2017 Year-end Review & Reminders

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1 Issue Year-end Review & Reminders There were fewer major developments in 2017 than in the last few years. On the legislative front, Patient Protection and Affordable Care Act ( PPACA ) repeal and/or replace legislation failed. Most of the regulations issued were clarification rather than new rules. There were two federal district court decisions that affect some health and wellness programs. In this Technical Bulletin we summarize significant developments for the first ten months of 2017, provide some reminders for 2017, and then take a look at what s anticipated for As always, we include action steps and provide links to additional resources. What Happened in 2017? Efforts to repeal and/or replace some or all of PPACA have not been successful as of November 8, One significant legislative action was the 21 st Century Cures Act passed in late 2016, which created a new type of Health Reimbursement Arrangement ( HRA ) for small employers and a directive that regulators take steps to increase compliance with the Mental Health Parity and Addiction Equity Act ( MHPAEA ). On the regulatory front, the Departments of Labor ( DOL ), Health and Human Services ( HHS ), and Internal Revenue Service ( IRS ) provided additional guidance with respect to requirements under PPACA, ERISA, and HIPAA. With the exception of new guidance on the requirement that nongrandfathered medical plans reimburse contraceptives with no cost-sharing, the guidance issued was primarily clarification or updates. The IRS also provided new, comprehensive guidance on a new type of HRA available to small employers. There were two federal district court decisions in December 2016 and August 2017 that may impact some employers. In December 2016, a federal district court ordered a nationwide injunction prohibiting HHS from implementing certain provisions of their May 2016 final regulations that relate to gender identity and termination of pregnancy. In August 2017, district court ordered the Equal Employment Opportunity Commission ( EEOC ) to review the May 2016 final regulations they issued relating to wellness programs. Legislation In December 2016, Congress passed and the President signed, the 21 st Century Cures Act ( the Act ), which contains two provisions that may impact employers. First, the Act directed federal regulators to create program materials that would enhance medical plan compliance with the MHPAEA. Materials are to include illustrative examples and provide recommendations for internal controls. In 2017 the regulators released a Fact Sheet on MHPAEA enforcement in 2016 and published a list of red flags applicable to non-quantitative treatment limitations. In June 2017, the regulators issued FAQ#38 which includes a model draft form that participants could use to request information from their health plan regarding nonquantitative treatment limits that may affect their mental health or substance use disorder benefits under the PAGE GALLAGHER BENEFIT SERVICES, INC. NOVEMBER 8, 2017

2 plan. Once the regulators have an opportunity to review comments submitted (the deadline for comments was September 13), they may provide a final version which may (or may not) be similar to the draft. The Act also created a new type of HRA a Qualified Small Employer Health Reimbursement Arrangement ( QSEHRA ). A QSEHRA may only be established by a small employer that is not an Applicable Large Employer ( ALE ) subject to PPACA s Employer Shared Responsibility ( ESR ) Mandate. In general, only employers that have fewer than 50 full-time and full-time equivalent employees may sponsor a QSEHRA. QSEHRAs must be funded solely with employer money. The legislation also includes specific rules governing which employees must be eligible, what expenses may be reimbursed, and sets the maximum reimbursement for a full year ($4,950 employee only and $10,000 family for 2017). The maximums will be $5,050 and $10,250 in 2018 and indexed in future years. Finally, the employer must provide a notice explaining the terms of the plan at the start of each year. In 2017 a number of bills were introduced that were an attempt to repeal and/or replace PPACA. Only one bill The American Health Care Act made it through the House, but did not receive sufficient votes in the Senate. Other bills were introduced, but were not voted upon. Although the specific provisions included in these proposed bills varied, there some common elements included in many of them. Recurrent themes included elimination of the ESR and Individual Mandates and enhancements to Health Savings Accounts ( HSAs ). As of November 8, 2017, it appears unlikely that Congress will succeed in passing repeal and/or replace PPACA legislation this year. PPACA Developments Although there has been no legislation affecting PPACA in the first ten months of 2017, regulators continued to provide additional guidance and one court issued a ruling that may affect some employers. The good news is the regulatory guidance primarily provided clarification rather than adding new rules or make major changes to existing rules. The one exception was the issuance of QSEHRA regulations in October. Following is a short summary of the regulatory guidance that affects many employer-sponsored health and welfare plans. Section 6055 and 6056 Reporting Requirement In order to administer the ESR Mandate and the Individual Shared Responsibility Mandate, the IRS needs information about the health coverage that individuals are actually enrolled in, and offers of health coverage made by employers to full-time employees. Under Internal Revenue Code Section 6056, employers are required to report to the IRS on offers of coverage made to their full-time employees. Under Section 6055, insurers (and employers with self-insured health plans) are required to report on individuals enrolled in health coverage. The information must be reported for full-time employees (under Section 6056) and individuals covered by a medical plan (under Section 6055) on a monthly basis for the entire calendar year. Employers reporting on offers of coverage to full-time employees report using Forms 1095-C, which shows offers of coverage by full-time employee and Form 1094-C, which is a transmittal form that must accompany Forms 1095-C when submitted to the IRS. ALEs with self-insured health plans are required to report both offers of coverage under Section 6056 for full-time employees and actual coverage under 6055 for individuals enrolled in Minimum Essential Coverage ( MEC ) using Forms 1095-C. In addition to full-time employees and their spouses and dependents, ALEs with self-insured health plans may be reporting on actual coverage for individuals who are not full-time employees (to the extent they are covered) such as part-time employees, retirees, and COBRA qualified beneficiaries. Employers that are not ALEs (i.e., an employer with fewer than 50 full-time and full-time equivalent employees) and are not PAGE GALLAGHER BENEFIT SERVICES, INC. NOVEMBER 8, 2017

3 subject to the ESR Mandate are not required to file Forms 1095-C, but must report on any self-insured health coverage that they provide using Forms 1095-B and 1094-B. The final 2017 forms and instructions for 6055/6056 reporting are available. The good news is that there have been minimal changes in the forms from last year. The instructions also include a tip that refers filers to Q&As 22 through 25 on the IRS website that explain how to report on COBRA coverage. Q&A 22 through 25 describe how to report COBRA coverage and offers of COBRA coverage. Q&A 23 includes three examples. Employers should be prepared to file 2017 calendar year reports by February 28, 2018 or April 2, 2018 if filing electronically. (Electronic filing is normally due on March 31, but will be due on April 2 in 2018 because March 31 is a Saturday.) Statements about offers of coverage and actual coverage must be provided by January 31, Statements may be provided electronically to participants and covered individuals as long as the IRS consent rules are followed. The IRS previously issued guidance on the steps entities must take to obtain Tax Identification Numbers ( TINs ) for individuals that it must include on Form 1095-B or 1095-C. For individuals the TIN is the individual s Social Security Number. Employers will virtually always have the employee s Social Security Number, but may need to obtain Social Security Numbers for covered spouses and dependents. An employer must make at least three attempts to obtain this information. Our August 2016 Healthcare Reform Update newsletter article IRS Proposes Changes to Section 6055 Reporting for Soliciting TINs, Catastrophic Coverage, and Other Issues provides more information (click here for a copy.) More detailed information is available in our Section 6055 and 6056 Toolkit click here ESR Mandate Penalty Process In late October, the IRS issued guidance on the ESR Mandate penalty process in the form of four questions and answers (Q&As 55 through 58) that are available on the IRS website (click here to access). The guidance explains the process for penalty determination, payment and appeal. The general procedures the IRS expects to use are described in a letter that the IRS will send to an employer that it determines may owe an ESR Mandate penalty. The letter will include specific information such as: A brief explanation of the ESR Mandate and penalty. A payment summary table itemizing the proposed payment by month (including which ESR penalty applies) along with an explanation of the summary. An employer response form. A list of employees who received a premium tax credit from a PPACA Marketplace for each month for whom a safe harbor or other relief does not apply, along with the indicator codes from lines 14 and 16 on Form 1095-C. A description of the actions an employer should take if it agrees or disagrees with the proposed payment. The letter will also include the name and contact information of a specific IRS employee that the employer should contact if the employer has questions about the letter. A description of the actions the IRS will take if the employer does not respond to the IRS s letter on a timely basis. Generally, an employer receiving notice of an ESR penalty will be given 30 days to respond. If the employer responds on a timely basis, the IRS will acknowledge the employers response in a letter. The IRS letter will acknowledge the employer s response and describe further actions that the employer may need to take. If the employer disagrees with the proposed (or revised) penalty, the employer may request a PAGE GALLAGHER BENEFIT SERVICES, INC. NOVEMBER 8, 2017

4 pre-assessment conference with the IRS Office of Appeals. This request should be made within 30 days of the receipt of the IRS acknowledgement letter. If the employer does not respond to IRS letters, the IRS will send a notice demanding payment. The notice will include instructions on how the employer is to make payment. The IRS expects to issue letters for payments for the 2015 calendar year later this year. Contraceptive Coverage Under PPACA, there is an exemption for religious employers to the requirement that non-grandfathered plans provide coverage of all FDA approved contraceptives with no cost sharing. An accommodation process is available for certain other qualifying organization such as religiously-affiliated employers and closely-held private companies whose owners object to covering some or all contraceptives on religious grounds. The regulations did not include an accommodation for objections based on moral grounds. On August 4, 2017 the 3rd circuit court of appeals confirmed a district court s decision that the accommodation was not available based on a moral objection. However, pursuant to an earlier Executive Order directing them to do so, on October 6, 2017 three federal agencies the DOL, HHS, and IRS issued new proposed regulations. These new proposed regulations significantly expand the type of employers that may be eligible for an exemption based on sincerely held religious beliefs. The broadened exemption would be available to non-governmental employers, including for profit employers and higher education institutions such as universities. In addition the proposed regulations include an accommodation process for certain employers that object on moral rather than religious grounds. The exemption for moral objection is narrower and is not available to publicly traded companies. (Note, however, that state insurance laws mandating coverage of contraceptives may also apply.) Our October 16, 2017 Healthcare Reform Update article Tri-Agencies Release Additional Contraceptive Mandate Guidance discusses the new regulations in greater detail. Click here for a copy. PPACA Dollar Values for 2017 PPACA includes a number of dollar values that are indexed each year. Two important areas where dollar values change are for the ESR Mandate and fees applicable to group health plans. Employer Shared Responsibility Mandate Under the ESR Mandate, an ALE must offer minimum essential coverage to its full-time employees or face a potential penalty. There are two potential penalties under the ESR Mandate the headcount penalty and the individualized penalty. The headcount penalty applies if the employer does not offer MEC to at least 95% of its full-time employees, and to dependent children of the employee (there are no penalties associated with failing to offer coverage to spouses). The individualized penalty applies if the employer offers MEC to a sufficient number of full-time employees, but the coverage offered to the employee either doesn t provide minimum value, or is not affordable as defined by PPACA. For the purpose of the individualized penalty, the coverage offered to dependent children is not required to provide minimum value or be affordable. In order to be minimum value, the plan must be designed to reimburse at least 60% of covered expenses and must include significant coverage for inpatient hospital and physician services. Affordable is generally defined as requiring an employee contribution for self-only coverage that does not exceed 9.69% of the employee s household income for The affordability percentage is indexed each year. PAGE GALLAGHER BENEFIT SERVICES, INC. NOVEMBER 8, 2017

5 The dollar amount of both the headcount and individualized penalties are indexed each year based on a formula included in PPACA. The original 2014 penalty amounts were $2,000 for the headcount penalty and $3,000 for the individualized penalty. The amounts for 2017 are $2,260 and $3,390. More information about the ESR mandate is available in our ESR Toolkit click here. PPACA Fees PPACA includes numerous fees that must be paid by insurers or self-insured health plans. Two of those fees are the Transitional Reinsurance Fee ( TRF ) and Patient-Centered Outcomes Research Institute ( PCORI ) fee. The TRF must be paid by the insurer for insured major medical coverage and by the plan sponsor (usually the employer) for self-insured major medical coverage. The amount of the fee for 2017 is $27 per covered life. The insurer or plan sponsor was required to report covered lives for 2016 by November 15, 2016, and schedule payment at that time. The insurer/plan sponsor was permitted to make payments of $21.60 and $5.40 by January 17, 2017 and November 15, 2017, respectively, or may have chosen to make one payment of $27 by January 17, Unless Congress enacts new legislation, the November 15, 2017 payment will be the last. The PCORI Fee is due by July 31 each year. The fee applies to all health plans that are not HIPAA excepted benefits. The insurer must pay the fee for insured plans; the plan sponsor must make payment for self-insured plans. The fee is based on the number of covered lives. For plan years that end on or after October 1, 2016 and before October 1, 2017 the fee was $2.26 per covered life. For plan years that end on or after October 1, 2017 and before October 1, 2018, the fee will be $2.39. More detailed information is available in our Healthcare Reform Fees Toolkit click here Other PPACA Developments There were three other PPACA developments in 2017 that affect employer-sponsored health plans. First, employers and insurers were required to begin using a new Summary of Benefits and Coverage ( SBC ) template. Second, HHS issued a new FAQ clarifying HIPAA special enrollment rights based on the loss of individual medical insurance. Third, a federal district court issued a nationwide injunction halting the implementing of certain sections of HHS s May 2016 PPACA Section 1557 nondiscrimination regulations. Summary of Benefits and Coverage The new template for the SBC must be used for plan years and open enrollments that begin on or after April 1, Changes intended to streamline the SBC template include eliminating the requirement that the first page header be on every page; eliminating references to annual and lifetime dollar maximums on essential health benefits (which PPACA prohibits); and removing Q&A language from the coverage example section were made. Other changes include a new row on the first page where plans must indicate whether any services under the plan are covered before an employee meets the deductible. For example, non-grandfathered plans need to indicate that specified preventive services are covered without cost sharing. Finally, one of the biggest changes is the addition of a third coverage example the example is a simple fracture with an in-network emergency room visit and follow-up care. More detailed information is available in our Summary of Benefits and Coverage Toolkit click here. PAGE GALLAGHER BENEFIT SERVICES, INC. NOVEMBER 8, 2017

6 Clarification of HIPAA Special Enrollment HIPAA special enrollment rights in the event an individual loses eligibility for coverage under a group medical plan such as an employer s plan have always been relatively straightforward. To qualify for special enrollment, an individual had to either lose eligibility for coverage or lose all employer contributions toward the cost of that coverage. However, what constituted a loss of eligibility for coverage in the individual medical insurance market was not always as clear because of the way that PPACA s Marketplaces work. For example, an individual has a PPO policy with insurance carrier A, insurance carrier A decides not to continue to offer PPO policies, and insurance carrier A cancels existing PPO policies at renewal. The individual is losing coverage under carrier A s PPO plan but may be able to purchase other types of plans from carrier A and may be able to purchase PPO plans from other carriers. The individual may still be eligible for Marketplace subsidies. So did the individual lose eligibility for coverage? In late 2016, federal regulators issued PPACA FAQ #35 addressing this issue. In FAQ #35 the regulators clarified that individuals who lose eligibility for individual medical insurance coverage based on certain events would be eligible for a HIPAA special enrollment. Events that would be treated as a loss of Marketplace eligibility would include the following: The insurer drops the individual medical policy product line; The insurer drops a specific plan design such as a High Deductible Health Plan, PPO or HMO; The insurer drops out of the individual market in a state; and The insurer stops offering the product at the end of the year. Section 1557 Nondiscrimination Section 1557 of PPACA prohibits discrimination on the basis of race, color, national origin, sex, age, or disability in all health programs and activities receiving certain federal financial assistance. HHS regulations issued in May 2016 interpret discrimination on the basis of sex to include gender identity and termination of pregnancy. This section applies to any health program or activity that receives funding from HHS. The nondiscrimination requirements apply to entities such as health care providers who receive funds such as Medicare or Medicaid and may also impact some group health plans. Health plans that are subject to these rules must comply with certain notice and tagline requirements to assist individuals with limited English proficient in getting information and about the plan s policies. For group health plans, the compliance date was the first day of the first plan year that begins on or after January 1, The requirement that employers post a notice summarizing the law s requirements with a tagline in up to 15 languages was effective October 17, A model notice is available on HHS s website. Section 1557 also contains certain requirements related to coverage of services related to gender transition and termination of pregnancy. For plans subject to the rules, the compliance date was targeted to begin on the first day of the first plan year that began on or after January 1, However, in December 2016 a federal district court issued an injunction preventing HHS from implementing the sections of the regulations that relate to discrimination on the basis of gender identity and termination of pregnancy. There have been no additional developments as of November 8, Wellness Program Regulations and Court Decision Update After many of years of silence, in 2015 the Equal Employment Opportunity Commission ( EEOC ) published proposed regulations under the Americans with Disabilities Act ( ADA ) and the Genetic PAGE GALLAGHER BENEFIT SERVICES, INC. NOVEMBER 8, 2017

7 Information Nondiscrimination Act ( GINA ) that are applicable to wellness programs. In May 2016, the EEOC released final ADA and GINA regulations that primarily provided clarification of the 2015 proposed regulations. The final regulations generally became effective on January 1, However, the EEOC s final regulations were challenged in court in the fall of 2016 and a federal district court issued a ruling in August In its August 2017 ruling, the district court stated that the EEOC s final regulations were arbitrary and capricious, and that the EEOC did not adequately explain why it chose to issue a rule that a plan could have an incentive up to 30% and still be considered voluntary. Prior to the 2015 proposed and 2016 final rules, the EEOC had taken the position that any incentive made the plan involuntary. The district court ordered the EEOC to review the May 2016 final regulations and to provide a timetable for that review to the court. In late September, the EEOC submitted a timeline showing that it intends to issue proposed regulations by August 2018 and final regulations by October Although the timetable has been submitted to the district court, as of November 8, the court has not responded to the EEOC s timeline. Although the court sent the EEOC back to review its regulations, the court did not vacate the regulations. The court stated that vacating the regulations at this time could cause considerable confusion and disruption because many employers are already using the final rules. At this point, employers should continue to use the EEOC s May 2016 final regulations. More detailed information is available in our Wellness Toolkit click here Other Developments in 2017 There were four other important developments in In January, 2017, the DOL and HHS issued indexed dollar values for certain penalties for In October 2017, HHS withdrew a January 2014 HIPAA regulation that would have required certification of compliance with HIPAA s electronic data interchange rules. Also in October 2017, the President issued an Executive Order that requires three federal agencies DOL, HHS, and IRS to consider new rules concerning HRAs, association health plans, and limited duration medical plans. On October 31, the IRS issued new guidance for QSEHRAs. Increased Penalties for 2017 As required by the Inflation Adjustment Act, the DOL published increased ERISA penalties in June 2016 and inflation adjusted penalties in January The increased amounts are calculated using a specific formula based on the Consumer Price Index for all Urban Consumers. Some of the June 2016 increases, such as the increase from up to $1,100 per day to up to $2,063 per day for failure to file Form 5500 as required, were substantial. The subsequent January 2017 increases were more modest. For example, the penalty for failure to file Form 5500 increased from up to $2,063 per day to up to $2,097 per day in January Other penalties, such as those for failing to provide certain documents to the DOL upon request, GINA violations, and failure to provide the annual CHIP notice also increased modestly in January Penalties for violations of HIPAA s privacy, security, and breach notification requirements also increased generally about 1.6%. HIPAA EDI Certification Withdrawn Proposed regulations issued in January 2014 would have required health plans to obtain and submit to HHS certification that the plan was in compliance with the HIPAA standards for three specific types of HIPAA standard transactions. The regulations identified two methods that could be used to certify compliance with HIPAA s Electronic Data Interchange ( EDI ) rules - a Phase III CORE Seal or a HIPAA Credential from the Council for Affordable Qualify Healthcare Committee on Operating Rules PAGE GALLAGHER BENEFIT SERVICES, INC. NOVEMBER 8, 2017

8 for Information Exchange. The health plan would have needed to obtain certification and then submit information about the certification to HHS. Although the proposed regulations required a health plan to submit documentation of compliance to HHS by December 31, 2015 (small health plans got an additional year), HHS did not provide the guidance that health plans would need in order to submit documentation to HHS. On October 4, 2017 HHS formally withdrew the proposed regulation. However, note that HHS only withdrew the requirement to certify compliance to HHS by submitting specific documentation. Health plans are still required to comply with HIPAA EDI requirements. Executive Order On October 12, 2017 the President issued an Executive Order that requires three federal agencies DOL, HHS, and IRS - to consider new rules governing three specific areas. (Note that the Executive Order only requires the agencies to consider new rules.) The three areas included in the Executive Order are: Health Reimbursement Arrangements the agencies are to consider changes in the rules for HRAs so that employers can make more extensive use of them. Association Health Plans the DOL is to consider relaxing regulatory requirements related to association health plans which may allow small employers to pool together to buy insurance. Short-term and limited-duration policies the agencies are to consider expanding coverage through these types of policies. Currently these policies are limited to three months. What the regulators will do in response to the Executive Order remains to be seen. Because the Executive Order specifies a review time frame of only a few months, we may see something in the near future. QSEHRA Guidance Issued On October 31, 2017, the IRS issued comprehensive guidance on QSEHRAs in the form of 79 Questions & Answers. QSEHRAs are available only to small employers that are not applicable large employers subject to PPACA s ESR Mandate (generally employers with fewer than 50 full-time and full-time equivalent employees). QSEHRAs are subject to many of the rules that apply to HRAs, but there are some significant differences. QHSERAs are not required to be integrated with a group health plan in order to satisfy PPACA requirements as other HRAs are required to do. In fact, in order to provide a QSEHRA, the employer must not offer a group health plan to any employee. QSEHRAs may reimburse individual health insurance premiums; PPACA prohibits HRAs that are not QSEHRAs from reimbursing individual health insurance premiums. However, although QSEHRAs are more flexible in some areas, the statute and regulations include restrictions on QSEHRAs that do not apply to other HRAs. For example, in addition to being limited to small employers, a QSEHRA must: Cover all employees, with limited exceptions (for example a QHSERA does not have to cover part-time employees). Limit the maximum annual benefit (including rollover amounts), and prorate amounts for periods of less than one year. Provide the same benefits on the same terms for all eligible employees. Be written to require that all eligible employees be enrolled (employees may not waive coverage). PAGE GALLAGHER BENEFIT SERVICES, INC. NOVEMBER 8, 2017

9 Employers offering a QSEHRA must provide an initial and annual notice describing the QSEHRA that contains specific information and require employees to provide proof of MEC before the QSEHRA may reimburse an eligible expense. There are other requirements that either are similar, but not identical to non-qsehras and some requirements that apply to QSEHRAs but do not apply to HRAs that are not QSEHRAs. The IRS guidance also includes questions that explain how QSEHRA coverage affects an individual s eligibility for a Premium Tax Credit for PPACA Marketplace medical coverage, the interaction between QSEHRAs and Health Savings Accounts, and Form W-2 reporting. Click here to access this guidance. Year-end Reminders We do not have any new reminders this year, just a list of important reminders that apply every year. We have marked one requirement the requirement to obtain a unique health plan identifier as Delayed, because as of November 8, 2017 it is still delayed. In addition, one requirement regarding certification of compliance with HIPAA electronic data interchange rules for three specific types of transactions has been removed because the regulation was withdrawn. Compliance with HIPAA s EDI rules is still required. Cafeteria plans Perform year-end nondiscrimination tests for the 2017 plan year. Notify highly compensated individuals and/or key employees if they will have any additional taxable income. Once enrollment data for 2018 becomes available, employers may also want to perform preliminary nondiscrimination testing for 2018 and notify highly compensated participants and/or key employees if it appears that the plan might need to modify any 2018 elections in order to pass the actual tests at the end of the year. Certificates of Creditable Coverage (Drug) Provide a Certificate of Creditable Coverage to Medicareeligible individuals. Notices are generally required when an employee becomes Medicare eligible, if there is a plan design modification that changes the status of the drug plan (e.g., from creditable to noncreditable), and annually. Creditable Coverage Notice to CMS Plan sponsors that provide prescription drug coverage must disclose annually to the Centers for Medicare and Medicaid Services ( CMS ) whether the plan s prescription drug coverage is creditable prescription drug coverage. The disclosure must be transmitted to CMS online within 60 days after the first day of the plan year. If there is a change in the creditable coverage status of the plan (e.g., from creditable to non-creditable), or a termination of the drug plan during the year, a new notice is required within 30 days after the change or termination. Instructions on how to complete the online disclosure to CMS are posted on CMS website. CHIP Notice Distribute an updated general Children s Health Insurance Program ( CHIP ) notice to employees about the potential for premium assistance under a State CHIP or Medicaid program. Domestic Partner Coverage Employers that currently cover domestic and/or civil union partners will want to make sure that their records are updated so that imputed income for health coverage, which may apply to domestic and/or civil union partners, is calculated and reported correctly. FSA Unless the plan includes a carryover or grace period provision for the health FSA for the 2017 plan year, remind employees about the use-it-or-lose-it rule. Grandfathered Status In addition to making plan changes such as covering required preventive care services with no cost-sharing, following ERISA claim rules, and making sure that plan design elements PAGE GALLAGHER BENEFIT SERVICES, INC. NOVEMBER 8, 2017

10 such as out-of-pocket maximum comply with the requirements for non-grandfathered plans plans losing grandfathered status should remember to remove the special grandfathered plan language from plan documents and other plan materials. Group Term Life Insurance Imputed Income Determine the amount of imputed income for employer-provided group term employee life insurance in excess of $50,000 and the value of all dependent life insurance amounts if the employer-provided amount is more than $2,000. For discriminatory plans, the total value of all employer-provided coverage must be included in key employees income. Health Coverage Imputed Income Calculate the amount of imputed income for coverage of any nonfederal tax dependent covered under the employer s health care plan. This may include a domestic partner or an older child (e.g., age 28). Note: imputed income does not apply to coverage of the employee s child up to the end of the calendar year in which the child attains age 26. The child is not required to be the employee s tax dependent for this exclusion to apply. In addition, calculate the amount of imputed income for highly compensated individuals under a selffunded health plan that did not satisfy Internal Revenue Code Section 105(h) nondiscrimination rules. HIPAA Business Associate Agreements Make sure that all Business Associate Agreements have been updated to reflect the final privacy, security, and breach notification regulations. Delayed! HIPAA Unique Health Plan Identifier (HPID) A health plan that is a Controlling Health Plan ( CHP ) is required to obtain an HPID; a Subhealth Plan ( SHP ) may obtain their own HPID or use the CHP s HPID. HPIDs must be obtained online on the CMS portal. Large plans (more than $5 million) were required to obtain an HPID by November 5, Small plans were given until November 5, The CMS news release on October 31, 2014 delayed enforcement of this requirement until further guidance is issued. Although enforcement of the requirement is delayed, health plans may still apply and receive an HPID on the portal. HIPAA Opt-Out Notices Self-insured nonfederal governmental plans that chose to opt out of any of four HIPAA group health plan requirements the Mental Health Parity and Addiction Equity Act, Women s Health and Cancer Rights Act, Newborns and Mothers Health Protection Act, or Michelle s Law must provide an annual notice to CMS and plan participants. The notice to CMS must be provided electronically on the CMS website. HIPAA Privacy Notice Provide a notice of the availability of the Notice of Privacy Practices every third year. Employers may want to provide this notice every year to eliminate the need for tracking. Medical Plan Notices and Communications Send the annual Women s Health and Cancer Rights Act notice. Provide a new Summary of Benefits and Coverage using the appropriate template. Update the SPD (or benefits booklet) and plan document as needed. Preventive Care Services Non-grandfathered plans should check to determine what new preventive health care services must be covered with no cost sharing in the upcoming plan year. Non-grandfathered health plans must include coverage for newly recommended procedures on the first day of the plan year that begins one year after the service is added to the required preventive services list. Transitional Reinsurance Fee Sponsors of self-insured major medical plans were required to provide a count of covered lives for 2016 by November 15, The first installment of the 2016 payment was due no later than January 17, 2017; the second installment is due by November 15, Unless PAGE GALLAGHER BENEFIT SERVICES, INC. NOVEMBER 8, 2017

11 Congress enacts legislation to extend the transitional reinsurance fee, the November 15, 2017 payment will be the last payment that must be made. Vacation/PTO For calendar year plans, determine the number of days that will be cashed out before the end of the year. What s Coming Next? Following is a high level look at major requirements that will become effective in 2018 or later. We have not included information about the Cadillac Plan tax this year for two reasons: (1) the effective date is 2020, and (2) the IRS has not provided any new guidance since August At the end of this section, we briefly touch on several requirements where guidance has not been issued as of November 8, 2017, and the enforcement date is either unclear or not yet known. As a result of the district court s order, the EEOC will be reviewing the final ADA and GINA regulations applicable to wellness programs. The timeline the EEOC provided to the court indicates that the EEOC is targeting August 2018 for proposed regulations and October 2019 for final regulations. In late 2016, the DOL issued final claim regulations applicable to disability plans subject to ERISA. The final rule was scheduled to apply to claims for disability benefit plans filed on or after January 1, (Our January 2017 Technical Bulletin DOL Finalizes Claims and Appeals Rules for Disability Benefits describes the regulations in more detail. Click here to access.) On October 10, 2017 the DOL proposed to delay implementation of these regulations from January 1, 2018 to April 1, We anticipate including an article about the proposed 90-day delay in the November issue of our Directions newsletter. We may see additional guidance related to MHPAEA based on the requirements of the 21 st Century Cures Act and continuing concern among regulators about compliance problems with respect to non-quantitate treatment limits. We may also see a final version of the 2017 draft model form for MHPAEA disclosures later this year or in Two taxes that had been suspended will return in The health insurer tax will not affect employers directly, but will affect employers indirectly as insurers pass the cost along through higher premiums. The medical device tax will also affect employers indirectly as this cost will be passed along though higher claim costs. Because the Executive Order that the president issued on October 12, 2017 gives the DOL, HHS, and IRS only a few months to consider new or revised regulations for HRAs, association health plans and limited duration medical plans, we could see some guidance later this year or early next year. Indexed Dollar Values for 2018 The IRS annually provides indexed values that apply to High Deductible Health Plans that make an individual eligible to contribute to a health savings account. The minimum deductible is based on the type of coverage and will be $1,350 for self-only coverage and $2,700 for any other type of coverage (for example employee plus spouse or family coverage) in The out-of-pocket maximums will be $6,650 for self-only coverage and $13,300 for other than self-only coverage in Maximum contributions to a health savings account will be $3,450 for those with self-only coverage and $6,900 for those with other than self-only coverage. Individuals who are 55 or older at the end of the calendar year have an additional $1,000 available as a catch-up contribution. The $1,000 catch-up contribution is not indexed. PAGE GALLAGHER BENEFIT SERVICES, INC. NOVEMBER 8, 2017

12 Under PPACA, non-grandfathered health plans may not have a maximum out-of-pocket amount that exceeds a specified level. For 2018 plan and policy years, the maximum out-of-pocket levels will be $7,350 for self-only coverage and $14,700 for other than self-only coverage. These dollar values started out at the same level as the maximums for qualified high deductible health plans back in 2014, but are indexed differently so that the 2018 out-of-pocket maximums for non-grandfathered health plans and qualified high deductible health plans are different. Note that PPACA also prohibits non-grandfathered health plans from using an out-of-pocket maximum for any one person that exceeds the individual out-of-pocket maximum, which for 2018 will be $7,350, under other than self-only coverage. For example, if a family plan covering four individuals has a $12,000 family out-of-pocket maximum and one of the family members has $10,000 in claims, the plan must limit the out-of-pocket maximum for that family member to $7,350 even if the family out-of-pocket limit has not been reached. The percentage for affordability under PPACA s employer shared responsibility mandate will decrease from 9.69% to 9.56% in The penalties under the employer shared responsibility mandate will increase from $2,260 to $2,320 for the headcount penalty, and from $3,390 to $3,480 for the individualized penalty. The PCORI fee will increase to $2.39 for plan and policy years that end on or after October 1, 2017 and before October 1, In mid-october the IRS announced a number of indexed dollar values for Many of the values relate to individual tax values such as the standard deduction; others relate primarily to pension plans. There are several values applicable to health and welfare plans: (1) the compensation level used in determining highly compensated employees under cafeteria plans, (2) the compensation level used to determine key employees for cafeteria plans and group term life insurance, (3) the maximum salary reduction amount for a health flexible spending account, (4) the maximum transportation assistance benefit, (5) Long Term Care deductible amounts, (6) adoption assistance deductible amounts, and (7) maximum reimbursements from a QSEHRA. HHS provided 2018 values for standard drug plans under Medicare Part D in April The Social Security base wage for 2018, which was announced in October 2017, will increase from $127,200 to $128, indexed values for Medicare Part A and Part B are generally announced sometime in November. Click here for a chart containing indexed values for 2017 and This chart will be updated when the Medicare Part A and B values for 2018 become available. Still to Come There are several other requirements applicable to employer-sponsored health and welfare plans for which additional guidance is anticipated (or may be needed). Those requirements with their current status follows: Nondiscrimination requirement for non-grandfathered insured health plans: Prohibits discrimination in favor of highly compensated employees using rules similar to those for selfinsured health plans delayed until the IRS issues guidance. Quality of care reporting: Group health plans and insurers are required to report certain information concerning coverage benefits and provider reimbursement arrangements that might PAGE GALLAGHER BENEFIT SERVICES, INC. NOVEMBER 8, 2017

13 affect the quality of care. The requirement applies to non-grandfathered health plans. The effective date is unclear, as no guidance has been provided to date. Cafeteria plans: Proposed regulations were issued in August 2007 and are in effect until final regulations are provided. No definite date for issuance of final regulations has been provided. SIMPLE cafeteria plans: Created by PPACA effective in To date no regulatory guidance has been provided. Health Plan Identifier ( HPID ): Health plans were required to obtain a unique HPID from CMS by applying on the CMS Portal. The HPID was intended to be used in HIPAA standard electronic transactions. Large plans were originally required to obtain the HPID by November 5, 2014; small health plans were given an additional year. On October 31, 2014 CMS delayed enforcement of this requirement until further notice. Although currently delayed, employers with self-insured plans may apply and obtain an HPID on the CMS site. Unfortunately, we do not have information on when any of this guidance may be forthcoming. Action Steps The Year-end Reminders section that begins on page 9 includes many of the action steps that employers will want to take before the end of the year. Here are some additional steps that employers may want to take: Review employee contributions for 2018 to confirm that coverage will be affordable in order to avoid a PPACA penalty for failure to offer affordable coverage. Because the percentage used to determine affordability will be reduced to 9.56% in 2018 it is possible that a required employee contribution that was affordable in 2017 might not be affordable in Use the 2017 Summary of Benefits and Coverage template. Make sure your special enrollment rules are updated based on recent guidance. Employees (and family members) who lose individual medical insurance may have HIPAA special enrollment rights. Review your health and welfare plans. Make sure that you have implemented any required plan changes. For non-grandfathered plans, make sure that you have updated the list of preventive services that will be covered with no cost sharing for your next plan year. Plans losing grandfathered status may need to make specific plan design changes. If your plan is losing grandfathered status, be sure to make changes to comply with requirements for non-grandfathered plans, such as covering specified preventive services with no cost sharing. Report as required under Section 6056 (and 6055 if applicable) report(s) on offers of coverage and actual coverage for Review the final forms and instructions for Make sure to follow the IRS rules for requesting Social Security numbers from covered individuals. Be certain to follow IRS rules if statements will be provided electronically. The deadline for reporting to the IRS is February 28, 2018 (April 2, 2018 if filing electronically. The date is April 2 for 2018 because March 31 is a Saturday). Statements to participants are due by January 31, Review any wellness programs to ensure compliance. Review your wellness plan to ensure that it will continue to comply with HIPAA, GINA, and ADA regulations. Although the EEOC will be reviewing the 2016 final regulations in response to a court order, the 2016 regulations remain in effect until the EEOC modifies them or the court takes another action. PAGE GALLAGHER BENEFIT SERVICES, INC. NOVEMBER 8, 2017

14 Small employers that have, or are considering, a QSEHRA should review the IRS s recent guidance. Small employers will want to review the recent IRS guidance carefully. Potential penalties for noncompliance can be significant. Failure to comply with some requirements could result in taxable income to some or all employees. Failure to comply with other rules could trigger PPACA s $100 per affected person per day penalty. Because of the comprehensiveness and complexity of the statute and IRS guidance and the potential penalties, employers that currently have or are considering implementing a QSEHRA should discuss their plans with an attorney with appropriate experience. Review your plan for MHPAEA compliance. Review your plan to confirm that it will continue to be in compliance with MHPAEA regulations. Once a final model notice for disclosures to participants becomes available, review the model to determine if you will use the model or an alternative. Coordinate roles and responsibilities for disclosure with your health insurance carrier or third party administrator. Update plan documents and materials, as needed. Adopt formal plan amendments for any changes made to the plan. Be sure to update other documents such as the Summary Plan Description or Benefits Booklet. Make the final Transitional Reinsurance Fee payment by the November 15, 2017 deadline. Review and update employee communications, as needed. Review current employee communication materials including benefits booklets, SPDs, SBCs, new hire packages and open enrollment materials to ensure that they are accurate and up-to-date. Some benefits may require additional communication materials or forms. Review existing HIPAA privacy, security, and breach notification policies and procedures. Become familiar with the OCR s revised audit program and protocol and determine if existing policies and procedures will meet the new standards, or if modifications will be needed. Self-insured nonfederal government plans need to send/submit their HIPAA opt-out notices. Plans that have opted out of one or more of HIPAA s portability provisions as permitted by law, will want to make sure that annual notices are sent to plan participants and that the annual notice to CMS is provided on the CMS website. Although the Cadillac Plan tax has been delayed until 2020, employers with multi-year collective bargaining agreements may need to prepare for the potential impact of the Cadillac Plan tax before upcoming negotiations. Other employers also may want to begin preparing for the Cadillac Plan tax because 2020 is not that far away. Additional Resources Gallagher has a wealth of information and materials to help you as you continue to comply with federal laws and regulations affecting employer-sponsored health plans. We have a number of toolkits with helpful materials covering a single topic such as our ESR Mandate and Section 6055 and 6056 Reporting toolkits. All of the toolkits contain either an explanatory article or whitepaper. The remaining contents of each toolkit vary based on the topic, but contents may include checklists, FAQs, sample communications, charts and timelines, worksheets, and recorded webinars. We also have many articles in our Healthcare Reform Update Newsletters, Technical Bulletins, recorded Webinars and Directions newsletters. Click here to access a five-page summary of additional GBS resources with clickable links. Gallagher Benefit Services, through its compliance experts and consultants, will continue to monitor legislative and regulatory changes that may impact your health and welfare benefits and will provide you PAGE GALLAGHER BENEFIT SERVICES, INC. NOVEMBER 8, 2017