exception for stand alone FSAs Creates exception for EAPs No coordinate exception for wellness programs Note: Reporting issues with stand alone wellness programs When is an EAP benefit significant medical care? Newly created exception for wrap around plans Limited to employees offered MV coverage Not restricted to those for which coverage unaffordable Must wrap around exchange coverage 13 7

8 FAQs Part XVIII Preventive services Cost sharing and OOP Ok to exclude OON and non covered services Many questions yet remain (PBMs, 3 tiered networks, etc.) Expatriate plans Fixed indemnity insurance Clarifies scope of Prior 1/13 FAQ 7 guidance Confirms that fixed indemnity paid on other than a per diem may qualify where limited to those with primary coverage Wellness programs Confirms that limited administrative period possible Reasonable alternatives not limited to physician recommendation 14 FAQs Part XIX New model COBRA Notices OOP 2015 limits of $6600 and $13,200 Reference based pricing PBM guidance Guidance on preventive care/tobacco use 15 8

9 9 IRS Notice Impact... Guidance forecloses the ability of employers to make pre tax payments of premiums for major medical policies (including through a cafeteria plan or premium reimbursement arrangement) issued in the individual market (IM) for active employees. Read Q/A 1 and definition of employer payment plan together. In addition, stand alone HRAs, stand alone MERPs, and limited dollar HRAs (e.g., San Francisco HCSO HRAs) are effectively eliminated (subject to certain transition rules). Arrangements not illegal, but failure to timely terminate such arrangements could result in a potential excise tax of $100 per employee participant per day, as well as potential actions under ERISA 16 What s Left After Notice ? Defined contribution arrangements that provide benefits exclusively to retirees and/or other former employees (e.g. disabled individuals). Arrangements that provide exclusively excepted benefit coverage. o Thus, for example, employer pre tax funding can occur for vision, dental, cancer, hospital indemnity, accident, disability, and other excepted benefit coverage. After tax funded individual medical arrangements that satisfy the DOL voluntary benefit safe harbor. Defined contribution arrangements that utilize group coverage HRAs that are integrated with group plans. o Important clarification provides that integrated plans need not share same plan sponsor, same plan document, or file single Form o Different integration rules apply based on whether the HRA provides reimbursement only of deductibles, copayments and non EHBs, (in which case the other GHP need not provide MV) or whether the HRA is open ended for any medical expense (in which case the other GHP must provide MV). 17

10 In a nutshell Notice Allows optional adoption of $500 (or less) carryover for Health FSA (not DCAP) Does not reduce $2,500 salary reduction amount Must be uniformly available In lieu of grace period 18 ACA: NEW TAXES AND FEES 19 10

11 Final PCORI Guidance Fee applies for plan years ending on/after October 1, 2012 and before October 1, 2019 Calendar year PYs fee applies to the 2012 to 2018 PYs Payment was due July 31, 2014: For PY ending on/before December 31, 2013 IRS Form 720 for self funded plans. Carrier should remit on behalf of fully insured plans 20 Exceptions Excepted benefits Final PCORI Guidance Non excepted HRAs/FSAs not exempt EAPs, disease management, wellness, as long as not significant benefits in nature of medical care HRAs that overlap with other self funded coverage E.g., an integrated HRA with self funded coverage Final regulations published 12/6/

12 12 Reinsurance Fee Guidance Effective for Final Rules with details of the fee calculation and payment issued in March 2013, proposed rules at 77 Fed Reg (12/7/2012) Payable by plans and insurers; Plans may pay through TPA if TPA agrees HHS will collect everything from self insured and fully insured Fee amount: $5.25 per covered individual per month ($63 per year) PCORI like calculation method Recent rule would provide for collection twice a year; the bulk of the fee ($52.50 per year/enrollee for 2014, attributable to the reinsurance program) would be payable in early 2015, and the remainder ($10.50 per year/enrollee, payable to the US Treasury) would be payable in late Proposed rules for 2015 published 12/2/13 provide that fee for 2015 (payable in 2016) would be $44 per year/per enrollee 22 Reinsurance Fee Exceptions Final rule (published March 2014) restricts reinsurance fee to plans providing major medical coverage (defined as minimum value). As a result virtually all FSAs, HRAs, and HSAs are exempt as well as following specifically exempt plans... Excepted benefits EAPs, disease management, wellness, as long as not major medical Prescription drug only Individuals for whom Medicare is primary 23

13 Other Taxes and Fees Starting in 2014 Individual mandate Proposed regulations issued 1/30/2013 Define "minimum essential coverage" to include any self funded group health plans Concept of a skinny/bare bones plan and interplay with 4980H Health insurers fee (does not apply with respect to self funded plans) Final Regs issued March 2013 No application to stop loss for now Starting in 2018 "Cadillac" plan tax 24 Fee on Health Insurers First payable in 2014 based on premiums for 2014 Aggregate amount ($8 billion for 2014) is divided among insurers based on relative market share (as determined by net premiums written) Does not apply to self funded plans Generally n/a excepted benefits Vision and dental not exempt Certain other exceptions may also apply Insurers will likely pass along the fee in the cost of health coverage Final regulations published 11/26/

14 Cadillac Plan Tax Beginning in 2018, ACA imposes a 40 percent excise tax on: Coverage providers: for the sum of months in which the aggregate value of employer sponsored health coverage for the employee exceeds: 1/12 of $10,200 for single coverage and $27,500 for family (i.e., other than single) coverage» The higher family threshold applies to both single and family coverage offered under a multiemployer plan» These amounts are to be adjusted automatically if health costs increase by more than anticipated before 2018» The thresholds are increased by CPI + 1 in 2019, and by CPI thereafter» An employer may make an adjustment to reduce the cost of plans when calculating the tax if the employer s age and gender demographics are not representative of a national average» No adjustment for high cost states The annual limit for retirees between ages 55 and 64, individuals engaged in certain high risk professions (e.g., law enforcement professionals, EMTs, longshoremen, construction workers, and miners), and those employed to install electrical or telecommunication lines is increased to $11,850 for individual coverage and $30,950 for family coverage 26 Cadillac Plan Tax Determined by the employer and assessed against coverage providers Coverage providers are defined to include the following: In the case of fully insured plans, the health insurer In the case of HSA or medical savings account (MSA) contributions, the employer making the contributions In the case of a self insured plan or flexible spending account (FSA), the person that administers the plan (e.g., the TPA) In many cases, employer sponsored coverage will include both fully insured and selfinsured contributions (it may also include HSA contributions) The coverage provider s applicable share of the tax will bear the same ratio to the total excess benefit as the cost of the coverage provider s coverage to the total value of employer sponsored coverage 27 14

15 Cadillac Plan Tax The coverage subject to the excise tax rule includes: The applicable premium (determined in accordance with COBRA rules) for all accident and health coverage provided by the employer, even if paid for with after tax dollars by the employee (except vision only insurance, dental insurance, accident and disability insurance, long term care insurance, and after tax funded hospital indemnity and/or specified disease coverage) Both non elective and salary reduction contributions to a health FSA Employer contributions (presumably including salary reductions) to an HSA 28 A Refresher and Recap PAY OR PLAY ECONOMICS

16 16 ACA Regs to Date 30 IRC 4980H: Overview IRC 4980H prescribes one of two excise taxes on an applicable large employer if a full time employee enrolls in the Exchange and receives an IRC 36B premium tax subsidy for any month AND: 4980H(a): The applicable large employer failed to offer full time employees minimum essential coverage during such month ("sledgehammer penalty" or "no offer of coverage penalty") OR 4980H(b): The applicable large employer failed to offer full time employees minimum essential coverage that is affordable and provides minimum value during such month ("tackhammer penalty" or "no qualifying coverage penalty") 31

17 Who is Eligible for an Exchange Subsidy? The following individuals will NOT trigger a pay or play penalty. Is not a citizen or legal resident Interesting treatment of residents of US territories Has household income greater than 4 X federal poverty line (FPL) (about $46,000/individual, $94,000/family of 4) Is offered enrollment in an employer sponsored plan providing MV and that is "affordable" to employee Actually enrolled in an employer sponsored plan, regardless of MV or affordability Employer cannot mandate enrollment Eligible for other specified coverage, including Medicare Part A, Medicaid, CHIP, TRICARE, etc. 32 Sledgehammer Tax Keys Are you an applicable large employer 50 or more FTEs (100 or more in 2015)? Do you offer minimum essential coverage (MEC) to 95% (70% in 2015) of FT employees AND dependent children? Transition relief for plans that never covered children for 2015 This test does NOT look at contribution rates so an access only plan would suffice Guidance provides for look back determination (measurement) period and look forward safe harbor (stability) period to determine FT Up to 1 year look back for seasonal and variable hour employees Variable hour determined based on facts and circumstances 33 17

18 Tackhammer Tax Keys Applies even if all FT employees are eligible Employee contribution for employee only coverage is more than 9.5% of W 2 or 9.5% of pay or FPL amount Or Plan does not provide minimum value (MV) coverage And employee actually gets subsidized exchange coverage 34 Minimum Value Minimum value (MV) is satisfied if: The plan's share of the total allowed costs of benefits provided under the plan is more than 60 percent of such costs 3 ways to determine if plan provides minimum value Minimum value calculator Array of design based safe harbors provided by the IRS, or Appropriate certification by an actuary that the plan provides minimum value HRA and HSA contributions may be taken into account in determining MV 35 18

19 19 Tackhammer Penalty Affordability Rules Based on self only premium for lowest cost option Safe harbor for determining affordability (available by class) W 2 wages Wages does NOT include pre tax salary reductions Adjustments for partial year offer of coverage Premium must remain a constant amount or percentage of W 2 Rate of Pay Safe Harbor Hourly rate of pay X 130 (for hourly employees) Monthly rate of pay (for salaried employees) This appears to be based on GROSS pay Rate of pay may be used when hourly rate changes during year (apply monthly) Federal Poverty Safe Harbor Federal poverty limit for single individual (based on FPL determined in last 6 months before start of PY) / UPDATE ON PAY OR PLAY RULES (IRC 4980H) 37

20 20 Highlights 1 year delay for small employers (less than 100 full time equivalents) Modified substantially all test (down to 70%) in 2015 for employers with 100 or more full time equivalents (but don t get too excited b/c tackhammer) Acknowledgement of monthly measurement period Limitations on classes that use different standards and administrative issues with transitions Revised look back measurement period rules (e.g. applies to all employees) Describes Monthly and Look Back methods as minimum standards Definition of seasonal Generally less than 6 months and start at same time (season) each year Guidance regarding staffing agency employees Revised offer rules 38 Transition Rules Fiscal plan year transition relief No change in plan year after 12/27/2012; Benchmark date is 2/9/14 New significant percentage rule using only full time employees 33% coverage/50% offered coverage 6 month measurement period/12 month stability period for month period to determine ALE status for 2015 Large employers (100 or more FTEs) 70% substantially all test Allocable reduction share increased to 80 But does NOT apply to FTEs (throwaway is still 30) Applies to employers with fiscal plan years that satisfy transition relief 1 year delay for small employer provided certain conditions satisfied 2015 relief for plans that did not cover dependents in 2013 and

21 21 Employer Reporting 6055 MEC reporting: Final Regulations Issued March 2014 Required of GHPs, Insurers, and CB plans Not much simplification Form 1095 C a report with the IRS that includes the following information: Whether you offer MEC The name, address and SSN of EVERY INIDIVIDUAL (INCLUDING DEPENDENTS) COVERED BY YOUR MEC The dates such individuals were covered by your MEC You are also required to send a report to EACH INDIVIDUAL. 40 Employer Reporting 6056 Reporting: Final regulations published March 2014 Form 1095 C, a report with IRS that includes the following information: Name/EIN of employer Certification that you provide MEC to full time employees AND dependents Duration of waiting period for full time employees Months when coverage was available to full time employees and dependents Name, SSN for each full time employee and their dependents and the months that they were covered Monthly premium for lowest cost option You also have to send report with same information to full time employees 41

22 Good, Bad, and Much Ugly Good: Some limited relief Less information if qualifying offer for year 2015 transition relief (q/o to 95% FT each month) Further relief if q/o provided 98% all employees Bad and Ugly: Must track and report monthly coverage information for every employee who is/becomes FT in a month even those for which coverage not required (limited non assessment period, waiting period, etc.) 42 Employer Response Not a Race to the Bottom (at least not yet) Shift Happens: Greater interest in HDHP and account based plans (HRA/HSA) Steerage away from traditional PPO plans Greater interest in long term wellness initiatives Pay or play planning Increases in premium cost share for spouse/family coverage (to offset extension of coverage/increase in subsidy to employee only) to avoid pay/play tax w/r/t employee coverage Extension of eligibility to all employees and increase cost Easier than tracking for those with limited PT workforce Reduction in hours 29ers (with buffer) for PT employees 43

23 Other announced approaches Employer Response Cessation of mini med coverage due to expiration of waiver Reliance on public exchange for PT and ineligible employees Termination of spousal eligibility where eligible for own coverage Offload pre Medicare retirees to age subsidized individual market Private exchange for actives (Pre tax must use group coverage) 44 Don t Forget ACA EDI Mandates All GHPs (broad HIPAA definition includes FSAs, HRAs, and excepted benefits) must have HPID Large GHPs by 11/5/14 Small GHPs by 11/5/15 What is a GHP Bundling? What is small $5 million in gross receipts HIPAA EDI Certification 12/15 for plans with HPID prior to 1/15 One year after HPID for plans obtaining HPID 1/15 12/

24 What Does it All Mean? What does it all mean for employer sponsored health coverage? Self funding before ACA Self funding after ACA What does it all mean for Individual account based plans? Focus on FSAs Focus on HRAs New Challenges Under ACA and Otherwise Focus on HSAs 46 Advantages Self Funding Before Health Care Reform Maximum flexibility with respect to plan design without regard to state mandates Uniform schedule of benefits across many states Premium taxes generally not assessed against self funded portion For "Good risk" employers self funded plans are not subject to risk pooling Small group insured market (state regulation impacting guarantee issue and rates) Medium/large group insured market (carrier risk pooling) 47 24

25 Self Funding Before Health Care Reform State Efforts to Avoid Adverse Selection for Small Group Risk Pool Some states prohibit issuance of stop loss coverage below certain thresholds Number of covered employees» NY, DE, NC Minimum attachment point» MD, NV, NH, VT 48 Disadvantages Claims Risk Self Funding Before Health Care Reform Potential Mitigation Through Stop loss Coverage Additional Infrastructure Requirements for Employer Document Maintenance: Plan Documents and SPDs Addressing employee questions Potential outsourcing to TPAs 49 25

26 26 Self Funding Before Health Care Reform Disadvantages Compliance Related Risks/Obligations HIPAA Privacy» Privacy officer» Privacy and Security policies» Recordkeeping requirements and Breach Notification ERISA» Plan document/spd Maintenance» Claim fiduciary role» Potential additional complexity fro Form 5500 COBRA and HIPAA Certificates Tax Nondiscrimination testing under IRC Section 105(h) 50 ACA Scorecard: Insured vs. Self Funding Factors to review and consider... Traditional self funding advantages Avoid state law mandates, premium taxes, etc Nondiscrimination testing will apply to insured and self funded Essential Benefit requirement Applies only to small insured plans requires insured plans to INCREASE coverage (and cost) Sector tax on insurers Only applies with regard to insured coverage resulting in increased costs MLR requirement Impacts profitability of insured coverage Limitations on "Unreasonable" premium increases for insurers 51

27 ACA Scorecard: Insured vs. Self Funding Factors to review and consider... Adverse Selection Risk for Exchange Employers will self fund until high risk (e.g., high claims employee) and then unload risk onto exchange and fully insured coverage, and then resume self funding once risk subsides Impact of risk pooling/smoothing Insurers generally required to pool exchange and non exchange risks thereby spreading increased risk of exchange to non exchange plans Impact of Cadillac tax and group centric wellness activities Employers with healthy workforces and/or aggressive wellness plans will seek to internalize "health/wellness" gains by self funding rather than pooling risk in insured plans 52 Question & Answer 53 27