ACA Legislative Update, March 2016

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The 2016 limits and penalty amounts.

 

It has been a busy quarter and now that we are past part one of 2015 filing, we are diligently preparing for the IRS filing of Form 1094-C. In addition, we are working with clients to ensure they have their 2016 data loaded monthly and know where they stand regarding the 95% compliance regulation and adhering to all mandates in preparation for 2016 reporting.

Below are the major updates and information you will need to continue to manage the Affordable Care Act (ACA) for your organization in 2016.

 

Medicaid Expansion States as of February 24, 2016

Thirty-two states, including Washington, D.C., have chosen to expand Medicaid. As part of the ACA’s broader effort to ensure health insurance coverage for all U.S. residents, the federal government will pay to expand Medicaid eligibility in every state if chosen. From 2014 to 2017, the federal government will pay 100% of the difference between a state’s current Medicaid eligibility level and the ACA minimum. Federal contributions to the expansion will drop to 95% in 2017 and remain at 90% after 2020, according to the law.

The graphic above identifies those expansion states. Health E(fx) is tracking these states and the minimums to ensure affordability is calculated for each employee at the mandated level.

NOTE: As of March 13, Utah is moving forward with partial coverage expansion.

 

2016 Limits

The 2016 limits and penalty amounts have been announced and approved.

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At the end of 2015, just before the IRS announced the delay in reporting, they released Notice 2015-87. This notice gave a range of compliance issues, of course including a number of areas requesting comments that the IRS will address in future guidance. The list of broad topics as presented in the Notice are summarized for your convenience below.  Please refer to https://www.irs.gov/pub/irs-drop/n-15-87.pdf for more detail.


HRA Market Reforms
Retiree Only HRA: A retiree only HRA is not subject to the market reforms under the ACA that generally apply to group plans. This applies even if the HRA contains amounts credited during the time that the retiree was a current employee covered by a group plan with an integrated HRA. This allows for a retiree-only HRA to reimburse individual market premiums, and it is not required to be integrated with a group health plan. This DOES NOT apply to HRAs that cover current employees.

HRAs Integrated with Self-Only Coverage
An HRA integrated with self-only coverage cannot be used to reimburse expenses of a spouse or dependent (yet, transitional relief does apply for plan years starting before January 1, 2017).

Employer Payment Plans – Reimbursement for Individual Market Coverage
Reimbursement of individual health plan premiums through a cafeteria plan, via salary reduction or employer contribution, or through an HRA, is considered an employer payment plan that will fail to comply with the ACA reform requirements. Therefore, these are NOT allowed unless the coverage consists of ONLY excepted benefits (for example, stand-alone dental or vision coverage).

Affordability Safe Harbor Percentage
As shown in the chart above, 2016 Limits, the IRS stated that it will amend regulations to allow the employer affordability safe harbor percentage (9.5% per regulations) to adjust in accordance with the affordability percentage used to determine subsidy eligibility for an individual purchasing health coverage through the public exchange (9.66% in 2016).

 

Other Affordability Issues

HRA Contributions
Amounts made available for the current plan year under an integrated HRA that an employee may use to pay premiums for an eligible employer-sponsored plan are counted as an employer contribution—and reduce the dollar amount of the employee’s required contribution to determine a plan’s affordability.

Health Flex Contributions to Section 125 Plans
Any employer contributions that are limited to health expenses (flex contributions) under a Cafeteria plan will also reduce the dollar amount of an employee’s contribution. For the amount to be considered a health flex contribution, the employee:

  1. May NOT opt to receive the amount as a taxable benefit;
  2. May use the amount to pay for minimum essential coverage (MEC); and
  3. May use the amount only to pay for medical care, within the meaning of Section 213.

Transition Relief for Non-health Flex Contributions
For the purposes of Section 4980H(b) penalties for plan years beginning before January 1, 2017, employer flex contributions (even those that do not meet the definition of a health flex contribution) will be treated as reducing the dollar amount of an employee’s contribution. This relief is NOT available with respect to a non-health flex contribution that is adopted after December 16, 2015, or that substantially increases the amount of the flex contribution after December 16, 2015.

Opt-Out Payments
The IRS has made previous statements regarding opt-out payments and their “dislike” of these plans. Notice 2015-87 states that the IRS plans to issue rules specifying that unconditional opt-out payments will need to be considered for purposes of affordability. Employers will need to include the value of the opt-out incentive in determining whether a plan is affordable. The regulations will also request comments on those opt-outs that place conditions upon the receipt (that is, proof of other health coverage), and on whether such conditional opt-outs should also be considered for affordability purposes.

Fringe Benefits Offered Under the SCA or DBRA
Employer contributions made for health coverage as a fringe benefit under the McNamara-O’Hara Service Contract Act (SCA) or the Davis-Bacon Act (DBRA) are not considered employer contributions, and therefore do not reduce the amount of the employee contribution for the purpose of eligibility for premium tax subsidies or compliance with the individual mandate. The Treasury and IRS will continue to consider how the requirements of the SCA, DBRA, and 4980H may be coordinated. Until further guidance, for any plans beginning before January 1, 2017, the employer may treat contributions toward fringe benefits that may be used to cover MEC as reducing the employee’s contribution, but only to the extent that the payment does not exceed the amount required to satisfy the fringe benefit payment under the SCA or DBRA.

Transition Relief for Employer Reporting
Employers may report the reduction of the amount of the employee contribution in accordance with the transition relief noted, but employers are strongly encouraged not to do so as this may impact their ability to receive a subsidy when enrolling for health coverage through a public Exchange. Rather, the IRS would prefer that employers report on Line 15 of Form 1095-C accurately, without use of the transition relief, and reconciliation would be allowed and potential penalties forgiven if applicable. For any employers using the transition relief, they are encouraged to notify employees that they may obtain accurate information about their required contribution by contacting the employer directly.

Hours of Service
Notice 2015-87 made clarification with regard to counting hours of service for a leave of absence. The current guidance provides:

  1. Definition of Hour of Service: An hour of services DOES NOT include a) an hour for which an employee is paid during a period in which no duties are performed, if such payment is made under a plan maintained for the purpose of complying with worker’s compensation, unemployment, or disability insurance laws; or b) an hour of service for a payment that reimburses an employee for medical or medically related expenses incurred.
  1. Short- and Long-Term Disability: Periods during which an individual is not performing services but is receiving payments due to STD or LTD result in hours of service for any part of the period during which the recipient retains status as an employee unless the payments are made from an arrangement to which the employer did not contribute directly (for example, employee is paid with after-tax contributions).

Educational Organizations and the 26-Week Break in Service Rule
Educational organizations (public and private schools and universities) must treat a rehired or returning employee as an ongoing employee if the employee’s non-employment period was 26 weeks or less. For other employers, this maximum threshold is 13 weeks. The IRS has been made aware that some educational institutions are or may be hiring workers from staffing agencies and applying the 13-week service break rule instead of the 26-week rule. The Notice states that the IRS plans to amend existing final regulations to apply the 26-week period not only to employees of educational organizations, but also to any employees who provide services primarily to educational organizations and who are not offered a meaningful opportunity to provide services during the entire year.

Other Miscellaneous Provisions

  1. TRICARE: If an employee is offered coverage under TRICARE for any month, the employer is treated as having offered such employee minimum essential coverage for that month.
  2. COBRA and HFSA Carry-Over amounts: Notice 2015-87 explains how COBRA continuation rules coordinate with unused Health FSA amounts that carry over from one plan year to the next.
  3. HSA eligibility and veteran benefits: Notice 2015-87 allows for the contribution to an HSA for individuals who are receiving medical benefits from the Department of Veterans Affairs.

  

2015 Reporting

The reporting extension for Form 1095-C is March 31, 2016, for the employee receipt of the first tax form. As shown in the chart above, 2016 Limits, the IRS has made it clear that penalties for employees not receiving their annual form are $260 per form, to a maximum of $3,178,000. Failure to then file Form 1094-C with the IRS by the June 30, 2016, deadline will result in the same penalties, so in essence, there is the potential of paying the penalty twice. Note that there are additional penalties, which speak directly to the need for accurate and timely receipt of HR, Payroll, and Benefits data each month of the year on an ongoing basis. For any forms that must be corrected due to material changes, any form corrected on or before 30 days after the filing date has the potential for a $50 per form penalty or if corrected after the 30th day but on or before August 1 (in 2016 this is extended to November 1), the potential penalty is increased to $100 per form.

The IRS released Notice 2016-4 stating that the IRS may consider penalty waivers if the employer has errors or incomplete data but can demonstrate a good faith effort to comply. If an employer does not meet the extended due dates, they are encouraged to still furnish the forms to their employees and file with the IRS. The IRS will take such furnishing and filing into consideration when determining whether to abate penalties for reasonable cause. If an employer can show the effort to prepare for reporting the required information (such as gathering and transmitting the necessary data to an agent, such as Health E(fx), to prepare the data for submission), the IRS will take this into account when considering penalty abatement. Also, the IRS has stated it will take into account the extent to which the employer is taking steps to ensure that it is available to comply with the reporting requirements for 2016.

Health E(fx) customers have all gone to print for Form 1095-C and Form 1095-B (for non-employees and COBRA participants), and we are pleased to report that more than 4.2 million forms have been processed prior to the March 31 deadline. We have successfully tested with the IRS and are ready to begin the Form 1094 process for IRS filing for each of your ALE members. In the coming week, you will receive information on the Form 1094 submission process, including step-by-step instructions, weekly webinar training, and an updated employer user guide. The Form 1094 process and review will be released to production on March 30, 2016, in time for the opening of the IRS filing period.

In the meantime, it is critical that all first quarter data is true and correct and accepted into Health E(fx). This includes all January plan year rate information. If you are having any issues with transmitting and loading your data, please contact your Client Services Manager as soon as possible. As you know, beginning on January 1, 2016, the member compliance percentage has increased to the offer of coverage to at least 95% of your full-time employees and their dependents.

  

2016 What Next?

Of course, there is no rest for us after a busy open enrollment, holiday and tax season! On February 26, 2016, the Department of Labor issued proposed revisions to the Summary of Benefits and Coverage (SBC) and related documents. As you are well aware, the ACA requires SBCs be distributed to ALL participants at the time of enrollment and prior to a plan’s annual enrollment period. Plan administrators and plan sponsors are responsible for issuing these to participants in a timely manner. The new proposed template, glossary, and instructions are for plan years beginning on or after April 1, 2017. As is customary, public comments will be requested. Some of the proposed changes are as follows: 

  1. The SBC template is a total of 5 pages instead of 8.
  2. A new heading guides participants to the glossary and a statement about premium costs and out-of-pocket expenses.
  3. A section on new questions, with better clarity on what is and is not included in out-of-pocket maximums.
  4. A revised section, “Limitations, Exceptions, and Other Important Information.”
  5. Disclosure statements with a simple “Yes” or “No” identifying if the plan provides MEC and if the plan meets MV. It explains the individual tax consequences of not enrolling in MEC coverage and eligibility for premium tax credits if not offered a MV plan.
  6. New and improved coverage examples.
  7. New instructions for providers and administrators for completing the SBC.
  8. A new uniform glossary.

We cannot forget what 2016 will bring: a new President. The ACA has been a major talking point over the last 6 years and as the candidates have jockeyed for position over the past months, but there are other issues should be kept in mind as we head toward the general election. These issues are workplace related and can have an impact on ACA determination of eligibility and affordability:

  1. Overtime Regulations: Proposed changes to federal overtime regulations would increase the pool of workers eligible for overtime pay and in turn would amount to additional take-home pay and higher income.
  2. Family Leave: Paid family leave is a hot topic and President Obama called for the mandating of paid maternity leave for all employees in his 2015 State of the Union. While this is not seen as viable on one side of Congress, many major companies have instituted such a workplace policy and it has garnered a great deal of attention.
  3. The Cadillac Tax: The excise tax has been delayed until 2020, and is still drawing a great deal of opposition and talk of full repeal, but until further guidance, employers must be diligent in preparing for the potential of the 40% nondeductible tax on health plans that provide benefits of more than $10,200 for individuals and $27,500 for families.

 

Looking Ahead: Out-of-Pocket Maximums for Non-Grandfathered Plans

March 2016 brought an announcement from the Department of Health and Human Services (HHS) regarding the finalized 2017 out-of-pocket maximums for non-grandfathered health plans. The limits are: $7,150 for self-only coverage and $14,300 for all other tiers, including family. Remember, the 2016 regulation will apply requiring all self-only maximums be applied to any individual, regardless of whether the tier is self-only or family coverage.

2015 was an exciting and challenging year and we are ready for the regulations and any changes that will come in 2016 and beyond with a new President. The new leader will most definitely influence the ongoing need for change in the healthcare space and workplace policies. As always, as changes in regulation are proposed or finalized, Health E(fx) will keep you informed and keep you compliant.

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Many of our customers have done extensive research to find the best and most trusted ACA tracking and compliance management solution on the market. Their final choice: Health E(fx).

Contact a Health e(fx) Representative

 

 

Health E(fx) at Benefitfocus One Place 2016: 95% Compliant: New Year, New ACA Changes

 

In December 2015, the IRS extended the deadline for ACA reporting Forms 1094-C and 1095-C, providing some large employers with yet another opportunity to avoid ACA reporting penalties. The extension, however, overshadowed a highly impactful legislative change that became effective on January 1, 2016:

Large employers must offer affordable, minimum value health coverage to 95 percent of their full-time employees and their dependents, or incur penalties.

95% Compliance Threshold

In 2015, the ACA stated that all applicable large employers must offer affordable, minimum-value health coverage to at least 70 percent of their full-time employees and their dependents or face penalties. So while the compliance threshold is not new, as of January 1, 2016, the compliance threshold has increased to 95 percent.

What makes the change significant is that many employers in 2015 struggled to meet the 70 percent minimum or found it difficult to prove such coverage was offered to that population in a timely manner. Employers were faced with many challenges that required new process workflows, revamped data requirements and protocols, data integrity initiatives, and the realization that the data needed is often hosted in separate, disparate systems.

25% More Challenging

The reality is that managing this low margin of error can be a significant administrative burden. Depending on the reporting method an employer uses, the ACA and its mandatory year-end reporting can require monthly data and code assignments based on the offer of minimum essential coverage and all associated variations (i.e., if there was no offer of coverage, or if an offer was made but was not a qualified offer). In addition, a new code standard pertains to the regulations of affordability and how this determination is made on a monthly basis. Without the right technology—and accurate and timely data—this can be a daunting task.

Without a reliable ACA solution in place, employers who manage their benefits information incorrectly may not even realize that they are out of compliance. That is, until the IRS runs their reconciliation process.

Here’s a summary of the significant ACA changes taking place in 2016:

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Of all the ACA changes in 2016, the requirement of offering health coverage to all but five percent of the full-time population will likely be the most challenging and the most impactful to employers. If not managed correctly, this could potentially mean millions of dollars in annual penalties for large employers. A reliable and trusted ACA audit and compliance solution can help ensure employers remain compliant by managing data, fulfilling reporting obligations, and helping employers strategically plan benefits for their employee populations.

To gain deeper insight into strategies that can help you cope with the 95 percent compliance threshold, register now to join us at Benefitfocus One Place 2016, where Allison Manno, Vice President of Compliance — Health E(fx), will be hosting a breakout session, 95%: A Study of ACA Compliance Sustainability. You’ll have the opportunity to earn CEU credits and meet with peers who are facing the same ACA challenges as you!

 

 

 

Many of our customers have done extensive research to find the best and most trusted ACA tracking and compliance management solution on the market. Their final choice: Health E(fx).

Contact a Health e(fx) Representative

 

 

ACA Legislative Update Fall 2015

The next phase of the Employer Shared Responsibility (ESR) mandate.

 

As we move into the next phase of the Employer Shared Responsibility (ESR) mandate and organize systems for 2016 eligibility requirements, we wanted to share critical updates and information you’ll need to be aware of as you continue to manage Affordable Care Act (ACA) requirements for your organization:
  1. Auto-enrollment Provision Repealed
  2. States that Expanded Medicaid as of November 3, 2015
  3. 2016 Limits
  4. Updates on Transitional Reinsurance Fee (TRF)
  5. 1095-C: Filing for an Extension
  6. Health E(fx) Updates


1. Auto-enrollment Provision Repealed

On November 2, 2015, President Obama signed H.R. 1314, the “Bipartisan Budget Act of 2015,” which among other things, repealed the Fair Labor Standards Act’s auto-enrollment requirement. Essentially, employers that were subject to the FLSA and employed more than 200 full-time employees, now do not have to auto-enroll new, full-time employees into one of the employer’s health plans.

2. States that Expanded Medicaid as of November 3, 2015

The Supreme Court’s 2012 ACA ruling allowed each state’s governor and leadership to decide upon its participation in Medicaid. As of Tuesday, November 3, 30 states and the District of Columbia chose to expand Medicaid (see figure above).

Background: This was part of the ACA’s broader effort to ensure health insurance coverage for all U.S. residents. From 2014 to 2017, the federal government will pay 100% of the difference between a state’s current Medicaid eligibility level and the ACA minimum. In 2017, this drops to 95% and after 2020, moves and remains at 90%.

Health E(fx) is tracking these states and their minimums to ensure affordability is calculated for each employee at the mandated level.



3. 2016 Limits 

While 2016 limits and penalty amounts have been announced, please note the IRS has not announced the specific penalty amounts that will apply. (As you may remember, last year’s suggested amounts included an increase to penalties but were not applied.)

As final rulings are published, Health E(fx) will notify you and all system parameters will be adjusted accordingly.

  2015 2016
Failure to offer MEC $2,080 $2,160
Not affordable or MV $3,120 $3,240
Affordability 9.56% 9.66%
Safe Harbor 9.5% 9.5%
PCORI $2.08 $2.17
Transitional Reinsurance Fee $44 $27
Max OOP (non-grandfathered)
**Must embed self only OOP Limit
$6,600 (individual)
$13,200 (family)
$6,850 (individual)
$13,700 (family)

 

4. Updates on Transitional Reinsurance Fee (TRF)

It’s that time again – the 2015 ACA Transitional Reinsurance Program (TRP) annual enrollment and contributions submission form (2015 Form) is online at Pay.Gov/public/form/start/70746962. Forms must be submitted no later than Monday, November 16, 2015.

For help and information on completing this form or creating supporting documentation, use the 2015 Reinsurance Contributions Form Completion and Submission Web-Based Training.

Answers to 3 Common TRP Questions
Section 1341 of the ACA established a TRP to stabilize premiums in the individual market both in and out of marketplaces. The TRP collects from contributing entities to fund reinsurance payments to issuers of non-grandfathered, ACA-compliant, reinsurance-eligible individual market plans; the administrative costs of operating the reinsurance program; and the U.S. Treasury’s General Fund from 2014 through 2016.

Q: Who makes contributions?
A: Pursuant to 45 CFR 153.20, a contributing entity means:

1) A health insurance issuer, or

2) For the 2014 benefit year: a self-insured group health plan whether or not it uses a third-party administrator, and
A self-insured group health plan includes a group health plan that is partially self-insured and partially insured, where the health insurance coverage does not constitute major medical coverage.

3) For 2015 and 2016 benefit years: a self-insured group health plan that uses a third-party administrator in connection with a) claims processing; b) adjudication (including the management of internal appeals); or c) plan enrollment for services other than for pharmacy benefits or excepted benefits within the meaning of section 2791(c) of the PHS Act.

  • A self-insured group health plan includes a group health plan that is partially self-insured and partially insured, where the health insurance coverage does not constitute major medical coverage.

4) To note: Notwithstanding the information above, a self-insured group health plan that uses an unrelated third party to obtain provider network and related claim re-pricing services, or for up to five percent of claims processing or adjudication or plan enrollment will not be deemed to use a third-party administrator, based on either the number of transactions processed by the third party, or the value of the claims processing and adjudication and plan enrollment services provided by the third party. 

Reinsurance contributions are required for major medical coverage that is considered part of a commercial book of business. For the purpose of reinsurance contributions, “major medical coverage” is defined in 45 CFR 153.20 as a catastrophic plan, an individual or a small group market plan subject to the actuarial value requirements under 45 CFR 156.140, or health coverage for a broad range of services and treatments provided in various settings that provides minimum value as defined in 45 CFR 156.145. A contributing entity must make reinsurance contributions on behalf of its enrollees in plans that provide “major medical coverage,” as defined under 45 CFR 153.20, unless one of the exceptions provided under 45 CFR 153.400 applies to such coverage.

Although a contributing entity is responsible for the reinsurance contributions, it may elect to use a third-party administrator or administrative services-only contractor for submission of enrollment data and the transfer of the reinsurance contributions.


Q: How are reinsurance contributions made?
A. HHS implemented a streamlined approach to complete the contributions process through Pay.Gov. To successfully complete the reinsurance contribution process, contributing entities, or third-party administrators, or administrative services-only contractors on their behalf, must register on this site.

If you created a Pay.Gov account for the 2014 benefit year, you can use it for the 2015 benefit year. This is required regardless of if you are in a transitional year or have a non-calendar year plan.

How it works:
1) Pay.Gov allows you to access 2014’s ACA Transitional Reinsurance Program Annual Enrollment Contributions Submission Form.

2) Enter the annual enrollment count for the 2014 benefit year.

3) From there, access the 2015 ACA Transitional Reinsurance Program Annual Enrollment Contributions Submission Form and enter the annual enrollment count for the 2015 benefit year. (Please note that there are specific forms for each benefit year.)

4) The form auto-calculates the annual contribution amount owed based on the annual enrollment count.

5) From there, schedule a payment for the calculated reinsurance contributions on the payment page.

Q: What are the payment options?
A: For the 2015 benefit year, HHS offers contributing entities two ways to pay:

1) the entire 2015 benefit year contribution in one payment no later than January 15, 2016, reflecting $44 per covered life; or

2) in two separate payments for the 2015 benefit year:
a. The first due by January 15, 2016, reflecting $33 per covered life
b. The second due by November 15, 2016, reflecting $11 per covered life.

Health E(fx) note: For our customers who are fully implemented, we provide the count methods and contribution amounts:

1) Log into Health E(fx).

2) Go to Communications/Federal Returns/Transitional Reinsurance fee calculations. Enter your 5500 numbers (if applicable).

3) Click “Run Report.”

4) You’ll also see a PCORI calculator for your annual PCORI fee calculation for your Form 720 filing.


5. 1095-C: Filing for an Extension

This past July, the IRS indicated that employers could request ACA deadline extensions for filing information returns and furnishing ACA statements to payees.

While these reporting requirements were initially scheduled for 2014, the IRS postponed them until 2015 – and now everyone is moving to meet the deadlines. Here are the dates to be aware of:

  • By February 1, 2016: Employers need to furnish Form 1095-B or Form 1095-C to employees,beginning with the 2015 tax year.

  • By March 1, 2016: Employers need to furnish Form 1095-B or Form 1095-C to the IRS,beginning with the 2015 tax year. Filing this electronically? You have until March 31, 2016.

How to request an extension for these 2016 deadlines
On a July 2 conference call, an IRS spokesperson stated that deadlines extensions are available for the 1094-C, 1094-B, 1095-C, and 1095-B.

To request an extension, file IRS Form 8809, Application for Extension of Time to File Information Returns, which is already used to request filing extensions deadlines for Forms W-2 and 1099.

IRS regulations allow filers to request an automatic 30-day extension on Form 8809, and an additional 30-day extension if:

1) the first automatic 30-day extension was granted by the IRS.

2) the additional extension is filed before the expiration of the automatic 30-day extension.

3) NOTE: The deadline extension to furnish ACA forms to employees is noted in Publication 1220 Specifications for Electronic Filing of Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G. Please click here for more information, page 120.

While employers can also request an extension to furnish Forms 1094-C,1095-B, and 1095-C to recipients, these requests are not automatically approved. And, if approved, extensions allow only a maximum of 30 days from the original due date.

To request this extension, employers must submit a letter to the IRS with the following information: Payer or employer name, TIN, address, type of return, specify that the extension request is to provide statements to recipients, reason for the delay, signature of payer or duly authorized person, file name (for electronic file transmission).

The letter can be sent by mail or fax:

Internal Revenue Service
Attention: Extension of Time Coordinator
240 Murall Drive Mail Stop 4360
Kearneysville, WV 25430

Fax: 877-477-0572 or 304-579-4105

The request must be postmarked no later than the date the statements are due to the recipients. Only the payer or authorized agent may sign the letter requesting the extension for recipient copies; however, if a transmitter has a contractual agreement with a payer to file extension requests on the payer’s behalf, the transmitter should state so in the letter requesting the extension.

Please note:

  • Refer to Form 8809’s instructions for more on Form 5498-QA extension requests. When requesting an extension for recipient copies, be sure to include the reason an extension is needed.

  • The paper Form 8809 and the online fill-in Form 8809 cannot be used to request an extension of time to furnish statements to recipients.

6. Health E(fx) Updates

The next Health E(fx) release will be completed on November 24, 2015. This will include the fully operational and functional audit process and submission readiness for print/mail and IRS filing. Training modules and webinars will be available shortly after the release, and release notes will be sent to you in the coming days.

 

 

Many of our customers have done extensive research to find the best and most trusted ACA tracking and compliance management solution on the market. Their final choice: Health E(fx).

Contact a Health e(fx) Representative

 

 

Legislative Changes Employers Should Be Aware of for 2015 and Beyond

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Legislative Changes Employers Should Be Aware of for 2015 and Beyond

 

Since early June, conversations about the Affordable Care Act have ranged from the Supreme Court decision and the impact of the court’s decision to penalty updates, reporting changes, and updates to benefit maximums.

As we move into fall, we have recapped some of the legislative changes to watch for in Q3 and Q4 of 2015 and how these inform your decisions for 2016. Each change will have a direct impact on the offer of coverage and ACA mandated requirements.

King v. Burwell: A Decision in Favor of the ACA
The court ruled 6 to 3 in favor of the White House, which essentially kept the Affordable Care Act (ACA) in place. The justices decided that the five contested words in the ACA (“exchange established by the state”) are not and were not intended to be interpreted that people in the 34 states without healthcare exchanges are not eligible for federal tax credits or subsidies. Subsidies will remain available in all states with federally established or partnership exchanges, thereby maintaining the mandate under which employers may be subject to potential penalties with respect to the granting of subsidies or tax credits.

After this decision, many companies found that an end-of-summer start to 2015 ACA compliance was very difficult, if not impossible. Companies providing ACA compliance announced as early as mid-July that they were no longer accepting new clients as timelines were too short for reporting accuracy by year-end.

While Health E(fx) was also forced to make the same announcement, we are currently bringing on new clients and working with existing ones to prepare for 2016 ACA compliance requirements and detailing the role 2015 data plays in the process.

For more information on the King v. Burwell decision, visit our full blog post here. 

Medicaid Expansion: States News
Many states held off on Medicaid expansion when the Supreme Court decided to hear the King v. Burwell case. With the case decided, here is a summary of Medicaid’s “state of the union”:

5 states are expanding Medicaid using an alternative to traditional expansion (as outlined under the ACA): Arkansas, Indiana, Iowa, Michigan, New Hampshire

1 state is expanding Medicaid pending federal approval: Montana

24 states are expanding Medicaid: Alaska, Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Hawaii, Illinois, Kentucky, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, North Dakota, Ohio, Oregon, Rhode Island, Vermont, Washington, West Virginia

1 state is transitioning from alternative Medicaid expansion to traditional expansion: Pennsylvania

1 state has an ongoing update: Utah
HCR 12: A resolution was passed stating the governor, lieutenant governor, and legislative leaders will find a compromise to the Healthy Utah Plan by July 31, 2015. If an agreement is reached, the governor will call a special legislative session to vote on the plan. If agreement is met, goal is a January 1, 2016, effective date.

The remaining states are not expanding Medicaid. 

 

2016: Plan Change Requirements
While late guidance caused a frenzy for insurers and employers, we’re seeing some areas where plan changes could save families hundreds or possibly thousands of dollars in out-of-pocket medical costs annually. In 2016, this could have a major impact on how much families pay for plans, as we’ve described below.

An overview of out-of-pocket maximums

In 2015, nearly all medical plans met minimum essential coverage and value and offered members the protection of an annual, out-of-pocket maximum for in-network care for essential health benefits.

An out-of-pocket maximum is the most a family or individual pays within a year for health coverage, including deductibles, coinsurance, or copays. Once the maximum is reached, the health plan steps in and pays 100% of the allowed amount of covered services.

There was a governmental limit on how much these out-of-pocket maximums could be. Family health plans, which include spouse, children, or spouse and children, could have a single, out-of-pocket maximum for the entire family; these were allowed to be twice the max of an individual’s health plan. In 2015, plans could count each family member’s expenses until the family maximum was reached. At that point, the plan would start covering all family members’ in-network care in full. This is about to change.

As of 2016, regardless of whether a plan covers a single person or a family, there is a limit on how much one person can be required to spend.

- For individuals, plans cannot require a person to pay more than the maximum amount.

- For families, when one member hits an individual limit, the plan must cover that person’s allowed bills in full for the rest of the year. The other family members continue to pay their deductibles, coinsurance, or copays until they reach the individual maximum, or the total family maximum is reached.


The individual maximum can be up to $6,850 and the family maximum up to $13,700. For high-deductible plans that are compatible with HSAs, amounts are reduced: $6,550 and $13,100, respectively.


Many plans are already set up this way, yet many must change. For 2016, family plans can be set up one of two ways:

 

1. A family plan maximum that is no more than the maximum for individual coverage.

2. A higher family maximum but with an individual maximum “embedded” in the plan. Once one person’s allowed bills reach the maximum, his or her bills are covered in full for the rest of the year. Other family members will continue to pay their share of their bills until one of them also reaches the individual maximum, or the family maximum is reached.

As you can see, for a family member who has the majority of the medical expenses, this change could mean thousands of dollars in out-of-pocket savings for the family. However, this enhanced coverage may come at a price. Insurers and plan providers have to calculate how much more this enhanced coverage will cost, and set prices accordingly, ensuring the affordability requirements are maintained.

Employers have to choose the plan design that meets the needs of their employees as well as the affordability maximums set by the ACA. The process of determining the employee contribution will be key to ensuring these requirements are met and costs are managed appropriately.

Extensions for Certain ACA Information Reporting Deadlines
During a July 2, 2015, conference call, the IRS told a group of payroll industry participants that employers will be able to request an extension of the ACA filing deadline for filing information returns with the IRS, and furnishing ACA statements to payees. These reporting requirements were initially scheduled to go into effect beginning with the 2014 coverage year, but the IRS provided transitional relief and postponed them until 2015.

Code Sec. 6055(a)
This code generally requires every health insurance issuer, the sponsor of a self-insured health plan, a government agency that administers government-sponsored health insurance programs, and other entities that provide “minimum essential coverage” (defined in Code Sec. 5000A(f)) to file annual returns reporting information for each individual for whom such coverage is provided.

Companies and organizations filing an information return reporting minimum essential coverage (MEC) must also provide a written statement to each employee listed on the return that shows their information was reported to the IRS (Code Sec. 6055(c)(1)). The purpose of this is to allow taxpayers to establish, and for the IRS to verify, that taxpayers were covered by MEC and their months of enrollment during a calendar year.

Reporting entities subject to Code Sec. 6055’s requirements use Form 1094-B, Transmittal of Health Coverage Information Returns, and Form 1095-B, Health Coverage, or another form that the IRS designates to report minimum essential coverage.

Code Sec. 6056
Code Sec. 6056 requires large employers* to report annual information regarding health insurance that they do or do not offer to full-time employees. The code also requires employers to furnish related statements to these employees.


What employers report allows the IRS to administer the Code Sec. 4980H employer shared responsibility provisions. This also allows employees to determine whether they may claim a Code Sec. 36B premium tax credit on their individual tax returns for each month of the calendar year.

Employers can meet the Code Sec. 6056 requirements by filing the following:

- Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns;
- Form 1095-C, Employer-Provided Health Insurance Offer and Coverage Insurance; or
- other form(s) designated by the IRS, or a substitute form.


By filing each Form 1095-C and the transmittal Form 1094-C with the IRS, employers meet the requirement for fulfilling Code Sec. 6056 (Reg. § 301.6056-1(c)(1)).


Dates to know:

  • By February 1, 2016: Many employers will have to furnish Form 1095-B or Form 1095-C to employees, beginning with the 2015 tax year.

  • By March 31, 2016: If employers are filing electronically, this is the filing deadline for all of the above forms with the IRS.

 

How to Make an Extension Request
The forms that can be extended include: Form 1094-C, Form 1095-C, Form 1094-B, and Form 1095-B.

Employers may request an extension of the information return filing deadline with the IRS on Form 8809, Application for Extension of Time To File Information Returns. This form is already used to request a deadline extension for Forms W-2 and 1099. The IRS is currently revising the form to include boxes that can be selected for the ACA information returns. The IRS regulations allow filers to request an automatic 30-day extension for the information return filing deadline on Form 8809, and an additional 30-day extension if:

- the first automatic 30-day extension was granted by the IRS, and
- the additional extension is filed before the expiration of the automatic 30-day extension.

The deadline extension to furnish the ACA forms to employees will be noted in an upcoming revision to IRS Publication 1220, Specifications for Electronic Filing of Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G. You can request an extension by submitting a letter to the IRS that contains certain information. These requests are not automatically approved. An extension of the deadline that is approved will allow for a maximum of 30 additional days from the original due date.

Please note, it will be required that each employer file Form 8809. As we await the revision to IRS Publication 1220, there is no assumption that Health E(fx) will be able to file this extension on a client’s behalf; Health E(fx) is, however, fully prepared and ready to file as expected, February 1, 2016, for employee statements and March 31, 2016, for IRS transmissions.

 

Thank You

It’s been quite a year for everyone, and this summer’s King v. Burwell decision was certainly a benchmark for the ACA.

We are all entering a busy time of year, one that is more critical with the addition of new required reporting following on the heels of open enrollment, the holiday season, and the beginning of 2016’s first quarter. Moving forward, Health E(fx) will keep you up-to-date as additional legislative changes are implemented. Please send questions on Health E(fx) to clientservices@healthefx.us

If you have any questions regarding topics in this newsletter, including legislative changes, please contact your benefits broker/consultant or legal team for interpretation and implementation at your organization.

 

* As defined in Code Sec. 4980H; in general, employers that employed an average of at least 50 “full-time employees” during the preceding calendar year.

 

Many of our customers have done extensive research to find the best and most trusted ACA tracking and compliance management solution on the market. Their final choice: Health E(fx).

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King vs. Burwell – Nothing Changes

SupremeCourt_ACARuling

As most are aware, the U.S. Supreme Court issued its King vs. Burwell ruling on Thursday, June 25.

The court ruled 6 to 3 in favor of the White House, essentially keeping the Affordable Care Act (ACA) in place. They ruled that five contested words in the ACA (“exchange established by the state”) are not and were not intended to be interpreted that citizens of the 34 states that have not created exchanges are not eligible for federal tax credits or subsidies. Subsidies will remain available in all states with federally established or partnership exchanges, thereby maintaining the mandate under which employers may be subject to potential penalties with respect to the granting of subsidies or tax credits.

The commentary of the Supreme Court Justices on the ruling is a concise and strong rebuke of the plaintiffs. “Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them,” Chief Justice John Roberts wrote. There is little room for further interpretation as to whether the ACA will remain or not – it is here to stay.

This decision, while politically charged, was expected by many. The ruling is also consistent with both the messages and information from the IRS indicating there will be no further delays, and annual reporting will proceed as scheduled for 2015, with the first 1094 and 1095 submissions due in 2016. The IRS has communicated a new reporting format, a testing schedule for both the 2014 voluntary year as well as the 2015 mandatory reporting year, and released 2015 draft forms. The regulations are set and reporting continues to move forward.

What does this mean for U.S. employers?

Employers that have been managing the ACA and the required reporting data know that the preparation for tracking and managing full-time eligibility determination is difficult. Add to this the required data aggregation, business policy decisions/changes, erroneous data cleanup, and meeting IRS-required reporting standards – and compliance is nothing less than daunting. Those employers that have not started or are just beginning the process must work quickly to fully prepare their 2015 data for reporting. It is almost July, month 7 of 12. Time is of the essence as the reporting deadline rapidly approaches.

Is there any chance that employers will get another “free” year to put their plans in motion?

This is not likely and is a very risky strategy to expect such. The law, for better and worse, has been in effect for five years. A major Supreme Court ruling in 2012, 50 attempts to repeal, and now a decisive Supreme Court ruling demonstrate that the law is just that – the law.

King vs. Burwell was likely the last major decision regarding the Affordable Care Act. Of course, there will continue to be lawsuits filed, and the 2016 general election will be filled with partisan discussion of repeal and “what if” scenarios. However, ignoring the inevitable may be a costly risk for any organization. ACA compliance is now critical to every organization. Data is key. If you do not have a plan, now is the time. 1094 B/C will need to be filed for this year. And 1095-B/C are due to employees/covered individuals by February 1, 2016.

Ensuring your data is ACA reporting ready must begin now to meet deadlines.

 

Learn more about how Health E(fx).

Contact a Health e(fx) Representative

 

Beyond 1094 and 1095 automation: 5 Things Your Data Should Be Telling You

iStock_000033830536_XXXSMALL

While the complexity of meeting Affordable Care Act (ACA) requirements is a challenge for some employers, other forward-thinking organizations are transforming compliance requirements into a strategic advantage.

By seamlessly integrating data from all HR systems, including benefits administration, payroll, and HRIS to track eligibility and affordability, these employers are unlocking the keys to better decision making and strategic analysis.

In addition to meeting compliance requirements, your ACA data should be:

  1. Determining your most advantageous safe harbor based on current employee income and the employee premium for the lowest cost, minimum value plan offered.

  2. Calculating all relevant ACA taxes and penalties, including transitional reinsurance fees, and Patient-Centered Outcomes Research Institute (PCORI) fees.
  1. Supporting optimization of medical benefits design with decision modeling on ACA-dependent variables.
  1. Providing period-based cost trend analyses over time — by month, quarter, and year.
  1. Forecasting adoption rates and impact, and determining the effects adoption rates have on overall plan design costs. 

If your current ACA solution isn’t supporting your company’s fiscal planning strategies, consider Health E(fx) for clarity, compliance, and control. As an award-winning, cloud-based solution for compliance, audit, reporting, and data analytics under the ACA, Health E(fx) combines automated oversight with strategic insight. You cannot escape the ACA requirements, but you can leverage the data to improve your business intelligence and your bottom line, and Health E(fx) can help.

 

 

Many of our customers have done extensive research to find the best and most trusted ACA tracking and compliance management solution on the market. Their final choice: Health E(fx).

Contact a Health e(fx) Representative

 

The Employer Mandate is Here: From Measuring and Tracking to Reporting and Appeal—Are You Fully Prepared?

 

 

After four long years of discussion, confusion, delay, and public exchange glitches, the Affordable Care Act (ACA) has gone into full effect. For those employers that are prepared, it is mostly business as usual. For those that delayed and thought it would be easy to implement closer to reporting time, the realization that requirements may not be so simple is likely beginning to set in.

 

Most employers have taken the necessary steps to ensure the offer of minimum essential and minimum value coverage for their eligible populations for 2015. However, there is continued confusion regarding who is measurable under the definition of a full-time employee—both new employees as well as those considered ongoing.

 

Also, the reporting hurdle (with correct and timely information as demanded by the IRS to ensure validation and reconciliation of the Employer and Employee Responsibility Mandates under the law that is both auditable and defensible) is not so simple. The major complicating factor for reporting is that all of the required information has never been housed in any one system before. Disparate data, in multiple systems, must be managed, accumulated, and reported, along with the offer of coverage and new indicator codes specific to 4980H. This is complex information that is not currently managed or calculated in most employer systems.

 

IRC §6055 and §6056—Required Reporting

Below is a summary of what must be reported to employees and the IRS annually beginning in January 2016 for the 2015 plan year and every year thereafter.

Section 6056 requires employers to report information to the IRS about health care coverage offered to full-time employees in order to administer the employer shared responsibility provisions of section 4980H of the code. Section 6056 also requires those employers to furnish related statements to employees that may be used to determine (for each month of the calendar year) whether they may claim a premium tax credit on their individual tax returns under section 36B.

 

Section 6055 requires information reporting by any person who provides minimum essential coverage to an individual during a calendar year, which relates to the individual shared responsibility section provisions. Like Section 6056, transmittals to the IRS, as well as individual employee statements, are required. IRS transmissions are due no later than February 28 each year (March 31 if filed electronically). Employee statements must be furnished on or before January 31 of the year immediately following the calendar year to which the employee statements relate (i.e., the same day as Form W-2).

 

Key Reporting Provisions

The final reporting regulations include the following key provisions, which give the basic structure of what must be collected, accumulated, and reported beginning in 2016 for the 2015 calendar year.

 

1. Single, Combined Form for Information Reporting—Employers that self-insure are allowed to report in a single, consolidated form that can be used to report to the IRS and employees under both §6055 and §6056, thereby simplifying the process and avoiding duplicative information submissions. The combined report includes two sections: the top is for information required for §6056 reporting; the bottom includes the information required for §6055.

- Employers with less than 50 full-time employees are exempt from the employer shared responsibility provisions and are not required to report.
 
- Employers that are considered Applicable Large Employers (ALEs) are subject to the final reporting requirements. Those who self-insure will complete both sections of the combined form. [NOTE: An Applicable Large Employer with respect to a calendar year is defined in Section 4980H(c)(2) as an employer that employed on average at least 50 full-time employees on business days during the preceding calendar year.]
 
- ALEs that do not self-insure will complete only the top section of the report, or information pertaining to §6056. Insurers and other providers of health coverage will only report under the bottom section (information pertaining to §6055) via a separate form for that sole purpose.
 

2. Simplified Option for Employer Reporting—The simplified option is provided for employers that offer a qualifying offer of coverage to any of their full-time employees. This is a simplified alternative to the monthly, employee-specific information that the general rules require.

- A qualifying offer of coverage is one that provides an offer of minimum value coverage where employee-only coverage is at a cost to the employee of no more than 9.56% of income under the General Rule. If an employer chooses to use one of the affordability safe harbors, this cost reverts to the original 9.5% of the employee’s income.
 
- For employees who receive a qualifying offer for all 12 months of the calendar year, employers will need to report only the names, addresses, and taxpayer identification numbers of those employees and an indicator of the fact they received a full-year qualifying offer. Employees will receive a copy of this simplified report or a standard statement for use when filing the individual tax return.
 
- For employees who receive a qualifying offer for less than a full 12 months of the year, employers will be able to simplify reporting to the IRS and to employees for each of those months with the use of a code indicating that the offer was made within that month.
 
- In keeping with the phase-in approach to the regulations, employers certifying that they have made a qualifying offer to at least 95% of their full-time employees (plus an offer to their families) will be able to use an even simpler alternative for reporting in 2015. These employers will be able to use the simplified reporting method for their entire workforce, including any employees who do not receive a qualifying offer for the full year. These employers will provide employees with standard statements relating to their potential eligibility for premium tax credits.
 
- The final regulations also give employers the opportunity to avoid identifying those employees who are full-time and just include in the report those employees who may be full-time. In order to take advantage of this option, the employer must certify that it offered affordable, minimum value coverage to at least 98% of the employees for whom it is reporting.
 

Each ALE member with full-time employees is the entity responsible for filing and furnishing statements with respect to its full-time employees under §6056. This means that the control group standards for determining ALE status is treated just like the assessment of penalties for non-compliance under the Employer Shared Responsibility provisions of 4980H. The responsibility for penalty payment and reporting lies with the ALE member. A third-party administrator (TPA) may be used to create and send the reports, but the ultimate liability remains at the employer level.

 

Summary

The data requirements, draft forms, and mandates on both the employer and employee are now in full effect. Large employers must begin the task of ensuring all the proper data is gathered, accumulated, and maintained. Given that much of the data required will be reported (with new and complex indicator codes), a great deal of programming and testing will be required to ensure that correct and timely reporting is ready for the 2015 calendar year if the plan is to mange this task in-house.

 

If systems are already in place to measure eligibility and annual form creation and submission is not programmed or a vendor has not yet been selected, the requirement to meet the data specification requirements to create and submit these forms is needed sooner rather than later. Further, because this consolidated data, with indicator codes, has never been required previously for reporting by the employer, this data has usually been housed in multiple disparate systems that are not specifically designed for audit and compliance management, which presents significant data quality risks. With the ALE responsible for both reporting and penalties, the complexity of managing this task is indeed difficult with existing system limitations.

 

And no system can calculate the needed data and codes without an entire year of employee (and their dependents!) information and a basis for managing how the full-time population is determined and offered minimum value coverage.

 

 

__________________

Many of our customers have done extensive research to find the best and most trusted ACA tracking and compliance management solution on the market. Their final choice: Health E(fx).

 

 Contact a Health e(fx) Representative

 

 

Gain a top-level view into the power of Health E(fx) to track eligibility, manage workforce, automate reporting, analyze data, and optimize compliance, benefits, and financial strategies under the ACA. Watch the video "Health E(fx): The Affordable Care Act Made Simple" here:

 

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Health E(fx) Legislative Alert: Deadline for the ACA’s Transitional Reinsurance Fee

November_15_Deadline

November 15, 2014, is the deadline for submitting the required information and scheduling the transitional reinsurance payment, which must be done through Pay.gov.

 

 

What Is the Transitional Reinsurance Fee?

The Affordable Care Act (ACA) provides for a transitional reinsurance program to help stabilize premiums for coverage in the individual health insurance market during the first three years of operation of the Health Insurance Marketplaces (2014-2016). The program is designed primarily to transfer funds from the group market to the individual market, where high-risk individuals are more likely to be covered.

Payments to individual market insurers under the reinsurance program are funded by “contributions”; and although some refer to this payment as a “tax,” we will refer to these contributions as “fees.” These fees are payable by health insurance issuers and third-party administrators on behalf of self-insured group health plans. However, under the regulations, self-insured group health plans are ultimately responsible for the payment.

Final regulations were published on March 16, 2012. These regulations have been modified frequently and the most current may be found at §45 C.F.R. 153.400, et seq.

 

Fee Amount

The transitional reinsurance fee requirement applies on a per capita basis with respect to each individual covered by a plan subject to the fee (“covered life”). The total amount for 2014 is $63 per covered life, and decreases to $44 per covered life in 2015.

 

Who Is Responsible for the Fee?

The fee, as defined, is imposed on the “contributing entity,” defined as an insurer (fully insured coverage) or the group health plan offering self-insured coverage. TPAs, ASO and others may submit on behalf of contributing entities; however, CMS has clearly stated that these groups have no requirement to do so under the law. Since the fee is imposed on the self-insured plan, not the sponsor as an entity, plan assets may be used to pay the assessment. The IRS has noted that plan sponsors may treat the fee as an ordinary and necessary business expense for tax purposes, thereby making it deductible to the company.

In the case where a plan offers options that are both self-insured and fully insured, and any option that separately provides major medical coverage, the insurer would be responsible for the fee under the insured benefit options and the plan would be responsible for the fee with respect to covered lives under the self-insured benefit options. Special and specific rules apply for plans that may be partially self-funded and partially fully insured or if a plan changes from self-funded to fully insured (or vice versa) during a calendar plan year.

 

How to Count Lives

Covered lives are not just your employees. In benefits, we refer to these as members or “belly buttons.” So everyone covered under the plan (including spouse, dependents, retirees, and COBRA participants) must be included. There are permissible counting methods that may be used. The methods of counting lives for the reinsurance fee are similar to the methods for the Patient-Centered Outcomes Research Institute (PCORI) fee, but plans should not rely on the PCORI method. You may choose any allowed method, but the same method must be used for a full benefit year and across all plans. The counting period is generally the first nine months of the calendar year (except for the 5500 method) regardless of the plan year.

 

Counting Options for Insured Plans

Actual Method: Add the total number of covered lives for each day of the first nine months of the benefit year, and then divide that total by the number of days in those nine months.

Snapshot Count Method: Add the total number of covered lives on any date during the same corresponding month in each of the first three quarters of the year, and then divide that by the number of dates on which a count was made. The date used for the second and third quarters must fall within the same week of the quarter as the corresponding date used for the first quarter.

Member Months/State Form Method: Multiply the average number of policies in effect for the first nine months of the benefit year by the ratio of covered lives per policy in effect, calculated using prior NAIC exhibit or a form with the issuer’s state of domicile.

 

Counting Options for Self-Insured Plans

Actual Method: Add the total number of covered lives for each day of the first nine months of the benefit year, and then divide that total by the number of days in those nine months.

Snapshot Count and Snapshot Factor Method:

  • Count: Add the total number of covered lives on any date (or more dates, if an equal number of dates are used for each quarter) during the same corresponding month in each of the first three quarters of the year, then divide that by the number of dates on which the count was made. Note that the date used for the second and third quarters must fall within the same week of the quarter as the corresponding date used for the first quarter.

  • Factor: Add the total number of covered lives on any date (or more dates, if an equal number of dates are used for each quarter) during the same corresponding month in each of the first three quarters of the benefit year, divided by the number of dates on which a count was made (note that the date used for the second and third quarters must fall within the same week of the quarter as the corresponding date used for the first quarter). Then, add the number of participants with self-only coverage and the product of the number of participants with coverage other than self-only coverage and a factor of 2.35.

Form 5500 Method: For a plan offering more than self-only coverage (dependent or spousal coverage), add the number of participants at the beginning and end of the plan year from the most current Form 5500 (line 5 and 6a-6c). For a plan offering self-only coverage, perform the same calculation, but divide this number by 2.

 

Note: Your choice of method may have a significant impact on the calculation of covered lives and therefore the fee owed. Choose a method that minimizes the fee, because once you register and set the count, the fee is auto-calculated and you must set payment timing and method. You must also maintain full documentation of the count for at least 10 years. CMS may audit a plan to assess its compliance with the program requirements, and it will be crucial to be able to produce this information. Health E(fx) is validating the configuration of the current methods (Form 5500 method will require your form input for full calculation) and will release these in the coming days.

 

Submitting the Fee

The entire process will take place on Pay.gov. CMS opened the form on October 24, 2014; however, CMS has not issued guidance regarding any delay to the November 15, 2014, deadline. Given that HPID was delayed, everyone was hopeful. But given the late date, it is best to assume the November 15 deadline is here to stay. In order to successfully and fully complete the transitional reinsurance fee submission, you must:

  • Register on Pay.gov
  • Fill out the Transitional Reinsurance Form
  • Attach supporting documentation
  • Schedule your payment

The form requires basic company and contact information, payment type, benefit year, and the annual enrollment count using one of the methods discussed.

You will be required to upload a Supporting Documentation CSV file that must contain specific company information, and the annual enrollment count and the benefit year. Note that the file has certain technical requirements, including file size and prohibition on certain special characters.

Last but not least, is the payment. The form will auto-calculate the amount owed. Plans will need to schedule payment for this amount, the form will not submit without payment information. Plans can choose to remit payment for the entire benefit year at once (the full $63 per covered life), or plans may submit two separate payments for the year. If the separate payment method is selected, the first payment ($52.50 per covered life) is due January 15, 2015, and the second payment ($10.50) is due November 15, 2015. CMS suggests leaving 30 days between the form submission and payment date. The payment must be scheduled by November 15, 2014, regardless of the method chosen. If the two-payment option is chosen, you will need to submit the same form and supporting documentation, with the exact information, twice.

ACH payment is currently the only accepted payment method, but an invoice may be sent should there be problems with your payment. Plans need to add a particular ALC+2 value with the applicable bank to ensure the payment is processed correctly; the company name for ACH purposes is “USDEPTHHSCMS.”

 

What Should You Do to Prepare?

To prepare for the November 15, 2014, deadline, first collect your count information. (Health E(fx) current self-insured customers with full history of nine months of data can refer to the system for count information—all methods other than 5500 at this time. For those customers who are in implementation, you will need to file this year without Health E(fx) and can use the system for the 2015 filing). Second, prepare a CSV file, and third, notify your bank of the applicable ALC+2 value.

Please contact your Health E(fx) Client Team or your Benefits Consultant for additional information.

 

__________________

Many of our customers have done extensive research to find the best and most trusted ACA tracking and compliance management solution on the market. Their final choice: Health E(fx).

 

 Contact a Health e(fx) Representative

 

 

Gain a top-level view into the power of Health E(fx) to track eligibility, manage workforce, automate reporting, analyze data, and optimize compliance, benefits, and financial strategies under the ACA. Watch the video "Health E(fx): The Affordable Care Act Made Simple" here:

 

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The Health Plan Identifier Number

Important Deadline and Action Required: The Health Plan Identifier Number: HIPAA Expansion Under the ACA

It is hard to believe that the Health Insurance Portability and Accountability Act of 1996 (HIPAA) was enacted almost 20 years ago. In its overly complicated and technical requirements, it included provisions that began the compliance rules regarding the integration of security, privacy, and administrative simplification. These requirements included standards for electronic healthcare transactions, which the government believed would improve efficiency and reduce costs in the nation’s healthcare system.

The ACA expanded these HIPAA transaction standards and directed HHS to craft regulations and standards for electronic transactions. The result of this expansion is the requirement that by November 7, 2016, all entities that meet the definition of a “health plan” must obtain a Health Plan Identifier (HPID). As with other HIPAA compliance standards, fully insured plans will be able to depend on the insurance carrier for compliance and will be covered by their insurance carrier’s unique identifier. Self-insured group plans are considered “covered entities” and must be compliant with the HPID mandate.

Self-insured health plans with more than $5 million in annual claims are required to register for a unique HPID by November 5, 2014. Those health plans with less than $5 million in annual claims are not required to obtain this HPID until November 5, 2015.

As with any regulations, especially regarding HIPAA and the ACA, simple and easy is not common. First, a plan must meet the definition of a “health plan.” The definition, for the purpose of the administrative simplification requirements, includes self-insured plans, as stated above. There are, of course, new rules that separate plans into two categories: Controlling Health Plan (CHP) and Sub-Health Plan (SHP).

Controlling Health Plan (CHP): This is a health plan that controls its own business activities, actions, or policies; OR

a. Is controlled by an entity that is not a health plan; and

b. If it has a sub-health plan(s), exercises sufficient control over the sub-health plan(s) to direct its/their business activities, actions, or policies.

Sub-health plan (SHP): SHP is defined as a health plan whose business activities, actions, or policies are directed by a controlling health plan. A self-insured plan that is an SHP may obtain a Health Plan Identifier number, but it is not directly required to do so.

The final regulations get more confusing in that they require any CHP self-insured plan to obtain a HPID, even if it does not conduct any of the electronic transactions and the identifier will not be used for this purpose. So, should all self-insured plans automatically obtain a HPID? Since no electronic transactions are being passed, it seems unnecessary. However, the regulations state that the HPID can be used for “any other lawful purpose,” so we must assume that at some future time, which could be next year or some day in the very distant future, this identifier will be used for some reporting purpose; therefore, it is best to follow the steps and obtain the number. Compliance is never a bad thing.

Health FSAs and HRAs

HIPAA treats FSAs and HRAs as self-insured and are typically subject to all HIPAA requirements. If an employer is using an insured plan, but offering a Health FSA or HRA (or both), the HPID requirement exists for these related plans. Self-insured health plans using these accounts would be responsible for obtaining separate identifiers, unless they meet the definition of the SHP.

November 5, 2014, is not that far away! The Centers for Medicare and Medicaid Services (CMS) created a website that has information about the HPID process. You can find it here.

They also provide a user guide for assistance in the application process.

Do not delay! November 5, 2014, will be here soon!

90-Day Waiting Period Limitation — Final Rule

 

The full implementation of the Employer Responsibility Penalty begins in a few months for all “applicable large employers” with more than 100 full-time equivalent employees. Make sure you understand the new rule and what it means for you.

What is it?
On June 25, 2014, the Departments of Labor, Health and Human Services, and the Treasury published a final rule on the 90-day waiting period limitation and the allowed employee orientation period.

The final rule adopts the language in the proposed rule from February 2012: The maximum length of the waiting period for all eligible employees remains a90 days, and any orientation period is one month. This final rule applies for plan years beginning on or after January 1, 2015.


What does it say?
Under the final regulations, a group health plan and a health insurance issuer offering group health insurance coverage may not apply any waiting period that exceeds 90 days.

 Here are some terms and their definitions to help you wade through this final rule.

Waiting Period: This is the period that must pass before coverage for an employee or dependent who is otherwise eligible to enroll under the terms of the group health plan can become effective. Being “otherwise eligible to enroll” is defined as having met the plan’s substantive eligibility conditions such as being in an eligible job classification, achieving job-related licensure requirements specified in the plan terms, or satisfying a reasonable and bona fide employment-based orientation period. This last part, the addition that a plan can require that an individual “satisfy a reasonable and bona fide employment-based orientation period” prior to receiving an offer of coverage, has been incorporated into the final rules without any substantive changes.    

Is 90 days REALLY 90 days: Ninety days refers to calendar days — not three months or a quarter — and includes weekends and holidays.

Orientation Period: The departments envision that an employer and employee will evaluate whether the employment situation is satisfactory for each party, and standard orientation and training processes will begin. This period is limited to one month. One month would be determined by adding one calendar month and subtracting one calendar day, measured from an employee’s start date in a position that is otherwise eligible for coverage.

So, does that mean the offer of coverage can be made after the one-month orientation period and a 90-day wait without triggering the Employer Responsibility Penalty?

Compliance with these final regulations IS NOT DETERMINATIVE of compliance with section 4980H of the code. In other words, an employer plan may not be able to impose the full one-month orientation period and the full 90-day waiting period without potentially becoming subject to an assessable payment. So, yes, an orientation period may be imposed, but you must ensure that coverage is effective on the first day of the fourth full calendar month to avoid a possible penalty.

Here’s an example: If an employee is hired as a full-time employee on January 6, a plan may offer coverage effective May 6 (one month orientation plus a 90-day wait period). This employer may be subject to a penalty, however, as this does not meet the offer of coverage on the first day of the fourth calendar month.

Eligibility: A group plan may impose conditions on plan eligibility as long as those conditions are not used to circumvent the 90-day limitation.     

Cumulative Hours of Service Requirements: Plans that require completion of cumulative hours of service may do so as long as the hours-of-service requirement does not exceed 1,200 hours.

Variable Hour Employees: If on an employee’s start date, it cannot be determined that he or she is reasonably expected to regularly work on average 30 or more hours per week, the plan may have up to 12 months to measure whether the employee meets the eligibility criteria. In that case, coverage must begin no later than 13 months from the employee’s start date (if the start date was not the first day of the month, then the time remaining until the first day of the next month).

Operating Structures: The departments recognized that multi-employer plans, due to collective bargaining agreements, may have eligibility arrangements that differ from individual employer plans. The final regulations allow union plan rules and structures that are not designed to avoid compliance with the 90-day limitation for waiting periods.

Preexisting Condition Prohibition and the Elimination of Certificates of Creditable Coverage: After December 31, 2014, plans will no longer be required to issue certificates of creditable coverage, which were introduced by the Health Insurance Portability and Accountability Act of 1996 (HIPAA). Since some plans were able to impose some preexisting limitation exclusions through December 31, 2014, these certificates were required to be continued. Any services that are handled by a third-party vendor should be discontinued at the end of 2014.

 

__________________

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Five tips to prepare for the ACA and open enrollment season

5_ACA_Tips

 

As you keep the Affordable Care Act (ACA) and the impact it will have on the enrollment process in mind, follow these five tips to ensure the rest of your summer includes soaking up the sun and not swimming in headaches.

1. Communicate, Communicate, Communicate

Employers must notify employees at least 60 days in advance of the company plan’s effective date, and they must ensure that modifications to the change in eligibility rules are properly documented. That means if you have a January 1 medical plan effective date, you need to notify employees by November at the latest.

2. Stay in Class

The right classification of employees as variable or non-variable is essential for ACA compliance. Employees must be classified as full-time non-measurable or measurable based on a “reasonableness” test. But just because an employee is hourly does not necessarily mean he or she is automatically measurable. The classification depends on if the employer can reasonably say the employee will work more than 30 hours per week on a regular basis.

3. The Feds

The federal reporting monthly tracking for all full-time employees begins January 1, 2015. Federal reporting is required for all deemed to be an “applicable large employer,” including those between 50 and 100 full-time equivalent employees. Reporting is by month and requires programming, testing, consolidation, and integration of data to meet the required format and submission deadlines.

4. Get Ready for Self-funded Deadlines

Employers need to prepare to make the proper counts and payments for the Transitional Reinsurance fee as well as ensure they obtain a Health Plan Identifier Number.

5. Prepare for Marketplace Interest, Year Two

Now that the federal marketplace has communicated the auto enrollment of current marketplace participants in plans—and continues current subsidies until new information is provided—the number of subsidy determination notifications sent to an employer for appeal will likely increase substantially. That puts the burden of proof on the employer at an increasingly high rate.

 

These are just a few important ACA points of interest to keep in mind as you enter your open enrollment season.

 

__________________

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Are You Fully Prepared to Report?

 

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Are You Fully Prepared to Report?

 

Beginning on January 1, 2015, all employers must maintain and identify, via a mandatory reporting process, detailed information about the medical coverage they offer to employees. The final regulations published in the Federal Register on March 10, 2014, discussed what would be required under the Internal Revenue Code Sections 6055 and 6056.

 

6055 and 6056 Requirements

IRS Code Section 6055 requires employers who administer self-funded plans and insurers managing fully insured plans to report information about the organization providing coverage, including company contact information and a detailed list of employees and the months each was covered during the applicable calendar year.

IRS Code Section 6056 requires employers to report information about the employer offering coverage and a full list of full-time employees, the coverage offered to each, by month, including the cost of coverage. Information about the employee’s covered dependents and additional information is required with the use of indicator codes.

Employers who are self-funded will be required to file both forms, while those who are fully insured will only have to file the form applicable to Section 6056. Any employer who offers both fully insured and self-insured qualified plans to all employees or a subsection of employees must be sure to report appropriately.

 

General Reporting Requirement

The IRS general reporting requirement includes:

• detailed information on each employee, for each calendar month;
• the total number of full-time employees;
• name, address, and Social Security Number of each full-time employee;
• whether the coverage offered to that employee was Minimum Essential Coverage;
• whether the coverage satisfied the Minimum Value requirement;
• whether it was affordable and how much the employees was required to pay; and
• whether the coverage was offered to all full-time employees and their dependents.

All employers deemed as “Applicably Large” (more than 100 FTE employees in 2015 and more than 50 FTE employees in 2016) must file these returns annually to the IRS and must provide annual statements to their full-time employees. The employee statements are due every January 31, in the same manner as Form W-2. The federal returns must be filed with the IRS by February 28 (or March 31 if filed electronically) for the applicable reporting year, which is always on the calendar, not on the employer plan year.

While the final regulations are specific to the requirements, we wait for form templates and instructions to be released to begin the “build” process. Current HR systems, including Payroll and Benefits Administration, do not currently have this capability; reports and forms need to be created, tested, and managed throughout the year to ensure proper compliance reporting on an annual basis.

 

Start Planning Now

Employers should not be complacent regarding this reporting requirement. While reports are not due until February/March 2016, employers MUST begin to start planning their reporting process now. Collection, maintenance, and audit will require careful cross-functional assistance in all departments – HR, Payroll, Benefits, and IT must be in lock step and ensure all the necessary data are captured and systems are capable of aggregating all the necessary data for annual reporting.

It is imperative that employers not assume current vendors and internal ERP or HR systems will be capable of reporting without significant process changes and updates as well as possible upgrades and likely additional costs.

Employers have been surprised and thankful for frequent delays and changes to the law. However, the complexities surrounding eligibility, communication, and reporting should not be taken lightly; early preparation and adoption should be top of the task list for Q3 and Q4 of 2014.

It is important to remember that the reporting requirement is for both the IRS and employees. A process for data collection, segregation, and aggregation of data will be needed, along with a full compliance process to ensure employers are reporting as required based on a number of factors.

Incorrect, improper, and delinquent reporting will not be taken lightly: under the regulations there is a cost associated with improper penalties. The penalty may be $30 to $100 per incorrect return capped at $1.5M per year. An additional penalty may be applied for each failure to file a correct employee statement in the same amount ($30 to $100) and applied in the same manner as the penalty for failure to timely file the IRS returns. Exceptions may apply (de minimis failures), but absolute disregard of the rules may cause much steeper penalties to be imposed.

Being confident in a process and system that ensures the required information is collected and managed for timely and correct reporting to the IRS and all employees is critical for an employer to remain compliant without additional labor costs, capital expenditures, and reliance on current vendors.

 

__________________

Many of our customers have done extensive research to find the best and most trusted ACA tracking and compliance management solution on the market. Their final choice: Health E(fx).

Contact a Health e(fx) Representative

 

Gain a top-level view into the power of Health E(fx) to track eligibility, manage workforce, automate reporting, analyze data, and optimize compliance, benefits, and financial strategies under the ACA. Watch the video "Health E(fx): The Affordable Care Act Made Simple" here:

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Committing to Compliance Under the ACA

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Employers have had some time to digest the overwhelming compliance requirements faced under the Affordable Care Act (ACA) regulations, and many still are likely pondering the “how” and “who” in meeting this new regulatory landscape. The final reporting requirements are significant. What is termed “simplified” in the final regulations released on March 10, 2014, in the Federal Register is actually quite complicated given that reporting to this detailed level has never been required before.

A definition of “full-time” that is different from the standard Fair Labor Standards Act that all employers have managed is hard enough. Add to that the determination of eligibility and affordability; documentation of the offer of coverage and elections; new hire mandated communication; mandated federal reporting; annual employee statements; and, we can’t forget, ensuring plans are designed to be compliant, cost effective to the employer and employee, AND do not breach the government’s definition of “too expensive” is enough to make any HR executive wonder “how” and “who” on a regular basis.

 

Technology and ACA Compliance

The complexity of the ACA and managing to the level of detail required is only possible through technology. Spreadsheets and point in time calculators will not be sufficient when it comes to the required annual reporting. And, those methods may not meet the organization’s strategic goals in terms of utilizing safe harbors for eligibility and affordability. A strong, data-driven structure is necessary to ensure full adherence with the law, especially reporting.

Many employers may realize that their current internal infrastructure is not sufficient and will therefore turn to their consultants and advisors to assist with the process. Implementations that will require wholesale changes to current systems – including HRIS, Payroll, and Benefits Administration – will likely require business case justification; lengthy RFP processes; and long, labor-intensive implementations. Given the effective date of January 1, 2015, for all employers with more than 100 full-time equivalent employees, time is running short to accomplish this and be prepared for enrollment processes and compliance activities.

For those employers who are not currently outsourcing full HR activities via the use of a Professional Employer Organization (PEO), the question remains as to how compliance and reporting will be completed and adhered to as needed.

 

Compliance Services

Payroll and Benefits Administration providers have begun to offer their partners compliance services. Measurement by job class/code, tracking service hours (as long as all service hours are managed/fed into the system), and identifying the eligible population is possible with a great deal of programming, data exchange, and HR staff effort.

Although reports can be generated and built as needed, hierarchy reporting for workforce management may not be possible without great effort. Payroll receives benefit deductions for the employee. Federal reporting requires employee and dependent information regarding coverage on a monthly basis. But neither Payroll nor HRIS has this information. Benefits Administration does, but all Payroll information would need to be fed to the Benefits System on a regular basis to generate the year-end reports. Who will create the employee statements? And what will the cost be for each employee if this is an added feature?

In addition, current contracts need to be validated and managed to ensure any new features are included in contract language. There is also the issue of renewal and data capture. If an employer has multiple providers (or even a single provider for both Payroll and Benefits Administration), should employer data be “held captive”? Should renewal become less of a negotiation and more of a “whatever it takes” given the requirements and timing of reporting? And what about defending and managing company enrollments and Exchange Open Enrollment?

An independent compliance system that manages all data without regard to system, platform, or provider will give the employer clarity, compliance, and control in managing the myriad of regulations and ensure all requirements are met; audit capabilities are sound; and required employer risk is mitigated through regular reports, hierarchical capabilities for workforce management, and call center support for employees, without additional HR, IT labor costs, and capital expenditures.

 

 

 

Many of our customers have done extensive research to find the best and most trusted ACA tracking and compliance management solution on the market. Their final choice: Health E(fx).

Contact a Health e(fx) Representative

 

 

Gain a top-level view into the power of Health E(fx) to track eligibility, manage workforce, automate reporting, analyze data, and optimize compliance, benefits, and financial strategies under the ACA. Watch the video "Health E(fx): The Affordable Care Act Made Simple" here:

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Health E(fx) Fact Sheet

Many of our customers have done extensive research to find the best ACA tracking and compliance management solution on the market. Their final choice: Health E(fx). 

As a result, we have pulled together a scorecard list showing our features and functionality.

Enjoy!

 View Health E(fx) Fact Sheet

Government Mandated Reporting Under the ACA: A New Definition of "Simple"

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Click here to download article

Reproduced with permission from Benefits Magazine, Volume 51 Number 6, June 2014, pages 44-49, published by the International Foundation of Employee Benefit Plans (www.ifebp.org), Brookfield, Wisconsin. All rights reserved. Statements or opinions expressed in this article are those of the author and do not necessarily represent the views or positions of the International Foundation, its officers, directors or staff. No further transmission or electronic distribution of this material is permitted. Subscriptions are available (www.ifebp.org/subscriptions).

 

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The highly anticipated final regulations for employer reporting were released on March 6, 2014. It is no secret that most employers, plan administrators, insurance brokers and consultants were eager to see how Treasury and the IRS finalized the details of the regulations. This has been a source of heated debate and a great deal of public commentary.

According to the Assistant Secretary for Tax Policy, Mark J. Mazur, “[The] announcement is part of the Administration’s effort to provide certainty and early guidance about major health policies so employers, small business owners, and other individuals can plan for 2015. Treasury’s final rules significantly streamline and simplify information reporting while making it easier for employers and insurers of all sizes to provide the quality, affordable health coverage that every American deserves.”

At first glance, this description of new rules that “streamline and simplify” reporting and compliance was a wonderful relief. But this bubble of relief soon bursts when you dig into the actual regulatory requirements. These reporting mandates are far from simple and the employer impact and risks are substantial.

This article is a review of the major components and employer responsibilities under the recently released final and “simplified” reporting requirements.

 

The “What” of Required Reporting: IRC §6056 and §6055

6056 requires employers to report to the IRS about healthcare coverage they offered to full-time employees to assure that the employer shared responsibility provisions of section 4980H of the Code are being implemented. §6056 also requires employers to furnish statements to employees that the employees can use to determine whether they may claim a premium tax credit under section 36B (premium tax credit) on their individual tax returns.

6055 requires all employers that provide minimum essential coverage to an individual during a calendar year to report information relating to the individual shared responsibility section provisions. Like the §6056, individual employee statements must also be reported to the IRS. These IRS transmissions are due no later than February 28 each year (March 31, if filed electronically), and employee statements must be furnished on or before January 31 of the year immediately following the calendar year to which the employee statements relate (i.e., the same day as Form W-2).

 

The “Why and How” of Final Reporting: Key Provisions

The final rules include the following key provisions and provide the basic structure of employer data to be collected, accumulated (and, in the employer interest, maintained for potential future audit), with reporting beginning in 2016 for the 2015 calendar year.

Single, Combined Form for Information Reporting.Employers that self-insure are allowed to report in a single, consolidated form that can be used to report to the IRS and employees under both §6056 and §6055, thereby simplifying the process and avoiding duplicate information submissions. The combined report (an as yet-to-be-released template) will include two sections. Section one will be for information required for §6056 reporting, and section two will include the information required for §6055, with these key provisions:

  • Employers with less than 50 full-time employees are exempt from the employer shared responsibility provisions and are not required to report.
  • Employers that are considered “Applicable Large Employers (ALE)[1]” are subject to the final reporting requirements. Those who self-insure will complete both sections of the combined form.
  • ALEs that do not self-insure will complete only the section pertaining to §6056 information requirements.
  • Insurers and other providers of health coverage will only report information pertaining to §6055, via a separate form specific to this purpose.

Simplified Option for Employer Reporting. The “simplified” option is provided for employers that extend a qualifying offer of coverage to any of their full-time employees. This is an alternative to the monthly, employee-specific information that the general rules require, with these key provisions:

  • A qualifying offer of coverage is one that provides minimum value coverage where employee-only coverage is at a cost to the employee that is no more than 9.5% of income (approximately $1,100 in 2015, which is 9.5% of the Federal Poverty Level), and is combined with an offer of coverage for the employee’s family.
  • For employees who receive a qualifying offer for all 12 months of the calendar year, employers will need to report only the names, addresses and taxpayer identification numbers of those employees and an indicator that the employee received a full-year qualifying offer. Employees will receive a copy of this simplified report or a standard statement from the employer for use when filing their individual tax return.
  • For employees who receive a qualifying offer for less than a full 12 months of the year, employers will be able to simplify reporting to the IRS and to employees for each of those months (with the use of an indicator code) that the offer was made within that month.
  • Employers certifying that they have made a qualifying offer to at least 95% of their full-time employees (including an offer to cover their families) will be able to use an even more simple alternative for reporting in 2015. In keeping with the phase-in approach to the regulations, these employers will be able to use this simplified reporting method for their entire workforce, including any employees to whom a qualifying offer for the full year has not been made. These employers will provide employees with standard statements relating to their potential eligibility for premium tax credits.
  • The final regulations also give employers the opportunity to avoid identifying those employees who are full-time, and include in the report only those employees who may be full-time. In order to take advantage of this option, the employer must certify that it offered affordable, minimum-value coverage to at least 98% of the employees for whom it is reporting.

Under §6056, each ALE member with full-time employees will be responsible for filing and furnishing statements with respect to its full-time employees. This means that the control group standards for determining ALE status is treated exactly the same as the assessment of penalties for non-compliance under the Employer Shared Responsibility provisions of 4980H. The responsibility for penalty payment and reporting lies with the ALE member. A TPA may be used to create and send the reports, but the ultimate responsibility and liability (including penalty risk) remains at the employer level under the law.

As stated previously, there is a general method that also exists for reporting to the IRS and supplying employee statements set forth in the regulations. The general method is available for all employers with respect to reporting for all full-time employees. The regulations do provide for simplified alternative reporting methods, but these may only be available for certain groups or groups of employees. In cases where an alternative method cannot be used, the general method stands. The alternatives are optional so any employer may choose to report for any or all of its full-time employees using the general method, even if an alternative method is available.

 

So, It’s Just that Simple, Huh?

The final regulations do attempt to simplify and streamline the reporting requirements, at least as far as a general method for all employers. The regulations provide that the §6056 return may be made by filing Form 1094-C (a transmittal) and Form 1095-C (an employee statement), or “other forms the IRS may designate.” Alternatively, the §6056 return may be made by filing a substitute form that must include all of the information required to be reported on both forms 1094-C and 1095-C (or, again, “any other forms the IRS designates”). As with any substitute returns, these must comply with applicable revenue procedures or other published guidance. The §6055 information will be submitted on a Form 1095-B, and as stated will be submitted with the §6056 information by self-insured employers or by the insurers of fully insured plans.

 

§6056: WHAT IS REQUIRED

The final regulations require the following information for reporting the §6056 return by March 31, 2016, for the 2015 calendar year (if electronically filed; if paper filed, the due date is February 29, 2016):

  • Name, address, and Employer Identification Number of the ALE, and the calendar year for which the information is reported;
  • Name and telephone number of the ALE’s contact person;
  • A certification as to whether the ALE offered to its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan, by calendar month;
  • The number of full-time employees for each calendar month during the calendar year;
  • For each full-time employee, the months during the calendar year for which minimum essential coverage under the plan was available;
  • For each full-time employee, the employee’s share of the lowest cost monthly premium for self-only coverage providing minimum value offered to that full-time employee under an eligible employer-sponsored plan, by calendar month; and
  • The name, address, and taxpayer identification number of each full-time employee and each individual covered under the policy during the calendar year and the months, if any, during which the employee was covered under an eligible-employer-sponsored plan. The employer must make at least two attempts to ensure the TIN of covered dependents is acquired. Any report that is filed without the TIN will result in IRS correspondence to the individual for verification. There are no penalties assessed on the employer for not having the TIN of covered dependents.

 

§6056: What WILL NOT Be Required

The final regulations DO NOT require reporting on the following data. (However, note the areas where it is likely that an indicator code will be requested due to the applicability to the administration of the code.):

  • Reporting of the length of any permissible waiting periods under Section 4980H. Although the length of a waiting period is not relevant for administration of the premium tax credit or for an individual to prepare his or her tax return, Treasury and the IRS anticipate that information will be requested, using an indicator code, regarding whether coverage was not offered to an employee during certain months because of a permissible waiting period, since it is relevant to the administration of 4980H.
  • Reporting of the employer’s share of the total allowed costs of benefits provided under the plan, because this is not relevant to the administration of the premium tax credit and section 4980H. However, since minimum value is relevant, Treasury and the IRS anticipate that information will be requested using an indicator code.
  • Reporting of the monthly premium for the lowest-cost option in each of the enrollment categories under the plan (i.e., employee only, family, etc.).
  • Reporting of the months, if any, during which any of the employee’s dependents were covered under the plan.

 

§6056: But Wait…There’s More!

To assist in administering §4980H and the premium tax credit, the IRS requires certain information not specifically set forth under §6056, but which is authorized under §6056(b)(2)(F). Under the general method for reporting, the following information will be reported through the use of indicator codes for some information (as part of the return and the employee statements):

  • Information as to whether coverage offered to full-time employees and their dependents provides minimum value, and whether the employee had the opportunity to enroll his or her spouse in the coverage;
  • The total number of employees by calendar month;
  • Whether an employee’s effective date of coverage was impacted by a permissible waiting period, by calendar month;
  • Whether the ALE had no employees or otherwise credited any hours of service during any particular month, by calendar month;
  • Whether the ALE is a person who is a member of an aggregated group and, if applicable, the name and EIN of each employer member of the aggregated group constituting the applicable large employer on any day of the calendar year for which information is reported;
  • If an appropriately designated person is reporting on behalf of an ALE that is a governmental unit or any agency, the name, address and identification number of the designated person;
  • If an ALE is a contributing employer to a multiemployer plan, whether, with respect to a full-time employee, the employer is not subject to an assessable payment under Section 4980H due to the employer’s contributions to the multiemployer plan; and
  • If a third party is reporting for an ALE with respect to the ALE’s full-time employees, the name, address and identification number of the third party – in addition to the name, address and EIN of the ALE already required under the final regulations.

It is also contemplated that the following information will be reported with respect to each full-time employee for each calendar month using a code:

  • Minimum essential coverage meeting minimum value was offered to:
o   The employee only;
o   The employee and the employee’s dependents only;
o   The employee and the employee’s spouse only;
o   The employee, the employee’s spouse and dependents;
  • Coverage was not offered to the employee and:
o   Any failure to offer coverage will not result in a payment under Section 4980H;
o   The employee was not a full-time employee;
o   The employee was not employed by the ALE during that month; or
o   No other code exception applies
  • Coverage was offered to the employee for the month although the employee was not a full-time employee for that month;
  • The employee was covered under the plan; and
  • The ALE met one of the affordability safe harbors with respect to the employee.

As with other government statements/returns, a large employer may furnish the §6056 employee statement in an electronic format in lieu of a paper format, provided that the format meets the requirements of the regulations. The recipient must have affirmatively consented to receive the statement in electronic format. The consent may be withdrawn as long is it is withdrawn before the statement is furnished. A paper statement must then be provided until further notice. A notice to the recipient is required when there is a material risk that a hardware or software change may prevent recipient access to the statement. The furnisher must issue the notice prior to changing the hardware or software, and provide the recipient with notice of the change.

 

So What Should Employers Do Now?

Employers now have the data requirements. Large employers should begin the task of ensuring all the necessary data can be gathered, accumulated and maintained as they wait for the form templates and instructions regarding form submission to be released.

Given that much of the data required will be reported with new indicator codes, employers will need to develop processes and systems to ensure correct and timely reporting is ready for the 2015 calendar year. And, as many employers began to breathe a sign of relief upon seeing “simplified” in the reporting description, it is now becoming clearer that most employers will not be able to utilize any of the streamlined reporting mechanisms. Further, and if it is possible, regulations for compliance must also be assessed annually, potentially requiring updates to systems and reporting decisions. Therefore, planning for the general method may be the most efficient and cost-effective employer plan.

Many are looking to third parties to manage and report the data given much of the required information resides in multiple, disparate (and often inaccurate) data sources within the HR system environment.

While the reporting is not due until 2016, time is of the essence when preparing the data. Incorrect data submission carries substantial penalties that can be avoided with thorough planning and preparation.

 

____________________________

[1] An Applicable Large Employer with respect to a calendar year is defined in Section 4980H(c)(2) as an employer that employed on average at least 50 full-time employees on business days during the preceding calendar year.

 


 

Many of our customers have done extensive research to find the best and most trusted ACA tracking and compliance management solution on the market. Their final choice: Health E(fx).

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Final Regulations Released for ACA Information Reporting for Employers and Insurers.

Let the data collection begin! On March 6, 2014, the highly anticipated final regulations for employer reporting were released. According to the Assistant Secretary for Tax Policy, Mark J. Mazur, “Today’s announcement is part of the Administration’s effort to provide certainty and early guidance about major health policies so employers, small business owners and other individuals can plan for 2015. Treasury’s final rules significantly streamline and simplify information reporting while making it easier for employers and insurers of all sizes to provide the quality, affordable health coverage that every American deserves.”

Section 6056 requires employers to report to the IRS information about healthcare coverage offered to full-time employees, in order to administer the employer shared responsibility provisions of section 4980H of the code. Section 6056 also requires those employers to provide to employees statements that employees may use to determine whether, for each month of the calendar year, they may clam on their individual tax returns a premium tax credit under section 36B. Section 6055 requires information reporting by any person who provides minimum essential coverage to an individual during a calendar year, which information relates to the individual shared responsibility section provisions. Like Section 6056, transmittals to the IRS, as well as individual employee statements, are required. IRS transmissions are due no later than February 28 each year (March 31 if filed electronically); employee statements must be furnished on or before January 31 of the year immediately following the calendar year to which the employee statements relate.

 

GENERAL REPORTING METHODS

The final rules include the following key provisions.

Single, Combined Form for Information Reporting: Employers that self-insure are allowed to report in a single, consolidated form that can be used to report to the IRS and employees under both sections 6055 and 6056, thereby simplifying the process and avoiding duplicated submissions. The combined report includes two sections: the top is for information required for 6056 reporting, the bottom, for section 6055.

  • Employers with less than 50 full-time employees are exempt from the employer shared responsibility provisions and are not required to report.
  • Employers considered applicable large employers (ALEs)* are subject to the final reporting requirements. Those that self-insure will complete both sections of the combined form.
  • ALEs that do not self-insure will complete only the top section of the report, or information pertaining to section 6056. Insurers and other providers of health coverage will only report under the bottom section, information pertaining to section 6055, via a separate form for that sole purpose.

Simplified Option for Employer Reporting: This simplified option is provided for employers that offer a qualifying offer of coverage to any of their full-time employees. This is a simplified alternative to the monthly, employee-specific information that the general rules require.

  • A qualifying offer of coverage is one that provides an offer of minimum value coverage where employee-only coverage is at a cost to the employee of no more than 9.5% of income (approximately $1,100 in 2015, which is 9.5% of the Federal Poverty Level), and is combined with an offer of coverage for the employee’s family.
  • For employees who receive a qualifying offer for ALL 12 months of the calendar year, employers will need to report only the names, addresses, and taxpayer identification numbers of those employees and an indicator of the fact they received a full-year qualifying offer. Employees will receive a copy of this simplified report or a standard statement for use when filing the individual tax return.
  • For employees who receive a qualifying offer for less than a full 12 months of the year, employers will be able to simplify reporting to the IRS and to employees for each of those months with the use of a code indicating that the offer was made within that month.
  • In keeping with the phase-in approach to the regulations, to allow for a phase-in of the simplified approach, employers certifying that they have made a qualifying offer to at least 95% of their full-time employees (plus an offer to their families) will be able to use an even simpler alternative for reporting in 2015. These employers will be able to use the simplified reporting method for their entire workforce, including any employees who do not receive a qualifying offer for the full year. These employers will provide employees with standard statements relating to their potential eligibility for premium tax credits.

The final regulations also give employers the opportunity to avoid identifying those employees who are full-time and just include in the report those employees who may be full-time. In order to take advantage of this option, the employer must certify that it offered affordable, minimum value coverage to at least 98% of the employees for whom it is reporting.

*An applicable large employer (ALE) is any member that is an applicable large employer or a member of an aggregate group. Each ALE member with full-time employees is the entity responsible for filing and furnishing statements with respect to its full-time employees under Section 6056. Only ALE members with full-time employees are subject to the filing and statement furnishing requirements of Section 6056 (and only with respect to the full-time employees).

 

SECTION 6056 REPORTING

As summarized above, there is a general method for reporting to the IRS and supplying employee statements set forth in the regulations. The general method is available for all employers and with respect to reporting for all full-time employees. The regulations do provide alternative reporting methods, but these may only be available for certain groups or groups of employees. In any cases where an alternative method cannot be used, the general method stands. The alternatives are optional so any employer may choose to report for any or all of its full-time employees using the general method even if an alternative method is available.

In an effort to simplify and streamline the reporting requirements, as a general method, the regulations provide that the Section 6056 return may be made by filing Form 1094-C (a transmittal) and Form 1095-C (an employee statement), or other forms the IRS designates. Alternatively, the Section 6056 return may be made by filing a substitute form. Any substitute form must include all of the information required to be reported on Forms 1094-C and 1095-C or other forms the IRS designates and comply with applicable revenue procedures or other published guidance relating to substitute returns.

The final regulations require the following information for reporting the Section 6056 return:

  • Name, address, ALE employer identification number, and the calendar year for which the information is reported.
  • Name and telephone number of the ALE’s contact person.
  • A certification as to whether the ALE offered to its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan, by calendar month.
  • The number of full-time employees for each calendar month during the calendar year, by calendar month.
  • For each full-time employee, the months during the calendar year for which minimum essential coverage under the plan was available.
  • For each full-time employee, the employee’s share of the lowest cost monthly premium for self-only coverage providing minimum value offered to that full-time employee under an eligible employer-sponsored plan, by calendar month.
  • The name, address, and taxpayer identification number of each full-time employee during the calendar year and the months, if any, during which the employee was covered under an eligible-employer-sponsored plan.

The final regulations DO NOT require the reporting on the following data elements:

  • Reporting of the length of any permissible waiting periods under Section 4980H. Although the length of a waiting period is not relevant for administration of the premium tax credit or for an individual to prepare his or her tax return, Treasury and the IRS anticipate that information will be requested, using an indicator code, regarding whether coverage was not offered to an employee during certain months because of a permissible waiting period, since it is relevant to the administration of 4980H.
  • Reporting of the employer’s share of the total allowed costs of benefits provided under the plan because this is not relevant to the administration of the premium tax credit and section 4980H. However, since minimum value is relevant, Treasury and the IRS anticipate that information will be requested using an indicator code.
  • Reporting of the monthly premium for the lowest-cost option in each of the enrollment categories under the plan (e.g., employee only, family).
  • Reporting of the months, if any, during which any of the employee’s dependents were covered under the plan.

 

INFORMATION NEEDED FOR SECTION 4980H

To assist in administering Section 4980H and the premium tax credit, the IRS will need certain information not specifically set forth under Section 6056 but authorized under Section 6056(b)(2)(F). Under the general method of Section 6056 reporting, the following information will be reported through the use of indicator codes for some information as part of the return and the employee statements:

  • Information as to whether coverage offered to full-time employees and their dependents provides minimum value and whether the employee had the opportunity to enroll his or her spouse in the coverage;
  • The total number of employees by calendar month;
  • Whether an employee’s effective date of coverage was affected by a permissible waiting period by calendar month;
  • Whether the ALE had no employees or otherwise credited any hours of service during any particular month, by calendar month;
  • Whether the ALE is a person who is a member of an aggregated group, and if applicable, the name and EIN of each employer member of the aggregated group constituting the applicable large employer on any day of the calendar year for which information is reported;
  • If an appropriately designated person is reporting on behalf of an ALE that is a governmental unit or any agency – the name, address and identification number of the designated person;
  • If an ALE is a contributing employer to a multiemployer plan, whether, with respect to a full-time employee, the employer is not subject to an assessable payment under Section 4980H due to the employer’s contributions to the multiemployer plan; and
  • If a third party is reporting for an ALE with respect to the ALE’s full-time employees, the name, address, and identification number of the third party – in addition to the name, address, and EIN of the ALE already required under the final regulations.

It is also contemplated that the following information will be reported with respect to each full-time employee for each calendar month using a code:

  1. Minimum essential coverage meeting minimum value was offered to:|
    • The employee only
    • The employee and the employee’s dependents only
    • The employee and the employee’s spouse only
    • The employee, the employee’s spouse, and dependents

  2. Coverage was not offered to the employee and:
    • Any failure to offer coverage will not result in a payment under Section 4980H;
    • The employee was not a full-time employee;
    • The employee was not employed by the ALE during that month; or
    • No other code exception applies

  3. Coverage was offered to the employee for the month although the employee was not a full-time employee for that month;

  4. The employee was covered under the plan; and

  5. The ALE met one of the affordability safe harbors with respect to the employee.

As with other government statements, an ALE may furnish the Section 6056 employee statement in an electronic format in lieu of a paper formant, provided that the furnisher meets the requirements of the regulations. The recipient must have affirmatively consented to receive the statement in electronic format. The consent may be withdrawn and as long is it is withdrawn before the statement is furnished a paper statement must be provided. If a change in hardware or software required to access the statement creates a material risk that the recipient will not be able to access the statement, the furnisher must, prior to changing the hardware or software, provide the recipient with notice.

 

SUMMARY

We now have the final reporting data requirements released. Large employers can begin the task of ensuring all the proper data are gathered, accumulated, and maintained as we wait for the templates and instructions for form submission to be released. Given that much of the data required will be reported with new indicator codes, a significant burden has been placed on the employer, if they intend to do this manually. Many will look to third parties to manage and report the data, which is a good plan given that much of these data come from multiple systems and create very complicated data collection. Not to mention the need to manage variable staff, analyze best options for benefit decisions, and automate audit and all compliance. Health E(fx) delivers on all requirements under the ACA, making the employer task simple.

 

Many of our customers have done extensive research to find the best and most trusted ACA tracking and compliance management solution on the market. Their final choice: Health E(fx).

Contact a Health e(fx) Representative

 

Gain a top-level view into the power of Health E(fx) to track eligibility, manage workforce, automate reporting, analyze data, and optimize compliance, benefits, and financial strategies under the ACA. Watch the video "Health E(fx): The Affordable Care Act Made Simple" here:

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ACA Compliance for Employers: How should employers design measurement and stability periods?

 

How should employers design measurement and stability periods?

 

You have read the statute (maybe not in its entirety), welcomed the delay in the employer mandate, and determined you have a significant variable employee population (meaning an hourly or non-exempt workforce without a set weekly schedule). It’s time now to strategically plan for 2015. One of the first steps is to design and implement your organization’s measurement and stability periods. Here are the steps:
  1. Choose your organization’s measurement period(s) length.*
  2. Choose your organization’s stability period length.**
  3. Determine your organization’s administrative period length.*** (Note: The measurement period + the administrative period may not be longer than 13 and a fraction of a month [date of hire until the first day of a calendar month equals a fraction of a month].)
  4. Calculate.****
  5. Perform the same steps for classes with different periods.
  6. Repeat at the end of each stability period.

* When choosing a measurement period, most employers will undoubtedly want a 12-month look-back. Why? A longer period is administratively more burdensome. Also, longer measurement periods often lead to lower average weekly hours and level out periods of high volume and scheduling such as holidays and clearance sales. A 12-month measurement gives the employer an opportunity to manage the workforce in terms of scheduling if the trend is higher average hours. (Remember, however, that a 12-month measurement will require a 12-month stability, thereby having the enrolled population on plan without disruption for a longer period of time.)

It is possible to choose a measurement period with a shorter length. Many variable employees fluctuate above and below 30 hours on a frequent basis. Measuring over a shorter period of time will account for this fluctuation more aggressively. Also, since the stability period must match, employers may want to minimize the amount of time that employees are offered insurance. (Remember, at the end of each stability period, the measurement must be repeated.) Based on organization need, some employers may only want to offer employees health coverage during periods of high work hours and not low, so this would be an effective tool to manage this strategy. It also allows the employer to manage benefits costs with industry-relevant time periods; for example, school semesters in the education area, tax time for accounting individuals and tax preparation service providers, and harvest time for the farming and food industry.

**The chosen stability period length should align with the organization’s medical plan or health insurance annual open enrollment and plan year. This will ease the administrative burden and become part of the process in preparing for the enrollment season. It will also ensure cost projections are in line based on trending and current eligible population and any premium cost increases or decreases at the Exchange level.

***The administrative period must be no more than 90 days (for any employee that is non-measureable), so depending on the measurement period chosen, the administrative period will likely be between 30 and 60 days. If an administrative period is not put into effect, the company will likely see a large amount of retro enrollments and need to collect back premiums as employees will have no time to assess their options before their effective dates. One thing to be aware of: administrative periods are in days, not months. So, depending on how it falls, your systems must be able to adhere to the calendar month. For example, an administrative period from October to December is actually 92 days, which is not allowed under the ACA.

****Once the periods are chosen, all systems are go, and data collection to assess service hours over the measurement period can begin. The ability to accumulate the data and ensure this is properly managed, maintained, and fed to the benefits administrator or in-house system is key to the success of using this methodology. If an organization is unable to do this and is overwhelmed with spreadsheets and the need to hire additional staff to manually analyze the data on a regular basis, the risk may be too high to manage a variable hour safe harbor. An organization must be able to defend its position on FT classification and have the audit trail to back up any claims because the penalties are high for non-compliance.

 

 

Many of our customers have done extensive research to find the best and most trusted ACA tracking and compliance management solution on the market. Their final choice: Health E(fx).

 Contact a Health e(fx) Representative

Gain a top-level view into the power of Health E(fx) to track eligibility, manage workforce, automate reporting, analyze data, and optimize compliance, benefits, and financial strategies under the ACA. Watch the video "Health E(fx): The Affordable Care Act Made Simple" here:

 

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ACA Compliance for Employers: What is the preferred Eligibility calculation for highly variable staff? Part 2

 

What do these final regulations mean for employers?

 

A week ago, we posted a blog concerning eligibility calculations required under the proposed Shared Responsibility for Employers guidance of the Affordable Care Act (ACA). Since then, on Monday, February 10, 2014, the highly anticipated final regulations were released.

Although these final regulations grant some additional (though limited) transition relief, in general, the existing proposed regulations remain intact and January 1, 2015, will begin the first employer penalty year. This means that some small businesses can take another deep breath and continue to prepare through another year. Other businesses, however, must begin (if they haven’t already) the daunting task of preparing staff, systems, and employees for the regulatory compliance road ahead.

Background

The ACA’s Shared Responsibility for Employers (Section 4980H) applies to applicable large employers. An “applicable large employer” is defined as an employer that has employed an average of at least 50 full-time employees on business days during the preceding calendar year, including all full-time and full-time equivalent employees (FTEs). If an employer was not in existence in the preceding calendar year, then the calculation is based on the average number of employees the employer is reasonably expected to employ on business days in the current calendar year. The code also states that an applicable large employer must offer minimum essential coverage (MEC) that is of minimum value (MV) to “substantially all” of its full-time employees, or be faced with a penalty.

In the final regulations, provisions have been granted to assist smaller businesses. Most employers in the United States are considered to be small business with fewer than 50 full-time employees. In the final release, these employers are exempt from the employer responsibility provisions through 2015.

Businesses with more than 100 FTEs that offer most (but not all) employees coverage in 2015 are now given greater latitude. For these businesses, “substantially all” is defined as 70% of eligible employees being offered affordable coverage prior to invoking the dreaded ACA sledgehammer penalties.

Final Regulations Summary

To assist employers that are subject to the regulations, a gradual phase-in approach has been adopted. The final regulations provide that for 2015:

  • The employer responsibility provisions will apply to all employers with 100 or more full-time employees (including FTEs) in 2015. Those employers with 50 to 99 full-time employees will not have to comply until 2016.
  • In order to avoid a payment for failing to offer health coverage, employers will need to offer coverage to 70% of their full-time, eligible employees in 2015 and 95% in 2016 and beyond. This will assist employers in phasing in the definition of full-time as 30 hours per week, which has not changed with the final regulations.

The definition of full-time for certain employee categories has been clarified for section 4980H:

  • Seasonal Employees: Employees in positions of customary annual employment of six months or less will not be considered full-time employees.
  • Volunteer Employees: Hours worked by volunteers who do not receive (and are not entitled to receive) compensation in exchange for their performance of services are not treated as hours of service. The definition of “bona fide volunteer” includes volunteer firefighters, emergency medical providers, or any employee of a government entity or organization in which these volunteers are exempt from taxation.
  • Student Employees: Hours of service performed by students in positions that are subsided through the federal work-study program or a substantially similar state program are not treated as hours of service. However, all hours of service for which a student employee of an educational organization (or outside employer) is paid or entitled to payment other than through a federal/state work-study program must be counted.
  • Internships and Externships: Hours of service would not be counted as long as the student does not receive and is not entitled to payment in connection with those hours. The final regulations do not adopt any special rules for student employees working as interns or externs for an outside employer and, therefore, the general rule applies, including the option to use the look-back measurement method, as appropriate, or the monthly measurement.
  • Education Employees: Teachers and other educational employees will not be treated as part time for the year due to closure or limited hours during the summer break.
  • Adjunct Faculty: The Treasury Department received many comments regarding staff whose compensation is not based on the actual time spent on non-classroom activities such as preparation, grading, and counseling students. The final regulations provide a general rule that, until further guidance is issued, employers of adjunct faculty must use a method of crediting hours of service for those employees that is reasonable and consistent with the employer responsibility provisions. One method deemed reasonable would credit an adjunct faculty member of an institution of higher education with 2¼ hours of service per week for each hour of teaching or classroom time. This may be relied upon at least through the end of 2015.
  • Layover hours for airline industry employees and on-call hours: With respect to layover hours, it is not reasonable for an employer to not credit a layover hour as an hour of service if the employee receives compensation for the layover hour beyond any compensation that would have been received without the layover, or if the layover hour is counted by the employer toward the required hours of service for the employee to receive regular compensation. Until further guidance is issued, employers with employees whose hours of services include on-call hours are required to use a reasonable method for crediting hours of service that is consistent with section 4980H.

Full-Time Employee Definition

The statute remains explicit in the threshold for status, as a full-time employee is an average of 30 hours of service per week or 130 hours per calendar month.

General Full-time Employee Status Determinations

  • In following the December 2012 proposed regulations, the final rules allow for an employer to use an optional look-back measurement method to make it easier to determine whether employees with varying hours and seasonal employees are full-time.
  • The final regulations clarify the application of this method and the alternative monthly method of determining full-time status.

Affordability Safe Harbors

  • Following the proposed regulations, the final rules provide safe harbors for employers that make it easier to determine whether coverage offered is deemed affordable to employees.
  • Methods remain as proposed: use of wages paid, employees’ hourly rates, or the federal poverty level as of the first day of the effective plan year in determining whether coverage is affordable.

Rehire Rules and Break-in Service

  • The final regulations retain the rehire rules contained in the proposed regulations but reduce the length of the break-in service required before a returning employee may be treated as a new employee from 26 weeks to 13 weeks (except for educational organization employers).
  • This break-in service period applies for both measurement periods allowed.

Other 2015 Transition Relief Provisions

In addition to the transition relief already discussed, a set of transition rules applied to 2014 have been extended to 2015:

  • Employers can determine whether they had at least 100 full-time or FTE employees in the previous year by referencing a period of at least six consecutive months instead of a full year.
  • Employers with non-calendar year plans will be able to begin compliance with the employer responsibility at the start of the plan year in 2015, rather than on January 1, 2015. However, this is only applicable for employers that maintained non-calendar year plans as of December 27, 2012, if the plan year was not modified after December 27, 2012.
  • Dependent coverage: The requirement that employers offer coverage to their eligible full-time employees’ dependents will not apply in 2015 to employers who currently do not offer such coverage and are taking steps to comply by 2016.
  • On a one time basis, employers may use a measurement period of six months even with respect to a stability period of up to 12 months, as long as that measurement period begins no later than July 1, 2014, and ends no earlier than 90 days before the first day of the plan year beginning on or after January 1, 2015.

The final regulations issued were a record for brevity in the long trail of ACA issuances–a mere 227 pages!

The market now eagerly awaits final 6055 and 6056 reporting regulations so that employers can have everything needed to prepare fully for the first penalty year beginning on January 1, 2015 (or at least for those employers with 100 or more full-time employees). The release of these final regulations is a strong indication that these report formats and processes will be released soon (but if additional “final regulations” precede the release of “final reporting processes,” the political fallout in mid-term elections will be interesting). In fact, the Treasury Department and the IRS have stated that they will issue final reporting regulations shortly, and that these will “aim to simplify and streamline” the proposed mandated reporting requirements.

The ability to collect the necessary data from time and attendance, payroll, HRIS, and benefits systems; manage multiple measurement, stability, and wait periods; ensure all measurement and affordability safe harbors are managed properly; and reduce the risk of penalty are issues keeping HR, benefits and finance executives awake at night. Preparation is necessary sooner rather than later. Once reporting requirements are released, the task gets that much more difficult, with time running short.

 

 

 

Many of our customers have done extensive research to find the best and most trusted ACA tracking and compliance management solution on the market. Their final choice: Health E(fx).

 Contact a Health e(fx) Representative

Gain a top-level view into the power of Health E(fx) to track eligibility, manage workforce, automate reporting, analyze data, and optimize compliance, benefits, and financial strategies under the ACA. Watch the video "Health E(fx): The Affordable Care Act Made Simple" here:


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ACA Compliance for Employers: What is the preferred Eligibility calculation for highly variable staff?

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Measurement and Stability Periods – What is the Preferred Eligibility Calculation for a Highly Variable Staff?

 

Employers with high variable staff (hourly/non-exempt workforce without a set weekly schedule) will find the measurement and stability option for determining its full-time staff to be the best methodology, but it does come with its share of administration and frustration. Retail, restaurant, staffing organizations, if equipped with the proper technology and assessment tools, will have the ability to identify their eligible, trending eligible and non-eligible staff quickly and easily so as to better project medical benefit costs. For each employer, there will be two sets of measurement and stability periods: Standard for ongoing employees and Initial for new hires. The total period prior to the offer of benefits includes the measurement period as well as an administrative period. Stability will begin immediately following the end of the administrative period. Definitions of these periods are below.

The measurement (or look-back) and stability period set-up is a two-step process that may be used for employees who do not have a standard schedule and the employer cannot reasonably state the employee will be recording at least 30 service hours per week:

  1. The employer must calculate the average weekly service hours during the measurement period chosen (may be from 3-12 calendar months in length).
  2. This weekly average over the period will determine the eligibility status for the subsequent stability period, regardless of the hours of service during that stability period. In other words, if the employee is deemed to be FT at the end of the measurement period, then that employee will be held in a FT status for the stability period, even if his/her hours fall below FT average weekly hours.

This process will be repeated on an annual basis to manage and maintain the eligible FT population and the offer of a qualified medical health plan each year.

Of course, there are different rules to remember for ongoing employees and new hires. An ongoing employee is one who has been employed for at least one complete standard measurement period. The standard measurement period is a period chosen by the employer that is 3-12 consecutive calendar months. The employer can choose both the duration and the start month of this period. Normally, this standard period will be prior to the annual enrollment for each plan year and will be completed prior to the open enrollment period so proper communication and materials can be created and delivered timely. This standard measurement period must be the same for all employees in the same category. Allowed categories are:

  1. Hourly vs. Salary
  2. State
  3. Union vs. Non-Union (employees in different unions can have different measurement periods as well)

During the standard measurement period, all hours of service must be recorded. Hours of service = Hours Worked (each hour, or fraction of an hour, for which an employee is paid, or entitled to payment, for the performance of duties for the employer + Paid Time Off (each hour, or fraction of an hour, for which an employee is paid or entitled to payment by the employer for a period of time during which no duties are performed due to vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military leave, or leave of absence + Unpaid Leave of Absence (if applicable). If an employee is absent during the standard measurement period due to unpaid FMLA, USERRA, or jury duty leave, the average weekly service hours is calculated by:

  1. Ignoring periods of special unpaid leave; or
  2. Crediting hours of service for the periods of special unpaid leave

For educational institutions/organizations, if an employee is not credited for any hours of service during an employment break (summer, sabbatical, etc.) of at least 4 consecutive weeks, the average weekly hours of service must be calculated by:

  1. Ignoring periods of break; or
  2. Crediting the hours of service for the period of the employment break

After the standard measurement period, the employer may elect to institute an administrative period. This is an optional period between the end of the measurement period and the beginning of the standard stability period for the employer to calculate and notify employees of their FT status, enroll in new plans/terminate prior coverage and any similar administrative tasks that are required during an open enrollment period.

The Stability Period is the period during which an employee is classified as either FT or PT based on the average service hours calculation over the measurement period (standard or initial). The stability period must be the same duration (or longer) as the measurement period, but many not be shorter than 6 months. So, if an employee averages more than 30 hours per week during a 12 month measurement period, this employee will be considered FT for a 12 month stability period regardless of the service hours recorded during this time.

The entire process can and likely will be confusing for many employers, and daunting, especially if an employer does not have the systems, analysts or tracking capabilities to manage multiple measurement, stability and administrative periods. Add to this the constant need to ensure employees are classified correctly, all service hours are being recorded timely and enrollment windows and required communications are in employees hands on time. Designing of the Measurement/Stability Period for an organization should be done sooner rather than later as well as an assessment of current system ability to manage this process. Then, the workforce analysis, benefit plan modeling and risk mitigation can begin for 2015.


Many of our customers have done extensive research to find the best and most trusted ACA tracking and compliance management solution on the market. Their final choice: Health E(fx).

Contact a Health e(fx) Representative

Gain a top-level view into the power of Health E(fx) to track eligibility, manage workforce, automated reporting, analyze data, and optimize compliance, benefits, and financial strategies under the ACA. Watch the video "Health E(fx): The Affordable Care Act Made Simple" here:

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ACA Compliance for Employers: How will §4980H affect employers and their FT employees?

As an employer, do you know how to identify your full-time employees and manage penalties?

 

As we wait (and wait some more), for the Treasury Department and the IRS to release final regulations on §4980H and reporting requirements under the Affordable Care Act (ACA), employers must—first and foremost—understand and identify their full-time employees. Secondly, employers must calculate how the §4980H regulations will affect them.

 First, what is the definition of a full-time employee? A full-time (FT) employee is employed an average of 30 service hours per week or 130 hours per month. There are two options under the statute for an employer to determine this status:

  1. Determine the average weekly hours of service each calendar month. The key word is “calendar,” which does not mean the pay period within a month.
    • As stated in the definition above, 130 total hours in a calendar month may be treated as 30 hours per week.
    • Monthly calculations by person where status is determined monthly. In this case, employees with fluctuating hours would be offered insurance on a monthly basis to avoid penalties. This is highly impractical and administratively burdensome, if not impossible.
  2. Determine the average weekly hours of service using a look-back or measurement period and an associated stability period. (More information on measurement and stability periods will follow in the coming weeks!)

 

Second, how will §4980H affect an employer with full-time employees? §4980H states that penalties will apply for employers who choose to “Pay” and possibly for those who choose to “Play” when it comes to their full-time employees. Under §4980H(a), the employer must offer coverage to 95% (substantially all) of full-time employees or potentially pay a “no coverage” penalty. §4980H(b) states that the employer must offer affordable coverage to full-time employees or potentially pay an “affordability” penalty.

However, a full-time employee who obtains a premium subsidy from the Exchange/Marketplace and is verified/validated via the annual reporting that is due beginning in 2016 for the 2015 calendar year will trigger BOTH penalties.

All employers must know employees’ full-time status by the time the employer becomes subject to the “Pay or Play” penalties. As of now, without further guidance on transition rules for 2014, this date is January 1, 2015, regardless of calendar or non-calendar plan years!

A critical first step in preparing for the employer responsibility mandate is determining the full-time population and what is an acceptable penalty, if any. Some options for employers include:

  • Identifying the FT group and determining that offering an unaffordable plan to a certain subset (while still meeting the substantially all definition) and paying the penalty should the employee acquire a subsidy, is a cost savings.
  • Offering an affordable plan to all employees, regardless of service hours.
  • Entering the Private Exchange and managing costs in a more defined, predictable manner.

Regardless of the strategic direction, every employer must know their full-time employee population and be ready for penalties to begin on January 1, 2015. Less than one year from now.

 

**Note: Committee mark-up of H.R. 2575 – Save American Workers Act of 2013 and H.R. 3979 – Protecting Volunteer Firefighters and Emergency Responders Act took place on February 4, 2014. H.R. 2575 calls for the definition of a full-time employee to be changed from 30 hours to 40 hour per week. H.R. 3979 calls for all volunteer firefighters and first responders hours to not be counted toward the calculation required in the definition of a large employer.

 

H.R. 2575 passed along party lines. H.R. 3979 passed unanimously. The continued process and procedures will be monitored and more blog posts will follow.


Many of our customers have done extensive research to find the best and most trusted ACA tracking and compiance management solution on the market. Their final choice: Health E(fx).

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Managing Plan Data for Eligibility, Affordability, Compliance and Benefit Optimization under the ACA.

A must attend webinar for employers!

Topic: Managing Plan Data for Eligibility, Affordability, Compliance and Benefit Optimization under the ACA.

When: February 25, 2014 at 11:00 - 12:00 PM ET

Presenters:

Allison Manno, Vice President, Compliance - Health E(fx)
Thomas Ference, New Business Development - Health E(fx)

Register at HR.com

Register for Webinar

 


Description
The implementation of the ACA is here. And while the employer mandate has been delayed, the major pieces of the ACA are still in effect. Most employers will want to begin managing required healthcare plan data as soon as possible in 2014 so as to be prepared for the October 2014 benefits enrollment for January 2015.

Employers now have to manage medical benefit costs as a line item like never before. Affordability, compliance, proposed reporting requirements have many CFOs, HR executives and benefits professionals confounded regarding how to manage costs, track eligibility and affordability within the complex rules, and ensure that reporting and audit is correct to avoid penalties and to mitigate risk. Further, employers seek ways to optimize their benefits strategies to reduce costs, and to manage workforce strategies to the best outcomes specific to their individual goals.

Employers must find a solution to ensure that benefits design, planning and management integrate the compliance requirements of the ACA. Today, management of health benefits and employee pay is often done in separate systems or via a third party, with the use of multiple databases, spreadsheets and disparate data feeds. It is critical that employers get ahead of the curve and know the true make-up of their workforce to manage hours to ensure compliance on a monthly basis, or risk unnecessary penalties and high administrative burden and cost in the design and management of benefits.

In this webinar, we will show you some proven methods to manage and automate all federal and state compliance regulations, effect disparate data control without costly payroll, HRIS or benefits system upgrades, and meet all reporting and employee notification requirements.

Who Should Attend:
HR professionals and finance executives, particularly in Retail, Staffing, Logistics, Education, Restaurant and Food Service, and other highly variable industries plus employers in any industry that want to conduct their own internal analysis of ACA implications

What You Will Learn
• Safe harbors for employers with a variable workforce are extremely complicated to administer. Learn how to manage your workforce and gain confidence in your ability to manage risk and forecast cost of employer-sponsored benefits.


• Analyze your current and future cost of offering employer sponsored benefits to your full time employees and communicate current and forecasted medical expense to your C-Suite with informative tools on a regular basis – taking a proactive approach and maintaining control of your bottom line expense.


• Reporting under the proposed IRS Code sections 6055 and 6056 is a daunting undertaking for most employers with disparate systems and data collection requirements that do not exist in current systems today. Learn how you can automate this data and ensure you are prepared for the necessary employee notifications and IRS returns on the mandated delivery dates.

 


 

 

ACA Compliance for Employers: When will annual limits and out-of-pocket maximums be eliminated?

Beginning 2014, nongrandfathered group health plans cannot have annual out-of-pocket maximums…

 

Beginning in 2014, employers must eliminate annual limits on Essential Health Benefits. After the passage of the ACA in 2010, the administration allowed for employers to file annual waivers to allow for a transitional period for annual limits on health plans. The last year for annual plan year maximums was 2013. What is not clear is whether day limits are still allowed. Since many employers relied on these waivers, and it is strictly prohibited to make changes to a plan year in order to extend an annual limit, it is important that plan sponsors work with their consultants to determine the cost impact and make necessary changes in a timely fashion. In order to mitigate any cost impact, plan sponsors may want to consider stop loss insurance. As with other plan changes, this must be communicated in the Summary of Benefits and Coverage (SBC) and provided 60 days in advance of the change.

In 2014, nongrandfathered group health plans may not have annual out-of-pocket maximums on essential health benefits that are greater than the applicable limit for health savings accounts (HAS) qualifying high-deductible plans. The limit for 2014 is $6,350 per individual and $12,700 per family. This restriction applies to the out- of-pocket maximums in-network benefits only; however, this still is considered an open question under the proposed rules. There is transitional relief in place for 2014, which allows multiple out-of-pocket maximums if each separate out-of-pocket maximum provided by separate service providers does not exceed the limit.

Beginning in 2015, however, this transition relief goes away and all separate out-of-pocket maximums in place for a plan’s different benefits (medical, prescription drug, etc.) must be aggregated and together must not exceed the limit. The HSA limits will be communicated annually in the fall.

 

Many of our customers have done extensive research to find the best and most trusted ACA tracking and compiance management solution on the market. Their final choice: Health E(fx).

Contact a Health e(fx) Representative

 

Gain a top-level view into the power of Health E(fx) to automate, track, manage, analyze, and optimize compliance, benefits, and financial strategies under the ACA. Watch the video "Health E(fx): The Affordable Care Act Made Simple" here:

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ACA Compliance for Employers: What are reinsurance fees?

The reinsurance assessment is a fee applied to all insured and self-funded major medical plans

 

On November 25, 2013, the Department of Health and Human Services (HHS) proposed regulations on certain 2015 benefit and payment parameters, including the Reinsurance Assessment contributions.

The reinsurance assessment is a fee applicable to all insured and self-funded major medical plans for calendar years 2014 through 2016. The assessment is to be used to help cover the cost of high dollar claims occurring within the individual market. The 2014 fee is $63 per insured member (not employee), which the updated regulation proposes payment in two installments: $52.50 in January 2015 and $10.50 late in the fourth quarter of 2015. For 2015, the proposed fee is $44 per insured individual.

The updated regulation also proposes to exempt certain self-funded group health plans from paying the fee for 2015 and 2016. Self-funded group health plans that do not use a third-party administrator for claims processing would be exempt. The proposed modification for the 2015 and 2016 benefit years would exclude from the obligation to make reinsurance contributions those self-funded plans that do not use a third-party administrator for their core administrative processing functions, including adjudicating, adjusting, and settling claims (including the management of appeals), and processing and communicating enrollment information to plan participants and beneficiaries.

 

 

Many of our customers have done extensive research to find the best and most trusted ACA tracking and compliance management solution on the market. Their final choice: Health E(fx).

Contact a Health e(fx) Representative

Gain a top-level view into the power of Health E(fx) to track eligibility, manage workforce, automate reporting, analyze data, and optimize compliance, benefits, and financial strategies under the ACA. Watch the video "Health E(fx): The Affordable Care Act Made Simple" here:

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ACA Compliance for Employers: When to start Preparing for 2015?

Start early in 2014 to ensure proper collection of service hours, income, and benefits enrollment.

The delay of the employer mandate was a huge sigh of relief for many employers, as it was all but impossible to rush to understand and implement the necessary changes to systems, processes, and plans of the tens of thousands of pages of ACA laws, final regulations, and proposed guidance. The good news for the employers allowed them to delay the need to enact required affordability changes and even delay some strategies to reduce employees’ average service hours to less than 30 hours per week. Insurers and the Administration may not consider this good news so favorably, however, with the ACA rollout this year.

Because businesses were not forced to comply with the employer mandate, this may have lead to less people enrolling in the Marketplace plans, thereby reducing the number of covered individuals with viable health insurance. The unfortunate and undeniably bad rollout of the Federal Marketplace has frustrated millions of Americans who were not able to apply for coverage in the first 60 days of the go-live. The Administration faces large shortfalls in funding projected from the employer mandate and the need for 7 to 9 million Americans to be active with coverage in the Marketplace by March 31, 2014.

The employer delay, SHOP delay, and Healthcare.gov problems prove that the ACA—with all its complex rules, regulations, and logistical challenges surrounding enrollment, privacy, and reporting—will not be easy for anyone for a while.

The delay in the employer mandate means that any employers who do not offer minimum essential coverage that provides minimum value and is affordable to its employees will not face a penalty until 2015. However, employers must comply with a whole host of other regulations that are in effect, including (but not limited to):
•    out-of-pocket limits (as long as no changes were made and offer of medical and Rx are separate),
•    preexisting condition elimination,
•    dependent coverage through age 26,
•    women’s preventive care, and
•    preparing and distribution of the Summary of Benefits and Coverage and Form W-2 reporting.

Employers have been encouraged to use 2014 to comply with the ACA in its entirety, and voluntarily report to the government (when reporting specifications are released) so that the transition to 2015 will be easier.

To prepare for 2015, employers who have not actively begun the process of analysis around “pay or play” through the use of measurement, stability, and administrative periods—and amended all plans to meet the new requirements—should start early in 2014 to set the strategy and begin testing to ensure proper collection of service hours, income, and benefits enrollment. Doing so will ensure forecasts of medical cost for the organization is strategically aligned with the employer’s financial projections.

The assumption that payroll and benefits providers will provide this service and that the aggregation of the required data for implementing measurement and stability periods is easy, could be a costly one, especially if preparation begins late in calendar 2014. If a company has multiple payroll systems, separate HR and benefits data systems will have many complex problems in meeting the requirements under the ACA. Most employers need to bring this data in to some centralized place. Add to this the fact that auto enrollment into the lowest cost qualified health plan, single coverage for 2015, has not been repealed at this time. Remember, any changes to plans and eligibility must be communicated to employees at least 60 days prior to the effective date. Employees and leadership will need plenty of communication and education to ensure a smooth transition into 2015.

 

Gain a top-level view into the power of Health E(fx) to automate, track, manage, analyze, and optimize compliance, benefits, and financial strategies under the ACA. Watch the video "Health E(fx): The Affordable Care Act Made Simple" here:

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ACA Compliance for Employers: Is your health plan still grandfathered?

To maintain status, plans must pay close attention to its benefits and contribution levels.


The topic of grandfathered status was huge just a short three years ago, but since March 2010 it has taken a backseat to the masses of regulations and proposed rules under the ACA. As plan designs are assessed and updated for 2014, those employers with grandfathered status need to decide if maintaining this status is the best option. They also need to ensure that if this is determined to be the best option, that the plan is truly still grandfathered!

A grandfathered plan is a group health plan, including self-insured plans or individual coverage, in which an individual was enrolled as of the original enactment date of the ACA: March 23, 2010. A grandfathered plan is not required to be amended for certain changes unless there is a change in the plan’s status.

The advantages of maintaining grandfathered status are many:


Grandfathered plans are NOT required to meet the following requirements under ACA:
  • Coverage of preventive care without cost-sharing, including contraceptives for women
  • Limitations of out-of-pocket limits
  • Essential health benefits and the metal levels
  • Guaranteed issue and renewal (only insured plans)
  • Non-discrimination rules for fully insured plans (delayed indefinitely, awaiting final regulations)
  • Expanded claims and appeal requirements
  • Expanded patient protections
  • Coverage of routine costs for clinical trials
  • Modified community rating (insured plans only)

Most ACA requirements apply to grandfathered plans:
  • 90-day wait period maximum
  • Patient-Centered Outcomes Research Institute (PCORI) fee
  • Transitional Reinsurance Fee
  • Summary of Benefits and Coverage (SBC)
  • Marketplace notice
  • No rescission of coverage
  • Lifetime and annual dollar limits on coverage prohibition
  • Dependent child coverage to age 26
  • Pre-existing coverage elimination
  • W-2 reporting
  • Employer shared responsibility penalty
  • Employer reporting to IRS (6055/6056)
  • Excise tax on high cost plans
  • Auto enrollment (for employers with more than 200 full-time employees)

To maintain grandfathered status, a plan must pay close attention to its benefits and contribution levels as of March 23, 2010, and must not:
  • Eliminate or substantially eliminate benefits for a condition
  • Increase cost sharing percentages
  • Increase copayments by more than $5 or a percent equal to medical inflation plus 15%, whichever is greater (current medical inflation is 9.5%)
  • Raise fixed-amount cost-sharing other than copays more than medical inflation plus 15%
  • Lower the employer contribution rate by more than 5% for any group of covered individuals
  • Add or reduce an annual limit
  • Maintain all records of plan designs and contribution levels as of March 23, 2010, and any changes since that date
  • Include a notice about the plan’s grandfathered status in enrollment communications



Certain changes can be made and still maintain grandfathered status:

  • Change insurers or third-party administrators (TPAs) as long as benefits do not change
  • Move between self-insured and fully insured status as long as benefits do not change
  • Make changes required by law
  • Make any changes other than one that is prohibited above (i.e., change to eligibility rules)
  • Increase benefits
  • Move drugs to a different copay tier (generic status)
  • Pass premium increases to employees (as long as the increase is shared pro rata)
  • Add new employees and/or family members to the plan


Violating any one of the requirements will forfeit grandfathered status.

Keeping grandfathered status is completely up to the plan sponsor. Care should be taken in forecasting and plan design as the full implementation of the employer responsibility mandate goes into effect and could have significant impact on plan funding.


 

Gain a top-level view into the power of Health E(fx) to automate, track, manage, analyze, and optimize compliance, benefits, and financial strategies under the ACA. Watch the video "Health E(fx): The Affordable Care Act Made Simple" here:

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ACA Compliance for employers: What is the wait period limit?

Under the Affordable Care Act, what are the proposed rules on waiting periods?

Beginning January 1, 2014, once an employee meets the plan eligibility requirements, the employee must be offered coverage no later than the ninetieth calendar day. The statute clearly states: “group health plans are prohibited from applying waiting periods for health coverage longer than 90 days after the employee or dependent is otherwise eligible for coverage.” And note that 90 days does not mean three months! Even with the delay of the Employer Shared Responsibility penalties for 2015 and the fact that the regulations are not final and are “proposed,” employers need to be mindful of how certain plan rules and possible collective bargaining agreements may together create waiting periods that are impermissible under the ACA requirements. Remember that the ACA is considered under the section of the Employee Retirement Income Security Act (ERISA), which allows plan participants to sue employers. So, if a waiting period is deemed to not meet ACA requirements and is in violation of the statute, an employee can sue the employer under ERISA. A small risk, but a risk nonetheless.

To sum up the proposed rules on waiting periods that are permissible:


• A plan can require employees to work 1,200 cumulative hours before they are eligible for coverage and then, at that point, they can apply the 90-day wait period rule.


• A plan may continue to require that employees work a minimum number of hours during a specified period (i.e., employees who work at least 30 hours per week) and may limit coverage to specific job classifications or require licensure.


• If a plan has an hours-based eligibility requirement, and the plan cannot reasonably determine whether an employee will meet this hours requirement, the employee can be considered a variable hour employee and the plan may use specific voluntary safe harbors to determine whether the employee is eligible for coverage. These safe harbors may result in measurement periods of up to 12 months, with coverage effective no later than 13 months from the employee’s date of hire.


• The plan can apply different rules for different groups of employees (collectively bargained and nonbargained, salaried versus hourly and those employed in different states or locations).

The rules may be a bit of an issue for collectively bargained groups, especially where the bargaining parties are in the driver’s seat in terms of when health coverage begins based on when the employer will begin to contribute toward coverage. If plan waiting periods under the bargaining agreements and the in force plan documents are not consistent with the ACA rules, a number of steps must be taken to address the compliance requirements and understand how any changes may impact plan cost. And, given the notification of change period requirements (60 days prior to effective date of change), be ready to communicate via the Summary of Benefits and Coverage (SBC).

 

Gain a top-level view into the power of Health E(fx) to automate, track, manage, analyze, and optimize compliance, benefits, and financial strategies under the ACA. Watch the video "Health E(fx): The Affordable Care Act Made Simple" here:

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Are You Really Ready?

January 1, 2014 is a Significant Step Closer to Full ACA Implementation.

Benefits professionals across the country have read thousands of pages of legislation (and thousands more pages of final regulations and guidance that have been issued). The readiness or panic of late spring 2013 was quickly diminished by a July 2 decision to delay penalties under the Employer Mandate. This caused many employers to take a step back and reassess decisions regarding their ACA strategies they had already made or that were close to being finalized. What is still not fully known is how this delay will impact cost, if at all.

What is known, however, is that the law was not delayed and full implementation (including all employer penalties) begins in 2015. This includes the Employer Mandate and all required federal reporting. All indications are that there will be no further transition relief, and the ACA is now going forward and is a reality.

October 1, 2013 brought the opening of the Marketplaces and the mandated (without penalty for non-compliance) employee Marketplace notice. It also brought about the federal and state Exchanges, and, as we all now know, those Exchanges have seen more than their share of technical hiccups. Frustration, data integrity issues, and the inability to get people enrolled in Exchange plans are likely making open enrollment for employers even more complicated and confusing than usual.

But there is still ample time to get prepared, right?

Time flies, especially in this new era of Health Care Reform. Before we know it, 2015 will be here. In just a few months, many companies will begin their strategic planning initiatives for 2015 and many questions will come into play, including:
• Pay or Play?
• Private Exchange?
• Self or Fully Insured?
• What should my measurement period(s) be?
• What is my communication strategy with employees?
• What is affordable?
• How will the FPL change for 2015 impact decisions?
• Will auto enrollment be a major factor now that we know the cost of the Marketplace plans?
• How will we get the look-back data we need through 2014 in order to comply in 2015?

All these questions must be answered, and senior executives are going to want to know sooner rather than later how to manage through this altered landscape of employer-sponsored health benefits.

Measurement periods are critical to managing the workforce, especially in highly variable populations. In order to do a full 12-month measurement for 2015, the best measure would be October 2013 (preferably around October 4 or 5) through September 2014. This standard measurement period will meet all the requirements under the law regarding look-back period maximums, while allowing enough time to prepare properly for system readiness and employee communication for the annual enrollment period. Gathering this data will be daunting and is likely to catch many employers by surprise. A company should also assess the viability and impact of all possible measurement and stability periods to ensure the best outcome for costs, as well as to align HR strategies in context of corporate goals. Having the required 12 months of look-back data through 2014, as well as complete analyses of strategic options and impacts, will become increasingly important starting January 1, 2014.

In addition, plan expense forecasting, penalty potential, auto enrollment, and high cost plan analysis will all become critical to managing employer-sponsored plans, and managing the accrual necessary for an exit and pay strategy.

Four long years have gone by since the passage of the ACA. While many took a step back and a deep breath this summer, now is a critical time for employers to begin their due diligence and be a step ahead.

January 1, 2014, is an important date.

January 1 not only begins the first year of federal subsidies, the individual mandate, and Exchange coverage, but it also marks the countdown to the next stage, when employer penalties and reporting will be in place.

 

To learn more about how to prepare for the Affordable Care Act requirements, click to watch the video below.

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Information Reporting Is Here: The Good, the Bad, and the Complicated

On September 5, 2013, the Department of the Treasury and the IRS finally released the notices of proposed rule making on information reporting requirements under IRC USC § 6055 and § 6056 as enacted by the Affordable Care Act (ACA).

For those who may have forgotten this requirement, here is a recap: Under section 6055, employers who offer self-insured plans as well as insurers must generally file a return with the IRS and provide a statement to each individual regarding who is covered by plans that offer minimum essential coverage. Under section 6056, large employers subject to the employer mandate must file a return with the IRS and provide a statement to each full-time employee with information regarding the offer of employer-sponsored healthcare coverage. Under the proposed regulations, the first mandatory filings and statements must be for calendar year 2015, filed in early 2016.

The proposed rules were filed and published in the Federal Register on September 9, 2013, and comments are due, after a 60-day comment period, by November 8, 2013. A public hearing on reporting under section 6056 is scheduled for November 18, 2013, and a public hearing on reporting under section 6055 is scheduled for November 19, 2013.

The Provisions
Let’s review what we already know about the Affordable Care Act since the confusion continues as more and more regulations are released. The ACA enacted three separate information reporting provisions, each for a particular purpose:

1. Section 6051 requires employers to report on an annual basis all wage information on a form W-2. In 2012 (form provided in January 2013), employers who filed 250 or more W-2s are required to report the aggregate cost of medical coverage offered to employees. This was done to give employees a view into the value of their provided coverage.

2. Section 6055 requires all employers with self-insured group health plans, insurance issuers, and governmental units to report to the IRS and provide a statement to individuals with information regarding Minimum Essential Coverage. This is for only those employees enrolled in coverage. The complicated part is that this annual filing tabulates the employee coverage information on a monthly basis. Section 6055 was enacted to assist the IRS in administering the individual mandate.

3. Section 6056 requires applicable large employers (those with 50 or more full-time equivalent employees) to report to the IRS and provide a statement to all full-time employees with information about the offer of employer-sponsored coverage, whether or not the coverage was accepted. This annual filing tracks and reports the offer of coverage on a monthly basis. Section 6056 was enacted to assist the IRS in administering the employer mandate and the premium tax credit program for individuals.

In summary, employers must complete three separate filings to the IRS, all due on the same date, and three separate statements for the employees, all due on the same date. In all the months we have been waiting for these regulations to be released, employers, associations, and insurance issuers have been raising the concern that they will be subject to duplicative reporting requirements. The Treasury Department and IRS have acknowledged these comments, and are looking for feedback on how to streamline, if possible. For this release, however, the proposed regulations generally do not permit combined reporting because each provision requires different information and a different time frame (6051 is annual, 6055 and 6056 are monthly). As stated, these departments are considering ways to combine, possibly by using an indicator on the W-2 in certain circumstances. Following are some concrete proposals for combined reporting in unique cases:

  • When an employer offers an insured health plan to its employees and an agreement is entered into with a health insurance issuer, the employer may include information required under 6056 with the return and a statement they provide to the issuer under 6055.

  • When an employer offers a no cost or very low cost (not defined) employer-provided self-insured coverage, the employer may report only on the section 6055 return to the IRS and the Form W-2 provided to the employee.

  • Employers sponsoring a self-insured group health plan may fulfill the obligation to furnish an employee statement under both sections 6055 and 6056 through the use of a single substitute statement, as long as all the required information is included and the integrity of tax administration is maintained.

Let’s take a look at a summary of sections 6055 and 6056 and the requirements of each. The proposed regulations for both combined came to 114 pages, so this is condensed for our purposes.

Section 6055: Information Reporting of Minimum Essential Coverage
Section 6055 is focused on IRS administration of the individual mandate. Essentially, it gives taxpayers the information they need to establish they were covered and gives the IRS the information needed to verify the taxpayers were covered by minimum essential coverage and the exact months that coverage was in place through the enrollment process. All health insurance issuers, employers offering self-insured group health plans, government entities, and other providers of minimum essential coverage must report under section 6055.

Persons required to report:

• Insurers of qualified health plans on an Exchange are not required to submit section 6055 returns because the Exchanges must report to individuals and the IRS. However, insurers are required to report on any qualified health plans enrolled through a shop Exchange because annual reporting by Exchanges does not include these plans.

• Employers with self-insured health plans. All employers within a controlled group must report.

• Multiemployer self-insured plans.

• Government entities sponsoring a self-insured plan.

Information required to be reported:

• Name, address, and TIN of the primary insured and each individual covered under the policy and the months of coverage. Where the TIN of a dependent cannot be collected, proposed regulations allow the enrollee’s date of birth to be reported. There are no penalties for not including a TIN as long as a reasonable effort has been made to gather the information.

Statement to individuals:

As stated, a statement to each covered employee (only one per address for all covered individuals in a family) must be delivered by January 31 each year. The proposed regulations permit electronic delivery of the statements as long as the individual consents to such delivery.

There is also flexibility to provide a substitute statement (a government form will be created and released at a later date) and report using the IRS truncated TIN program. Filing to the IRS is due by March 31 if filing electronically (February 28 otherwise).

 

Section 6056: Employer Reporting on Coverage Offered
Section 6056 requires employers to collect and report information regarding all full-time employees and the offer of employer-sponsored coverage. As outlined previously, there are some proposals for streamlined reporting , but the general method of reporting continues to require employers to report detailed information on the plans, the number of employees who are employed, and offered coverage on a monthly basis. The simplified methods may work for some employers (those with very little change or turnover), but most will need to default to the general method.

The following information required to be reported on a month-by-month basis includes:

• The number of full-time employees for each month during the calendar year

• The months for which coverage was available for each full-time employee

• The employee’s share of the lowest-cost monthly premium for self-only coverage minimum value plan offered to that employee, by month

• The IRS is likely to request additional information, including:

• whether the employee had the opportunity to enroll his or her spouse in a plan with minimum value coverage;

• whether coverage was offered to employees who are not full-time;

• total number of employees by calendar month;

• whether the employee’s effective date of coverage was affected by a waiting period;

• if the large employer was not conducting business during any particular month, by month;

• if the large employer expects that it will not be a large employer the following year;

• information regarding whether the employer is part of a controlled group, and the name and EIN of each member of the controlled group making up the large employer;

• if a designated entity is conducting the reporting on behalf of a large employer, the name, address, and EIN of that designated person or entity;

• if an applicable large employer is a part of a multiemployer plan, whether a full-time employee is treated as eligible to participate due to the employer’s contribution to the multiemployer plan; and

• if the administrator of a multiemployer plan is reporting on behalf of the large employer with respect to the employer’s full-time employees, the name, address, and EIN of the administrator.


Every employer is required to file a section 6056 return with the IRS and furnish a section 6056 statement to each of its full-time employees. Same filing schedule for 6055 is in place for 6056. If filing electronically, it is due by March 31 (February 28 otherwise). Employee statements are due by January 31.

As stated, there are several potential methods for streamlined reporting. Large employers would be able to use different methods for different employees at their discretion, but the administration of this could be extremely difficult. For example:

• W-2 reporting for certain groups of employees: Allowing large employers to report offers of minimum value coverage on the W-2 instead of a 6056 statement. This could only be used for an employee who was employed for the entire calendar year when the offer is made and for whom the lowest-cost employee-only option remained the same for all 12 months. Therefore, non-calendar year plans may not use this option and employers with high turnover will not find this attractive or administratively simple.

• Minimum value coverage offered to all or potentially all (95% rule): IRS and Treasury are considering allowing an employer to certify that all employees who did not receive an offer of coverage during the calendar year were not full-time or were otherwise ineligible due to initial measurement and wait periods. This method would allow large employer to forgo identifying the full-time status of its employees and make a filing with the IRS under section 6056 that would not be required to identify the number of full-time employees or specify the full-time status of a specific individual. This alternative may be attractive to those employers who have designated their healthcare plans offered to all full-time employees. It does not, however, release the employer from the individual 6056 statements to employees; and if a premium tax credit is claimed, the IRS could ask the employer to confirm whether the individual was a full-time employee during the calendar year.

• Self-insured employers offering employees, spouses, and dependents mandatory no-cost minimum coverage: Under this proposal, the IRS and Treasury Department are considering whether the employer could file and furnish only the 6055 return, a code on the W-2, and summary information provided in the 6056 transmittal.

We knew the reporting regulations would be complicated and elicit comments from the employer and insurance issuer community. We expect the final regulations and government forms and transmittal details to be released early in 2014, since they are requesting that large employers voluntarily report for 2014. Much remains to be seen, but having the proposed regulations and information required will assist in getting the data requirements lined up and tested well before the real due date. Remember, all data must begin to be collected on a monthly basis beginning January 1, 2015.

 

If you found this informative and valuable and are interested in learning more about how your business can better address the complexities of the ACA - Here is a video to hekp you gain a top-level view of how to automate, track, manage, analyze, and optimize compliance, benefits, and financial strategies under the ACA.

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How Will Employers Communicate with Exchanges?

We received the proposed regulations for reporting requirements under IRS 6055 and 6056 and they are under review. These reports are meant to inform the IRS, Treasury Department, and individual-covered employees of qualified coverage, and coverage and cost by each month covered. This information will ensure that the appropriate true up can be done at tax filing time, and that employees have what they need to file their 1040 each year.

Wouldn’t it be great if employers were linked to the federal hub—the database where the Exchanges will be able to tap into information from the IRS, DOL, HHS, and SSA—and quickly and easily certify qualified plans and monthly cost, and update employee information in real time? Such “blue-sky” ideas require a direct communication link between employers with both state and federal Exchanges, regardless of their offer of employer-sponsored health coverage.

Employers currently file corporate taxes and supply W-2 data to the IRS for employees and 1099s for its independent contractors. In addition, beginning in 2015, employers will be required to submit very thorough information under 6055 and 6056 regarding every employee and dependent name, SSN, plan coverage, and cost of coverage for every month that the employee is/was employed. All we know right now is the general information that will be needed and when it is due. Given that this information will be held in this government hub, shouldn't it be possible to enable employers, in addition to the state Exchanges, to access this same or a “like” database that will allow for up-to-date information regarding an employee, their eligibility, and the required plan cost information? Not all organizations have long-term employees who have long tenure. Many companies have highly variable employees who, based on the nature of their jobs, have income that changes monthly or even weekly. This fact alone begs the question of how it is that individuals and employers alike will all be providing the most up-to-date and proper information to the entities that are making what may be deemed a very important decision for an individual regarding health coverage and financial assistance?

With some “high-tech” thinking, as an employee submits an application to an exchange, rather than have the applicant return to the employer to gather the required information to take with them, the applicant could complete the application online or submit via paper. The Exchange could then verify employment/eligibility via a database using the applicant’s SSN. A regular feed to this database would occur from participating employers so that all new hires, ongoing employees, and employee status is kept current—thereby ensuring the Exchange knows immediately if the applicant:

1) has been offered affordable coverage of minimum value,
2) is in a measurement or wait period, or
3) has waived an offer of affordable coverage by the employer.


This could be a secure database employers automatically feed information to on their qualified health plans, whether an employee is in a wait or measurement period, and when they became eligible and were offered a qualified plan, or if they had waived coverage. This could allow for an immediate determination of eligibility. In return, the determination could be communicated to the employer without delay, thereby allowing an immediate response should an appeal be required.

The current plan to use a manual process for managing communications with Exchanges will be a heavy and costly burden on employer benefits/HR staffs. And the reconciliation of this issue as a manual process will also be very burdensome.

Health E(fx) is lobbying for the automation of this process, has pre-developed the capability, and is well positioned to deliver employer data directly to Exchanges if/when this automation occurs. But to date, this rests with the Exchanges and nobody is discussing it.

Delay Doesn’t Really Mean DELAY

Some time has passed since the fireworks of the July announcement of a one-year delay in employer penalties under the employer responsibility section of 4980H. In that month, many employers may have assumed that this meant all is status quo regarding employer health coverage for 2014—no penalties means non-compliance is okay, right?

Not so fast. While the delay is certainly welcome news for employers, it does not mean that they can ignore the ACA or the critical decisions it calls upon employers to make.

To put it in the clearest terms: the ACA is the law of the land, despite the penalty delay, and a very substantial number of compliance and management issues that are impacted by the ACA remain. 2014 is going to be a busy and confusing year for all. Employers need to be aware, prepared, and in compliance as major mandates go into effect beginning in October, less than a month away.

Critical ACA Regulations Currently in Effect

1.  Benefit Mandates

a.  All non-grandfathered plans must continue to offer preventive care coverage, clinical trial services, provider nondiscrimination, and limits on out-of-pocket maximums.
b.  Maximum 90-day waiting period.
c.  No limits on pre-existing conditions or essential health benefits.
d.  Dependent coverage changed to age 26.
e.  Expansion of Wellness Incentives (30%, or up to 50% for smoking-related incentives).
f.   Limits on deductibles and out of pockets not to exceed the HSA-regulated amount.

2.  Summary of Benefits and Coverage

a.  SBCs must be made available and distributed during the Open Enrollment period for 2014 and must indicate whether the plan provides minimum value, as defined under the ACA.


3.  W-2 Reporting

a.  Employers must continue to report the aggregate value of employee’s health coverage on Form W-2 each year.


4. Fees

a.  PCORI: Patient-Centered Outcome Research Institute Fees must be paid by July 31 each year. For plans beginning after October 2013, the fee is $2 per member.
b.  Transitional Reinsurance Fee is $63/year or $5.25/month for each covered member that must be paid on or before January 15, first one in 2015.


5.  Exchange Notification

a.  Employers must distribute ACA-mandated Exchange notices by October 31, 2013, to all current employees and to each new employee within 14 days of hire.

6. Application for Advance Premium Credits

a.  All employers are required to fill out the appropriate section of a 12-page application for health coverage when requested by employees who are applying for ACA advance premium tax credits when purchasing coverage through an Exchange.

7.  Employer Mandate Determination

a.  All employers must assess their monthly eligible population to determine if they will be subject to the employer-mandate penalties that will begin in January 2015. Since clarification on a transition period is needed, it is highly recommended that all employers track hours for each employee, every month, beginning no later than January 1, 2014. If a 12-month measurement period is going to be used and there is no short counting period allowed, this count should have begun as early as August 2013!

While employers will avoid penalties for offering unaffordable plans or not offering coverage at all, it is wise to continue to track and forecast the future predicted penalty for non-compliance as well as any risk for discriminatory practice penalties.

Exchange Notices

In less than a month, the employer exchange notification is due to be delivered to every employee—either via the old-fashioned snail mail or email. And every employee means every employee—not just those eligible for benefits, but every employee on your payroll: active, leave, temporary and let’s not forget those who are not on your payroll but once were. (Yes, your COBRA participants are eligible and will require a notification, but this may be released during your annual enrollment period.)

By October 1, employers are required to ensure every employee receives this notice of the existence of the Exchange/Marketplace option. After January 1, 2014, every new employee must receive this notification within 14 days of hire to remain compliant. HHS released a model notice earlier this year that every employer can use, and edit if necessary, to meet corporate needs (as long as the standard required information remains in the body of the notice). Two notices exist: one for employers offering coverage and one for those not offering coverage. The notice includes information on whether the employer is offering coverage—to whom and if that coverage is affordable. It directs employees to healthcare.gov for more information on assessing the options available in the employee’s state. One section is identical to the Marketplace Employer Coverage Tool on the Exchange application. What is not included in this notice? Specific information for each employee that will assist him or her in filing an application with the Marketplace in the resident state if so desired.

Is the assumption that the employer will send this blank form notification out en masse and wait for the employee to come back to the HR department and ask, “Would you please fill out the employer section as I would like to apply for coverage in the Marketplace?” Based on what is included and excluded, that seems like the plan. To complicate matters, the employer must fill out the Marketplace Employer Coverage Tool, but the employee must enter the information into the application; he or she is not allowed to submit the employer-completed section.

Health E(fx) solves this issue of incomplete employer information and automates the generation of all employee notifications. It also solves what could be overwhelming and unsustainable pressure on the HR/Benefits staff to complete forms and act as advisors to perhaps thousands of employees trying to meet enrollment deadlines. The Health E(fx) system has automated the entire notification process. After an employee census data load, all the information needed for an individual employee is pre-filled in the model notice and the Marketplace Employer Coverage Tool. Employers can send the form to a fulfillment vendor to mail or email by the deadline. The employee now has all the information needed: employer name, address and contact, affordability information, and the cost of the QHP the employer offers. The employee then can use the Marketplace tools and compare offered plans. If the Marketplace has a plan that meets the employee’s needs, he or she now has everything needed to make an informed decision and complete the application in a timely manner without the need to call the HR department for data, questions, and manual workarounds.

October 1 is approaching quickly, and there is still much confusion around the ACA, the Exchange/Marketplace offerings (for example, Utah announced that its citizens will be able to choose from 99 different plans!), and employer plan changes and pricing. It is going to be a very long fall and a difficult enrollment season for employers on a calendar year plan who have made substantial changes to meet the ACA requirements. No one is exempt from the Notice of Exchange/Marketplace coverage delivery. The penalties are unclear, if any, for employers’ failure to deliver the notice in a timely manner or at all. Failing to deliver violates the ACA and the Fair Labor Standards Act (FLSA), subjecting employers to investigations and possible monetary punishment. And any employee reporting the failure to distribute will have full employment protection under the ACA.

How Will Employers Communicate with Exchanges?

With the release of the Final Exchange/Marketplace Application for individuals (see our blog HHS Releases Streamlined Exchange Applications for more information), communication with the state and federal exchanges regarding eligibility and potential tax credits and federal subsidy requires employers to provide very specific information—but via paper! And that information is NOT to be submitted by the employer. The applicant must use the employer-supplied information to complete the application that he or she then submits.

Why this process? Good question. What we know is that this is a potentially daunting task at hand, assuming employees will even know what they will have to do come Open Enrollment for 2014.

Is there a better way? Absolutely. There are alternative, automated processes that are both intuitive and allow the employer the opportunity to ensure true and correct information on each employee that is submitted in a timely fashion. This process does not require the employer to submit the information to the employee who then hopefully transfers the information to the individual employee application for submission to the exchange for eligibility and subsidy determination. It is possible that communication could be direct to the exchange, in which case there would be no employee transfer, translation, or risk for miscommunication.

Such “blue-sky” ideas require a direct communication link between employers and both state and federal exchanges, regardless of their offer of employer-sponsored health coverage. Health E(fx) is ready to communicate with the exchanges once these links are established, putting the employer in a proactive position regarding employee coverage and enrollment choices.

Top 10 Issues Employers Should Consider Now

1.  Review and revise documents related to healthcare plans and arrangements. Employers need to verify that they have made all necessary changes and eligibility provisions. Employers may have already had plan design changes in play in preparation for the Employer Mandate, and they should consider what to implement in 2014 and what to delay to 2015.

2.  Continue to prepare for the Employer Mandate. Employers do not have to worry about enforcing the Employer Mandate tax penalties and reporting requirements in 2014, yet they should continue to prepare by evaluating their workforce—both employee classification and hour counting.

3.  Review cost-sharing for 2014 coverage of the Employer Mandate. Even though the affordability requirement will not be enforced in 2014, limits on cost-sharing provisions are still effective in 2014. Employers should take the time to review their cost-sharing structures and evaluate whether to implement or delay any shifts in employee-contribution cost-sharing.

4.  Review and revise wellness programs and incentives based on the ACA guidance. Employers can financially incentivize employees to meet certain health standards. Compliance with the ACA's guidance on wellness programs does not guarantee compliance with other program provisions, however, so employers need to carefully develop their wellness programs.

5.  Prepare for the rest of the ACA. Although the Employer Mandate has been delayed, the rest of the ACA provisions are scheduled to move forward. Employees need to implement new employee notice requirements and communications, plan fees, and other ACA requirements as originally scheduled.

6.  Gear up for ACA notices. Significant ACA requirements involve communicating information regarding the employer’s health plan to employees. Employers are required to send notices to their employees regarding the “New Health Insurance Marketplace Coverage Options and Your Options.” All employers must produce and distribute this notice.

7.  Prepare for earlier open enrollment as a result of additional notice requirements. With the October 1, 2013, deadline for the distribution of the Marketplace Notice, employers should consider moving open enrollment to an earlier date to accommodate the Marketplace Notice deadline.

8.  Develop strategies for the Individual Mandate and Health Insurance Marketplaces. Even though the Employer Mandate is delayed to 2015, the obligation of employees to have individual coverage under the “Individual Mandate” begins January 1, 2014. The opportunity for individuals to purchase coverage on the Health Insurance Marketplaces starts October 1, 2013. Employers are required to provide notices to employees regarding the Marketplaces and will be required to respond to Marketplace requests to confirm employee data and coverage.

9.  Review HIPAA/HITECH—Updates required for the Final Rule. All employers should be reviewing and updating their HIPAA policies and procedures for their covered entity health plan. Reviews should include updating Privacy Notices and evaluating business associate relationships and underlying agreements. The deadline for compliance is generally September 23, 2013.

10. Evaluate changes necessitated by the Supreme Court's ruling related to the Defense of Marriage Act (DOMA). Although it is anticipated that guidance for this act will be issued soon, all employers should be evaluating their health

Transition Relief for 2014 Announcement

On July 2, 2013, the Treasury Department made an announcement of transition relief for 2014 under sections 6055 (Reporting of Health Insurance Coverage by Individual), 6056 (Large Employer Health Coverage), and 4980H (Employer Shared Responsibility Provisions). Most have termed this transition relief a “delay”; some choose to call it “non-enforcement.” Regardless of the terms used, the announcement brought a huge sigh of relief from many employers given that there is now no penalty. But many substantial and critical provisions of the ACA will still be effective on January 1, 2014.

The released notice stated that employers only have to VOLUNTARILY comply with the reporting requirements under sections 6055 and 6056 of the code, and that reporting will begin in 2015. It also stated that employers will NOT be subject to any tax penalties under the employer mandate, section 4980H, until 2015. This transition, however, DOES NOT DELAY the following:


    • • Individual Mandate: This is a statue that requires all Americans to have health insurance coverage or face a penalty ($95 or 1% of household income in 2014).

    • • Transitional Reinsurance: This is a fee due on all self-insured plans and insurance companies to fund risk adjustments and risk corridors for plans in the individual market (2014 to 2016). For 2014, this fee is $63 per covered life (“belly button”), or $5.25 per life, per month.

    • • PCORI: This is a fee due on all insurance plans to pay for comparative clinical effectiveness research under the Patient-Centered Outcomes Research Institute (2012 to 2019); $1 per covered life for plan years ending before October 1, 2013, and $2 for all covered lives for all plan years ending after October 1, 2013.

    • • Wellness Programs: Employers are allowed to implement a 30% premium differential for participation in wellness programs (up to 50% for tobacco cessation).

    • • Insurance Product Reforms: No annual or lifetime limits and no co-pays are allowed on preventive services on any plans offered as of January 1, 2014.

    • • Exchange Communication: By October 1, 2013, all employers must provide all employees with information about coverage in the state and federal exchange/marketplace, including notification of the employer plan offer being affordable and of minimum value.

    • • 90-day Waiting Period: Under the ACA, an employer may not have a wait period longer than 90 days before enrolling an employee in coverage.


 

This transition relief leads to financial relief for employers, but it does not solve any of the issues that are an administrative burden to the employer benefits process. The transition relief makes one wonder how the employee will be affected. It has been stated that this “delay” allows an employer to offer unaffordable coverage because no penalty will be assessed. According to the Treasury statement, all individuals will continue to be eligible for the premium tax credit by enrolling in a qualified health plan through the Affordable Insurance Exchanges if their household income is within a specified range and they are not eligible for other minimum essential coverage, including an eligible employer-sponsored plan that is affordable and provides minimum value.

As of mid July, no guidance on the delay has been released, and there has been no mention of an expected date for additional guidance other than the fact that agencies want to get immediate feedback on reporting capabilities and needs from employers. The transition relief announcement has only enhanced the already politically charged environment around implementing the ACA. A great deal of posturing is occurring, and many organizations and coalitions are trying to educate Congress on the impacts of the ACA and this transition on the business community.

So the sigh of relief has now led to the questions, “Should we use this year to practice, prepare, and move forward with what we have already accomplished in preparation, or should we stop and institute whole sale change in 2015 when the government demands we comply?” And, “Given this transition, should we or can we expect more legislative changes?” Good questions with many potential answers. While no penalties are being assessed this year, employers still must comply with the underlying design requirements. It is imperative that employers know what they are challenged with on a prospective basis. Being prepared from a cost perspective will ensure senior management, shareholders, and employees are educated and ready for 2015. Until more is known—and the government seems to be full of surprises—anything is possible.

See Health E(fx) in Action

We have created several informational product sheets, including an overview and feature details. There is also an industry comparison chart that shows how Health E(fx) measures up to the task of ACA compliance while positioning you for success when forecasting healthcare plans and budgets.

We are confident you will like what you read in the product sheets, so once you have reviewed the information, feel free to share them with your colleagues and peers and then sign up on our website to view a demo of Health E(fx) in action!

 

Learn more about Health E(fx)

Health E(fx) OverviewHealth E(fx) FeaturesHealth E(fx) Comparison Chart

 

 

 

 

Model Notices—From an Employer Perspective

On May 8, 2013, the Department of Labor (DOL) issued Technical Release No. 2013-02 that provided temporary guidance for employers about the requirement to notify all employees of coverage options available through the exchanges. The release stated that all employers must provide notice free of charge to current full-time and part-time employees (whether or not they are enrolled in a health plan) before October 1, 2013.

This notice, which is an obligation, not an option or suggestion, has two model notices: one for employers that offer coverage and one for those that do not. Employers may use one of these models or create their own as long as the notice meets the content requirements outlined in the technical release. The employer may provide the notice by first class mail or electronically if in accordance with the DOL regulations. Employers are required to provide the notice to all current employees regardless of full-time status and each new employee at the time of hiring beginning October 1, 2013. For 2014, the DOL will consider a notice to be provided at the time of hiring if the notice is provided within 14 business days of an employee’s start date.

Each model notice includes a section that requires the employer to provide the employer’s contact information, tax identification number, and other information about any employer-provided health coverage.

The notice and the required sections are easy to fill in and distribute if the employer has the capacity and the right technology. There is a section that is optional to the employer to fill out. But if the employer leaves this section blank, it is extremely likely employees will ask the employer to help them in getting the information as it is required in the “Marketplace Employer Coverage Tool” section of the individual application for exchange coverage.

If an employer has limited staff and a large population, completing this form and distributing may be a huge administrative burden. This could result in application and timing delays. It may also lead to the need to ensure staffing levels are prepared for the potential run to the exchanges, especially if the employer does not offer coverage, or offers unaffordable coverage or coverage that does not meet minimum value.

Health E(fx) Newsletters

In 2013 and 2014, employers will be inundated with releases for ACA guidance and regulations, some of which must be implemented by October 1, 2013, and others by January 1, 2015. Our monthly newsletter keeps you informed about the regulatory landscape at federal and state levels to help you navigate the complexities of the ACA.

 

October 2013

October's newsletter the article "Are You Really Ready?" focuses on January 1, 2014 a Significant Step Closer to Full ACA Implementation. Take a quick look the information will show you that January 1 not only begins the first year of federal subsidies, the individual mandate, and Exchange coverage, but it also marks the countdown to the next stage, when employer penalties and reporting will be in place.

View October Newsletter

 

September 2013

September's newsletter includes an article outlining employers’ requirements of model notifications and how Health E(fx) automates these requirements. There is a recap of legislative updates, including more details about the Treasury Department’s early July “delay” of the Employer Mandate to 2015 and what it means for employers. We hope you will also enjoy the articles and commentary on the challenges and opportunities around the Exchanges.

View September Newsletter

 

July 2013

July’s newsletter recaps legislative updates, including details about the Treasury Department’s early July transition announcement and what it means for employers. There is also commentary on the challenges and opportunities around communication between the employer and exchanges, and a quick employer’s perspective on the model notices and the potential impact they can have for organizations with an already stressed staff. And finally, in preparation for our commercial launch, you can now download product data sheets and sign up for a demonstration of the Health E(fx) system.

View July Newsletter

 

June 2013

In June’s newsletter, there are legislative updates including a new HHS release and final regulations on employer wellness programs, as well as commentary on the challenges and opportunities around communication between employer and exchanges. A quick Q&A for brokers and consultants answers some questions about Health E(fx)’s role in client ACA compliance.

View June Newsletter

 

May 2013

In May's newsletter, there are legislative updates impacting employers, as well as some no-nonsense commentary on how employers will need to address core compliance issues.

View May Newsletter

 

 

Brokers/Consultants Quick Q&A

Q. What are some main obstacles brokers/consultants face when helping their clients with ACA compliance?

A. Brokers/consultants face many challenges when helping employers with ACA compliance. As most have discovered, much of the initial guidance issued was just that—guidance, and often ambiguous. Assisting clients means: 1) reviewing and interpreting the legislation’s legal jargon to put it into laymen’s terms, 2) understanding which items impact which clients, and 3) determining the strategic implications of the ACA and figuring out how to implement changes in the short and long term.

 

Brokers/consultants are also in the position of ensuring that each client receives consistent information—any conflict in interpretation of regulations can jeopardize a client’s trust in their broker/consultant. If brokers/consultants are not 100% certain about the ACA regulations, then this trust can be compromised. Brokers/consultants also have faced the issue of not agreeing with a client’s interpretation of aspects of the ACA. It can be challenging, to say the least, on both factual and philosophical levels when the broker/consultant and client disagree.

 

Q. How can brokers/consultants leverage Health E(fx) to better serve their clients?

A. Although it may not seem like it lately, navigating healthcare reform is only a portion of a broker/consultant’s role with clients. It has, however, been the number one concern of most clients, especially in 2013. How do brokers/consultants read 20,000 pages of legislation, decipher and understand it (keeping in mind they are not lawyers), identify implications to clients, and develop a strategy to implement ACA, while also managing day-to-day services such as vendor management, financial reporting, placement, and client services?

 

Health E(fx) takes much of the burden off of the broker/consultant. A broker/consultant can now say, here is a plug-and-play solution to help clients understand the implications of the ACA.

 

The Health E(fx) system works for all employer groups, including those who currently have a variable hour population who do not receive benefits, to those who offer benefits to everyone, and even those who do not offer benefits. Data-driven decision making empowers all Health E(fx) users to understand the implications of the ACA from a tactical approach, and provides the elements needed to develop a long-term strategy for ACA implementation.

Final Regulations Regarding Wellness Programs

Final Regulations on Wellness Programs

On May 29, 2013, the IRS, DOL, and HHS released final regulations regarding wellness programs integrated with employer-sponsored health plans. These new regulations apply to all insured and self-insured programs, grandfathered and non-grandfathered plans, and are effective for plan years beginning on and after January 1, 2014. The final regulations divide wellness programs into two categories:

 

Participatory wellness programs are offered to all similarly situated individuals who do not provide a reward or do not condition said reward on satisfying any standard related to a health factor. These must be made available to all regardless of their health status.

 

Health-contingent wellness programs require an individual to satisfy a standard related to a health factor to obtain a reward. These have a further breakdown into “activity-only” or “outcome-based” programs. Activity-only programs require an individual to complete an activity related to a health factor, such as participating in an exercise program, attending a class, or keeping a food diary. Outcome-based programs require that the individual achieve a certain health outcome, such as not smoking or obtaining specific cholesterol or triglyceride levels. These programs must give all individuals the opportunity to qualify for the reward at least once per year. The reward may not be in excess of 30% (50% if preventing or reducing tobacco use) of the total cost of coverage under the employer’s plan. It must be designed to promote good health or prevent disease, and the reward must be made available to all similarly situated individuals—an alternative must be made available for those who are unable to meet the stated targets, regardless of health status.

 

Employers who have invested in wellness programs up until 2013 will need to evaluate their programs closely before beginning their 2014 plans to ensure full compliance.

HHS Releases “Streamlined” Exchange Applications

Early in 2013, HHS released a 21-page Exchange draft coverage application. This form was complex and confusing and employers were eager to submit comments regarding the release. In response to all submitted comments, HHS issued a shorter, more streamlined FINAL application that individuals enrolling in medical coverage in a public health exchange will use; the federal government refers to this application as the Health Insurance Marketplace. There are three versions: the Individual Short Form, the Individual Form with no Financial Assistance, and the Family Exchange Form.

On one of the forms, employers are required to complete a section requiring information on various elements of the employer-offered health plans, including eligibility, waiting periods, premiums for the lowest-cost, self-only plan option, wellness program incentives, whether the plan meets minimum value standards and what plan changes are contemplated for the new plan year.

These revised forms will be used by HHS not only for coverage in the Health Insurance Marketplace, but also to determine eligibility for Medicaid and CHIP coverage. This information will be used to determine eligibility for federal premium tax credits or other federal subsidies. This form, as developed by the HHS, will be used by states deferring to the federal government for Exchange coverage, and it looks now that most states that are operating their own Exchanges will also use these applications, yet they do have the option to create Exchange-specific forms.

As stated above, the HHS package has three versions:


    • Application for Health Coverage & Help Paying Costs (Short Form): Unmarried adults who are not offered coverage from their employer, who do not have dependents, who cannot be claimed as a dependent on someone else’s tax return, and who do not have items that can be deducted from their taxable income other than student loan interest use this 5-page form.

    • Application for Health Coverage & Help Paying Costs: Single individuals and those with a family who are offered health coverage from an employer use this 12-page application.

    • Application for Health Coverage: Anyone who wishes to enroll in a health plan offered in the Marketplace, but who is not eligible for premium tax credits, cost-sharing subsidies, Medicaid, or CHIP coverage fills out this 5-page application. Those individuals unsure about their eligibility can also complete this version of the application and will receive assistance regarding eligibility and enrolling in coverage.



Employer Requirements
The 12-page version of the application includes an “Employer Coverage Tool.” Instructions guide applicants to “take the Employer Coverage Tool on the next page to the employer that offers coverage to help you answer these questions.” The interesting part of this section is that this tool is NOT to be included when the application is submitted; but instead, the applicant uses the information provided by the employer in the Tool to respond to similar questions asked in the Health Coverage From Jobs section of the application.

This section is relevant is determining whether the applicant is eligible for federal premium tax credits and subsidies and thereby determining if an employer is liable for penalties under the play-or-pay requirements.

The application and the Employer Coverage Tool request the applicant to fill in very specific and important information that, if reported erroneously, may determine employer liability. Information required includes the following:


    • 1. Applicant’s before-tax wages and frequency of payment – determining affordability.2. Average number of hours worked each week by the applicant – determining eligibility.3. If income of the applicant changes from month to month, the applicant is required to identify his or her “total income this year” and “total income next year (if you think it will be different)” – this year being the year the application is submitted. So, if submitted in October 2013, “this year” refers to 2013, “next year” refers to 2014.

      4. The applicant’s eligibility for coverage including whether any waiting period applies.

      5. If the employer offers a health plan that meets minimum value standards.

      6. Employee premium requirement for self-only coverage under the lowest-cost plan offered by the employer. If the employer maintains wellness incentives, applicant is asked to provide the premium that the applicant would pay if he or she received the maximum discount for any tobacco-cessation program and did not receive any other discounts based on wellness programs.

      7. What plan changes will be made to the group health plan for the new plan year (if known), including the potential that the employer will not continue to offer coverage, or that the premium for the lowest cost plan will be changed or if the employer will start offering coverage.



As of now, the Employer Coverage Tool is expected to be completed manually by each employer for each employee who files an application for coverage in the Marketplace. A daunting task for current benefit staff levels in organizations of all sizes.

Automated solutions to the manual, cumbersome, and time-consuming process facing all employers are possible. Health E(fx) has all the data necessary for the Employer Coverage Tool already developed in the system. Should the Exchanges allow the pre-filled forms to be submitted (rather than having the employee fill out all the pertinent information themselves), there would be significant reduction in redundant, manual processes allowing for improved communication and less burden on both employers and employees.

Ultimately, to automate a solution between the employer and the Exchanges, there will need to be an electronic, regular feed to a National Exchange Database, where an employer can submit all the necessary information, by employee, so the Exchange can validate the Employer Coverage. This would allow for an effective and efficient means of employer plan validation at the Exchange. It would also allow for Qualified Health Plan (QHP) affordability and eligibility determination for the applicant to be assessed BEFORE subsidies are granted that may be erroneous and drive significant downstream reconciliation problems.

Health E(fx) Garners National Attention: HR Magazine, Wall Street Journal, and Yahoo Finance!

Well this was a pleasant surprise! We had no idea Health E(fx) had been written up in the Society for Human Resource Management's April edition of "HR Magazine" until a couple of our Beta Participants brought it to our attention. Here's a Twitter link to the article:

 


In fact, recent press releases were also picked up by some fairly major news agencies. You can see a couple of them here:

Wall Street Journal:

 


Yahoo Finance:

 


For our beta customers who are keeping an eye out, thanks! Oh, and we'll make you a deal: we'll keep our heads down to get the commercial release of Health E(fx) out on time, and you keep us informed if something is being written out there we may not be aware of (...in addition to all the great feedback you're giving us, of course!).

PPACA World: Meet New Employer Reporting Requirement IRC Section 6051(a)(14)

Employers are still waiting for the final regulations and guidance they need to meet the health plan reporting requirements created by the Patient Protection and Affordable Care Act (PPACA).

While regulators are establishing the final PPACA reporting requirements, employers and their advisors can review what has been released to date, to get an idea of how those final requirements might impact large -- and not so large -- employers. One section of PPACA that is already starting to get employers attention is PPACA Section 9002.

PPACA Section 9002 added Section 6051 (a)(14) to Internal Revenue Code (IRC) Section 6051. Secton 6051(a)(14) requires employers that offer medical benefits to report the aggregate cost of the coverage in a new box on Form W-2 -- Box 12DD.

The Section 6051(a)(14) reporting mandate applies to all employers that issue at least 250 W-2 forms annually. The first due date for Box 12DD data was Jan. 31, 2013. Employers will have to send in new Box 12DD data on Jan. 31 every year. The Box 12DD amount must include both the portion of the health benefits total paid by the employer and the portion paid by the employee, according to the implementing regulations.

Generally, an employer can use the COBRA premium to calculate the value of the coverage to be reported.

If the health plan is insured, an employer can use the premium charged by the insurer for that employee’s coverage (as applicable to the employee) as the reportable cost.

This Box 12DD total should not include contributions to health savings accounts (HSAs) or most contributions to flexible spending arrangements (FSAs). The Box 12DD total should include spending on:

- Major medical coverage.

- A health FSA for the plan year in excess of an employee’s cafeteria plan salary reduction for all qualified benefits.

- A hospital indemnity arrangement or specified illness arrangement (either insured or self-funded), paid through a pretax salary reduction program or by the employer.

- Domestic partner coverage included in gross income.

This reporting, while required, is informational only. It gives employers an opportunity to show employees how much the employees receive in benefits.

While this provision sounds easy enough to implement, it will require most employers to program the integration of this data into their W-2 reporting. That's no easy task, given that a system for generating this data for all active employees during a calendar year is not standard in most payroll or human resources information systems.

Depending on how an employer handles payroll, benefits and W-2 reporting, it might need new systems or support services to gather all of the data required in a timely fashion.

On the bright side: Regulators developed the 6051(a)(14) regulations early enough that employers and their vendors were able to get the systems needed developed and tested in time to implement the changes on time, per the law.

Issues Facing Employers Under ACA Legislation Impact More than a One-Time “Pay or Play” Decision

On the surface, the “Pay or Play” requirements of the Affordable Care Act (ACA) seem relatively straightforward. Employers analyze their employee census data and current plan contribution information regularly, and knowing if you are a “large employer” is a fairly easy calculation of ACA-defined full-time and full-time equivalent employees as of a certain moment in time. Based on this, if you qualify as a large employer, the "Pay or Play" decision begins. “Pay” applies if you choose to not offer minimum essential coverage or any coverage. This will result in a $2,000 per full-time employee per-year excise tax. “Play” applies if you offer minimum essential coverage to all of your full-time employees - relatively simple when an Employer has the correct data regarding their current population and spend. However, ongoing monitoring of compliance and projected cost, while ensuring consistent eligibility and affordability standards are met over time, especially within the context of highly variable employee populations, is where ACA impacts become orders of magnitude more challenging in context of current benefits management approaches within organizations.

Employer decisions will have ramifications well beyond the initial impact of whether or not to continue providing health benefits to employees, or to pay penalties and have employees seek benefits from a public exchange. The decision itself either way can have both a financial and motivational impact on employees. The employee population has come to expect, rightly or wrongly, that their company will offer a comprehensive benefits package as a part of total compensation/total rewards. Should this no longer be offered, the employee is faced with the prospect of lower take home pay (due to loss of what are known as Section 125 Cafeteria Plan benefits) and the stress of having to ensure coverage is secured and is paid on time.

The employer must be aware of the compensation issues and expectations when removing something that ranks high on the list of employee “wants”. There is also the need to identify the goals, opportunities and risks associated with these decisions surrounding recruitment and retention in employee strategy. Benefits have long been used as a recruiting tool to ensure the best and brightest employees are hired and are retained. With the ACA implementation, a “Pay” decision is much larger than the “straightforward” $2,000 per-head, per-year calculation. Compensation changes, loss of tax deductibility and effect on total compensation, employee turnover and retention, competitive value to employee attraction...all have significant financial impacts on the total cost of the decision. When employers really start looking at the impacts of a "Pay" decision, many will find that the equation can become much more complex and quickly shift in favor of a “Play” decision.

As such (...and as is suggested through many industry polls of employers qualifying as “large” under the ACA) many employers will elect to continue providing health benefit plans, but will also seek ways to reduce cost-burden while maintaining employee morale and company “brand” as an employer of choice. Many employers will evaluate or expand on self-insured plans as a means to effect this cost-control, and focus significant resources to arrive at ‘best-of-all options’ approaches. Achieving this, however, presents a significant challenge to employers and their advisors that will require changes to current benefits management practices, data, and systems.

Affordable Care Act

On Christmas Eve of 2009, we watched the historic Senate vote that paved the way for the House of Representatives to pass the Patient Protection and Affordable Care Act (PPACA) by narrow majority.

The PPACA legislation addressed several aspects of health care reform, including insurance exchanges, federal subsidies to assist low-income families, Medicare and Medicaid reform, the individual health coverage mandate, and an employer mandate to provide health care that is deemed “affordable.”  Lawsuits ensued, and the most significant of these was a test of part of the legislation known as “the individual mandate” on grounds of constitutionality.

Many companies believed the Supreme Court would not uphold the legislation (now named the Affordable Care Act or ACA) as the law of the land in its entirety. But on June 28, 2012, the Supreme Court did just that. When President Obama was re-elected in November 2012, the path was set for the ACA to be fully implemented beginning January 1, 2014.

What does the ACA mean for the United States?

At a high level, the legislation is intended to provide health care insurance for as many as 46 million currently uninsured Americans, while making health coverage affordable and accessible for millions of individuals and small businesses. Further, the ACA makes the preclusion of those with pre-existing conditions from access to affordable health plans illegal. It mandates that all individuals must carry health insurance (or be penalized) and requires employers to either offer affordable coverage to its full-time employees or pay significant penalties.

What does the ACA mean for companies?

Many components of the law are already in place, and over the next few years additional regulations will be introduced. Starting in 2013, employers and insurance providers must:


    • ·      Report the value of benefits on an employee’s W-2 for the 2012 tax year

    • ·      Limit Health Flexible Spending Accounts to $2,500

    • ·      Distribute a Summary of Benefits and Coverage to all plan participants

    • ·      Increase Medicare payroll taxes

    • ·      Cover costs for certain health services that previously did not apply

In 2014, the list of employer requirements gets considerably longer and far more complex: state Exchanges; Medicaid expansion; required data management and reporting based on newly legislated procedures such as “look backs,” “stability periods,” and “affordability” based on variable and still-changing measures. Not to mention how companies will need to audit internal systems and processes to ensure compliance to existing regulations such as Sarbanes-Oxley.

 

Under the ACA, companies face overhauling internal processes related to health care or decide to cease offering health care plans and pay penalties—often a much higher cost when compared to that actual impact of implementing the required changes and managing their health plans within the context of ACA requirements.

Is your company ready…?

How are the carriers affected?

 


    • Under the Affordable Care Act (ACA), patients have more rights, protections, and security that coverage will be available when they need it. Insurance providers—or carriers—are accountable for ensuring compliance. For example:

    • ·      No more pre-existing condition denials for children.

    • ·      No more lifetime dollar limits on coverage—annual limits on essential health benefits, as defined by the ACA are no longer set. Annual dollar limits for other coverage are set at increasing higher amounts until January 1, 2014, when plans are banned from having an annual dollar limit on coverage.

    • ·      Insurance carriers cannot drop people with coverage when they get sick.

    • ·      No more denials of coverage without appeal.

    • ·      All health plans must assist consumers in understanding their coverage without the difficulty that comes with insurance documents. Beginning September 2012, all health plans must provide consumers with clear, consistent, and comparable information about the health plans offered and coverage available.


The ACA also includes features that hold insurers/carriers/providers accountable for how they spend premium dollars and rate increases. Medical loss ration and rate review are two features that directly will affect consumers and employers offering coverage.

What does this mean to employers? Whether you are self-insured or fully insured, the ACA’s fee requirements and mandates will have a direct impact on rates, delivery of health care, and management of plan design and effectiveness. For example, to ensure that premiums are spent primarily on health care, the law generally requires that at least 85% of all premium dollars insurance companies collect for large employer plans are spent on services and quality improvement. If this requirement is not met, rebates will be mandated. As the state exchange process and development becomes more clear, it is expected that large and small insurance providers will be more transparent on their plans, network effectiveness, and quality so that employers can make good, cost-efficient decisions.

What about my Broker and/or Benefits Consultant...will they be able to help?

The relationship between corporate Client and the benefits broker and consultant is one of trust, confidentiality, and commitment. The broker/consultant brings a level of marketing, negotiating, and vendor relationships that are difficult for an employer to master on their own. Under the Affordable Care Act, this relationship takes on even greater importance.

The benefits broker and external benefits consultant is expected to bring a high level of expertise on health care reform and guide customers through regulatory changes. However, providing service that is informed and consistent with Client goals and their unique employee populations, while helping their Client to meet all requirements under the ACA, creates a pressing need for both data and alignment with the decision processes of the customer. Common, collaborative tools for analysis and performance monitoring that is based on the unique and constantly changing demographics of an employer is a challenge, and creating value for their Clients in this environment will be imperative. Without the proper data, collaborative analytical tools, and successful ongoing management of decisions and data, the success of this relationship may be compromised.

Health E(fx) is a comprehensive, cost-effective management information solution that integrates and validates data from disparate, disconnected systems, alerting when data from originating sources are outside either established parameters and/or compliance standards. Robust, scenario-based analytics allow for modeling of cost-benefit options around "pay or play", eligibility, affordability, plan design, minimum value compliance, and cost projections. Ongoing monitoring and alerting assures all eligibility and affordability compliance requirements are met, avoiding unnecessary taxes and penalties. Additionally, Health E(fx) facilitates and automates both ACA-mandated compliance reporting as well as ad-hoc report generation. Health E(fx) extends configurable dashboard communications - both graphically and in detail - to stakeholders either within or external to the organization - ensuring those who need to know are informed on benefits decisions and performance at all times. All without costly upgrades to existing HRIS, Payroll, Benefits Administration, and other ACA-impacted systems.  

Health E(fx) is a valuable foundation for close alignment and integration of the broker and consultant with their Client, increasing their service value, enabling clarity, compliance and control over Client health benefits management under the ACA.

Challenges facing employers as a consequence of ACA legislation

The decisions facing U.S. employers under the Affordable Care Act (ACA) are many. First and foremost is the decision regarding whether it is financially and competitively in their interest to offer/continue offering health benefits coverage? Addressing this question during 2013 will be important ahead the January 2014 date when many of the more significant ACA regulations take effect. This decision to continue or discontinue employer-sponsored health benefits, and the cascading results of it, is what is referred to as "Pay or Play".

One option is for an employer to "Pay" penalties and have some or all of their employee population seek health benefits from the new public exchanges. If they make this decision, they will be required to pay $2,000 per eligible employee annually (assessed monthly based on their full time employee population). While this may seem like a simple decision - especially if average cost-per-employee the employer currently incurs exceeds $2,000 per year - below the surface, this decision can be much more complex and is neither simple nor easy.

A number of critical factors must be taken into account. Eligibility requirements under ACA define variables that affect employee populations and demographics differently, including some choices that are in the employer's authority to make. What will the effective "look-back", "stability" and "wait periods" be? How does this impact employee eligibility? How will employee hours worked over time affect eligibility? Does the employer meet safe harbor requirements under the ACA? What is the effect of alternate health benefit plan design strategies on overall costs? How do health benefits fit into overall compensation strategies, and how will this impact attraction and retention of employees? What will the impact be to taxable benefits and compensation for employees, and what downstream effects can this have on compensation strategies, competitiveness and performance? These are just some of the key questions employers should be considering.

Many employers are concerned at both the challenge and cost of system upgrades to HRIS, Payroll, Benefits Administration, etc. that may be required. Necessary data often resides in disconnected systems, or with third-parties such as providers and benefits administrators. The ACA defines a series of employer requirements that, in order to comply, will require accurate data that is often either unavailable, unusable, or of questionable integrity within context of multiple current corporate systems. Further, to conduct analysis that is valid, with management approaches and decision outcomes that will not place the employer in unnecessary tax and penalty situations, companies face new processes that have not previously been required to manage health benefits. The right data and tools will be necessary to conduct analyses that informs employer decisions, forecast, track, and manage costs and trends over time, and ensure that all compliance requirements are met and correctly reported. Public firms may also be concerned about materiality of their health benefits plans, liabilities, and financial reporting, as well as audit requirements of corporate systems to meet ACA requirements under Sarbanes Oxley requirements.

Under ACA, those employees without employer-based coverage are mandated to obtain their own insurance through a government-run exchange (state or federal), or face the individual mandate penalty enforced under the tax code, and this is an option available to employers. But it may be far from the best path for an employer to come to this conclusion without a deep look at the cost-benefit of this decision. And if employers continue to offer benefits (as more than 80% of current employers offering health benefits contend they will), they will be held to strict standards that ensure at least one of the plans they offer (if more than one option is available) meets the requirements of "minimum essential coverage", "minimum value", and "affordability", as defined by the law. As well, their most expensive plans must also meet new standards of "affordability" under the law which, if not managed appropriately, has potential for heavy fines in 2018 in the form of excise taxes, or what has come to be known as the "Cadillac Tax" provision of the ACA.

As it stands today, with the most recent guidance and final regulatory releases, the ACA legislation is in excess of 3,000 pages, with both subtle and significant impacts on employers leaving many questions that must be answered. Should businesses redefine their workforce strategy? Are companies beginning to alter business strategy due to the “unknowns” of ACA because of potential added costs? One thing about the new law is clear - if you are an employer with more than 50 full-time employees, you will need to take action to understand and decide on how the ACA will affect your business.

Important ACA Terminology

Glossary of major coverage requirements under the ACA:

 

Individual Mandate:
All Americans, with some exceptions, must maintain minimum essential coverage or face a penalty (on their taxes).

 
Employer Mandate:

All employers with 50 or more full-time employees (FTEs) provide affordable coverage of at least minimum value to full-time employees and their dependents or pay tax penalties if a full-time employee obtains exchange coverage and a federal premium tax credit.

 
Insurance Exchanges:

New state-based insurance exchanges through which individuals and small employers can shop for health insurance. Federal premium tax credits and subsidies will be made available to low- and moderate-income individuals who do not have access to affordable, employer-sponsored insurance to purchase private insurance coverage through an exchange. States may opt out under Supreme Court ruling and defer exchange to Feds.

 
Medicaid Expansion:

States are given the choice to expand their Medicaid program to allow individuals with incomes up to 133% of FPL to be eligible for the program. States may opt out of this.

 
Large Employer:

Fifty or more full-time equivalents. This is a count of all full-time employees (30 or more hours per week per month). It is done by aggregating the number of hours worked by non-full-time employees (including seasonal workers) and dividing by 130. Add the number of full-time employees and full-time equivalents for each of the 12 months in the preceding calendar year. Verify if seasonal exception applies. This seasonal exception applies to organizations whose workforce exceeds 50 full-time employees for 120 consecutive days or fewer in a calendar year if the employees in excess of 50 who were employed during that period of no more than 120 days were seasonal. If an employer meets this requirement, they are not deemed an applicable large employer and are not subject to the employer mandate.

 
Full-Time Employee:

At present, the ACA defines a full-time employee as an employee who is employed on average 30 hours per week or 130 hours in a month. This is a significant adjustment for many as full time is normally defined as between 32 and 40 hours per week.

 
Measurement/Stability Period:

Notice 2012-58 was issued on August 31, 2012, stating that employers, at least through the end of 2014, could use a measurement/stability period safe harbor, which allows a look back measurement period to determine whether a certain category of employee should be considered full time based on employee’s hours of service. Per the notice, “a new employee is a variable-hour employee if, based on the facts and circumstances at the start date, it cannot be determined that an employee is reasonably expected to work on average at least 30 hours per week.” Employers can choose a standard measurement period of 3 to 12 months for ongoing employees, after which employees determined to be full time would be eligible for coverage during an associated stability period equal to or greater than the look back period (but not less than 6 months) during which coverage must be offered. Employers may use measurement periods and stability periods that differ either in length or in their starting and ending dates for certain groups: collectively bargained employees and noncollectively bargained employees; salaried vs. hourly; employees located in different states

 
Wait Periods:

Notice 2012-59 clarifies the calculation of the 90-day waiting period begins upon the date that an employee becomes eligible to participate in the plan. For those employers using the measurement/stability safe harbor, coverage for an eligible employee must be effective within 13 months of the employee’s start date (plus the fraction of a month to the first day of the next calendar month). Failure to comply may result in an excise tax of $100 per day during the noncompliance period multiplied by the number of affected employees.

 
Minimum Value:

Plan’s share of the total allowed cost of benefits provided under the plan must be at least 60% of such costs. This is generally understood to be a 60% actuarial value test (percent of medical expenses—deductibles, coinsurance, copays, etc.—paid for the plan for a standard population and set of allowed charges). Large employers are not required to offer essential health benefits.

Treasury/HHS have proposed three options for determining minimum value on a pass/fail basis. All three options are linked by a “standard population” claim data set. This set is the Thompson Reuters large commercial claims data that reflects a “typical” self-insured employer plan.

1. Minimum Value/AV Calculator: Allows an employer to input certain features of plans into an online calculator. If an employer has “non-standard” features to a plan, such as atypical cost sharing on the core benefit categories, they will not be able to use this calculator.

2. Safe Harbor Checklist or “eyeball test”: Allows an employer to see if their plan meets one of several design-based safe harbors such as a high deductible with an HSA. In order to use this, an employer MUST cover all four core categories of benefits and services and could have nonstandard features.

3. Actuarial Certification: Use a certified actuary to determine whether plan meets minimum value. According to the rules, this is the absolute last option as an employer must prove that the first two will not work.

 
Essential Health Benefits:

There is a mandated set of design options that must be included in plans offered. Large group plans are prohibited from imposing lifetime limits or annual limits on any essential health benefits offered. There are 10 benefit classes:

1. Ambulatory patient services
2. Emergency
3. Hospitalization
4. Maternity and newborn care
5. Mental and substance abuse
6. Prescription drugs
7. Rehab services and devices
8. Lab
9. Preventive services
10. Pediatric

Affordability:
An employee’s contribution for self-only coverage must not be more than 9.5% of W2 earnings. The law itself states that the contribution cannot exceed 9.5% of his/her household income. Since household is not known, it was updated for self-only, known as the affordability safe harbor.

What you should know about the ACA

The Health E(fx)™ team wants you to stay informed on the Affordable Care Act (ACA) as it affects your health plan administration. We expect hundreds of thousands of pages of guidance and regulation over the coming weeks and months. As these regulations are released, we will summarize the knowns and unknowns and any interpretations. As always with health benefits, the information provided is not to be considered a legal recommendation or guidance, and you should verify all data and information with your legal team and broker/consultants.

For additional reference on the ACA:





What is meant by “Pay or Play?”

Starting January 1, 2014, the Affordable Care Act (ACA) will require companies with 50 or more full-time employees (or equivalent) to provide health insurance coverage, send employees to a health insurance exchange (either state or federally run), “pay” a penalty of $2,000 per employee per year (less the first 30 employees, if at least one employee goes to an exchange and receives a federal subsidy for coverage), or develop a plan to do both.

Employers who decide to “play” will be subject to a $3,000 penalty for any employee who finds the offered employer coverage unaffordable and receives a subsidy. What is “unaffordable”? Unaffordable is defined as an employee’s self-only coverage premium that exceeds 9.5% of the employee’s wages (based on the annual W-2).

The new State Exchange process is a key component of the reform. Each state is mandated to provide individuals with a range of health insurance plans to choose from. It is through this exchange that individuals who meet federal income guidelines will be eligible for subsidies to pay premiums. Note: the “mandated” piece was struck by the Supreme Court as the decision to opt out of the exchange development process is allowed. The deadline for states to make this decision was December 14, 2012. So far, 29 states are either deferring to the federal government to provide this exchange or have not declared the decision. A “donut hole” in the law is that the subsidy is currently only tied to the state opting in. There is no language that says if the federal government provides this exchange access that individuals will be eligible for a subsidy. Interpretation by legal experts is still underway.

The issue faced is: Which makes the most sense for businesses today: extend coverage to all employees, elect to not provide coverage and pay the penalty, or develop a hybrid of the two? How this will impact employees and analyzing which employees may be eligible for subsidies is the major challenge companies face today.