Affordable Care Act

For the second time in three years, the U. S. Supreme Court has upheld a key provision of the Affordable Care Act. The Supreme Court ruled last week in King v. Burwell that premium tax credits are available to lower-income individuals who buy health insurance on a federal exchange, as well as to those who buy insurance on a state exchange. The ruling means that the Affordable Care Act will persist in its current form, at least for now, and employers must continue to grapple with its restrictions, mandates, and reporting requirements.
Continue Reading Supreme Court Saves Affordable Care Act Again

Starting in 2015, the Affordable Care Act imposes burdensome new reporting requirements on employers and insurers that provide group health coverage.  We described the reporting requirements in earlier posts, here and here.

Employers and other reporting entities have anxiously awaited the IRS forms on which these reports will be made, so that they can program and test their computer systems, develop administrative procedures, coordinate reporting responsibility with their affiliates, and make arrangements with their business partners to collect and report the necessary information.  The IRS posted drafts of the reporting forms on its website yesterday.  Unfortunately, however, the instructions to the forms—which are expected to provide much of the detail programmers will need—will not be available until August.
Continue Reading IRS Releases ACA Reporting Forms

Yesterday two federal courts of appeal reached opposite conclusions on the question whether individuals in 34 states are eligible for federal subsidies when they purchase health insurance coverage.  Depending on how this issue is resolved, it could have a significant impact on the future of the Affordable Care Act, including the employer mandate scheduled to take effect in 2015.
Continue Reading Key Component of Affordable Care Act Might Be Invalid

Many employers will face two significant new reporting requirements for employee health coverage starting next year:

  • Section 6055 Return:  Employers and insurers that provide minimum essential coverage must report information to the IRS about each covered individual for each month, and provide a copy of the report to covered employees and retirees.
  • Section 6056 Return:  Employers with at least 50 full-time employees must report additional information to the IRS (with a copy to the employee) to confirm that the employer offers health coverage that is affordable and provides minimum value to full-time employees and their dependents.

Final regulations (available here and here) adopt the reporting requirements proposed last fall, with only modest changes.  (We described the proposed requirements in our earlier post: Health Coverage Reporting Rules Create New Burdens for Employers.)  These are some of the challenges employers will confront as they prepare to comply with the new requirements:

No Further Extension of the Reporting Deadline

The IRS announced last year that it would waive the reporting penalties for coverage provided in 2014.  The final regulations do not provide any further extension of the reporting deadline.  Accordingly, the first reports will be due early in 2016 for health coverage provided in 2015.

Employers will have to develop administrative systems and procedures to collect the required information, and many employers will wish to engage outside vendors to help them comply with the new reporting requirements.  These arrangements generally must be in place by January 1, 2015, when the new requirements take effect.

No Electronic Statements Unless the Employee Consents 

An employer must provide individual statements to employees showing the health coverage information reported to the IRS for the employee and the employee’s family.  Although employers had requested rules that would allow them to furnish these statements electronically, the final regulations continue to provide that an employer may furnish an electronic statement only if the individual consents.  The consent rules will make electronic delivery impractical for many employers.

The employer’s request for consent must refer to the specific forms that the employer wishes to provide electronically.  Accordingly, even if an employer has previously received the employee’s consent to furnish other forms (such as Form W-2) electronically, or has received a general consent to furnish all forms electronically, these consents will not extend to the new health coverage statements.
Continue Reading Final Health Coverage Reporting Rules Offer Employers Little Relief

The final shared responsibility regulations under the Affordable Care Act, issued earlier this month, in large part maintain the rules set forth in the proposed regulations.  However, there are several ways in which the final regulations modify or clarify these rules.  Below is a top ten list (which we’re sure David Letterman would use if he were a benefits lawyer) of things to know about the final regulations.

The rules govern the requirement that employers with at least 50 full-time employees could owe a “shared responsibility” excise tax if they fail to offer group health coverage.  One penalty (known as the “A” penalty) applies if an employer fails to offer group health coverage to 95% of its employees on every day of a month and at least one employee purchases coverage through an exchange with a federal subsidy; the “A” penalty each month is an excise tax of 1/12 of $2,000 for each full-time employee in excess of 30.  Even if the employer meets the 95% test, a separate penalty (known as the “B” penalty) applies if the employer fails to offer affordable health coverage to an employee, and the employee purchases coverage through an exchange with a federal subsidy; the “B” penalty each month is an excise tax of 1/12 of $3,000 per each such employee who actually purchases coverage through an exchange with a federal subsidy.  A “full-time employee” is a common-law employee who works an average of at least 30 hours per week. (You will find a more detailed description of the shared responsibility rules here and here.)

Below are our top 10 highlights of the final regulations:
Continue Reading Top Ten Things to Know about the Final Shared Responsibility Regulations

If an employee assistance program (“EAP”) provides counseling for substance abuse, stress, depression, and similar health problems, the Labor Department and IRS regard it as a group health plan.  Unless the EAP qualifies for an exception, it will have difficulty complying with the group health plan coverage requirements and other mandates.

Recent guidance from the federal regulatory agencies gives many EAPs a “free pass” for 2014, and creates new compliance options for 2015 and beyond.  In order to keep their EAPs in compliance after 2014, employers might need to make design changes or satisfy other new requirements.  EAP sponsors should take this opportunity to review their compliance options and develop a compliance strategy.
Continue Reading Compliance Strategies for Employee Assistance Programs

Starting in 2014, most individuals must maintain minimum essential health coverage or pay a penalty.  (Please see our post here for a description of the health coverage mandates that apply to individuals and their families.)  The Internal Revenue Service recently issued a proposed regulation clarifying the minimum essential coverage rules and other aspects of the individual mandate.  Several points addressed in the proposed regulation will be of interest to employers that offer group health coverage to their employees.

Excepted Benefits Are Not Minimum Essential Coverage

Employers might wish to structure programs providing limited health benefits—such as dental and vision coverage or employee assistance—as “excepted benefits” so that these programs will avoid the group health plan requirements.  Final regulations issued last year explained that minimum essential coverage does not include “health insurance coverage” consisting only of excepted benefits.  The proposed regulation clarifies that no coverage (whether insured or self-insured) consisting solely of excepted benefits will qualify as minimum essential coverage.

This clarification confirms that coverage consisting solely of excepted benefits will not satisfy the employer’s obligation to offer minimum essential coverage to at least 95% of its full-time employees or the individual’s obligation to maintain minimum essential coverage.  Employers must offer, and individuals must maintain, other group health coverage in order to satisfy these shared-responsibility mandates.

On the positive side, however, a lower-income employee who is covered by a plan that offers only excepted benefits will not be prevented from receiving premium tax credits.  The tax credits help lower-income individuals purchase individual health coverage on an exchange.  An employee who has minimum essential coverage from an employer health plan is not eligible for premium tax credits; but employer coverage consisting solely of excepted benefits will not affect the employee’s eligibility.
Continue Reading New Guidance Clarifies Minimum Essential Coverage Rules

By now, employers who sponsor self-insured medical plans are familiar with the fees they must pay to fund Patient-Centered Outcomes Research (“PCORI”) and the Transitional Reinsurance Program. This post describes a detail that can have a significant effect on the amount that each sponsor must pay.

Both fees are calculated as a dollar amount per covered life.  The implementing regulations describe three ways to determine the number of covered lives:

  1. Actual count (averaging), where you count the number of covered lives on each day of a period (a year for the PCORI fee and 9 months for the Reinsurance fee), and then divide by the number of days;
  2. Snapshot, where you count the number of covered lives on one or more days per calendar quarter and then divide by the number of days; and
  3. Form 5500, where the number of covered lives is based on the number of participants reported on the plan’s Form 5500.

There are minor differences in the calculations for the PCORI fee and the Reinsurance fee.  Those differences and other details are not discussed in this post.

Whereas the actual count and snapshot methods require counting every person in the plan–including employees, spouses, and dependents–the Form 5500 method offers a shortcut that can produce significant savings for large employers.  Instead of actually counting covered lives, the plan sponsor simply deems the number of covered lives to be the number of participants at the beginning of the year plus the number of participants at the end of the year.

The reason for this shortcut is that a Form 5500 reports only the number of participants, and not spouses or dependents.  The shortcut assumes an average of one spouse or dependent per participant.  For plans that have an average of more than one spouse or dependent per participant, this shortcut will result in savings.
Continue Reading Potential Savings Opportunity for Sponsors of Self-Insured Medical Plans

The Affordable Care Act requires employers to provide to employees a written notice about public health exchanges (now called Health Insurance Marketplaces).  The Department of Labor issued a frequently asked question today confirming that employers subject to the Fair Labor Standards Act (FLSA) should provide the notice by October 1, 2013, but there is no