Employee Benefits

President Trump Issues Executive Order Encouraging Transparency in Pricing and Expanding Consumer-Directed Arrangements

On June 24, 2019, President Trump issued an Executive Order intending to develop price and quality transparency initiatives to ensure that healthcare patients can make well-informed decisions about their care. This is part of the consumer-driven healthcare initiative, which has been a focus of government and patient groups alike to have more transparency regarding the cost of services from hospitals and other healthcare providers, as well as expanding the ability to use certain pre-tax health spending arrangements. The goal is to help consumers to make better informed decisions regarding their healthcare. It is also intended to address so-called “surprise billing,” which can expose patients to unexpected medical bills. The Executive Order directs federal agencies to promulgate regulations and issue guidance to meet these objectives.

Transparency in Prices

The Executive Order instructs the Department of Health and Human Services (HHS) to promulgate regulations requiring hospitals to publicly post standard price information for services rendered in an easy-to-read format. The regulations should mandate the disclosure of standard charge information for services, supplies, and any other fees that apply to the hospital and its employees. HHS may also use the Executive Order to create regulations for other providers and self-funded health plans to also post standard costs for services and supplies. The objective of such disclosure is to allow patients to make more informed decisions about the cost of services and goods if the patient goes to a certain healthcare facility. If a patient understands the cost and quality of services, they could avoid unexpected costs. It could also facilitate further analysis regarding the cost differentials between facilities and providers. The standard costs posted must be regularly updated, in order to provide accurate, […]

By |July 2nd, 2019|Compliance, Employee Benefits, Employee Communications, Human Resources, Legislation, Medical|Comments Off on President Trump Issues Executive Order Encouraging Transparency in Pricing and Expanding Consumer-Directed Arrangements

Final Rule Released on Individual Coverage and Excepted Benefit HRAs

On June 13, 2019 the Department of Labor, the Department of Health and Human Services, and the Treasury Department (the “Departments”) released the final rule concerning health reimbursement arrangements (HRA) for individual market coverage and excepted health benefits. The rule, based on an executive order from President Trump in 2017, is intended to increase choice in plan options, which could lead to greater flexibility in choice and provide more affordable healthcare. The final rule impacts many different entities and individuals, including employers, health plan issuers, employees, plan sponsors, and those who purchase individual health plans. This rule is effective for plan years starting January 1, 2020. Background An HRA is an account-based health plan that allows employers to reimburse employees for medical care expenses. It is funded solely by employer contributions. Amounts reimbursable under an HRA are typically limited to a certain amount during a certain period (for example, $500 for expenses incurred during a calendar year). Under prior IRS rules issued as part of Affordable Care Act (ACA) implementation, HRAs offerings were limited to an extent. Under those rules, an employer may offer an HRA to employees only if the HRA is “integrated” with a qualifying group health plan. Under the new final rule, some of the restrictions have been eliminated, and the Departments have determined that other types HRAs can be integrated with individual market coverage and Medicare in a way that meets statutory requirements. Notably, under the final rule, an employer of any size could offer an Individual Coverage HRA that can be used to pay for Medicare (e.g., Parts B and D) and Medicare Supplement premiums, as well as other medical care expenses, without violating the Medicare Secondary Payer rules. […]

By |June 17th, 2019|Employee Benefits, Health Care Reform, Human Resources, Legislation, Medical|Comments Off on Final Rule Released on Individual Coverage and Excepted Benefit HRAs

Treating Employees Differently- Health Plan Rules

Do you want to be selective and treat employees differently for purposes of group health plan benefits?  For example, some employers may consider implementing the following plan designs:

  • A health plan “carve-out” that insures only select groups of employees (for example, a management carve-out);
  • Different levels of benefits for groups of employees; or
  • Employer contribution rates vary based on employee group.

In general, employers may treat employees differently, as long as they are not violating federal rules that prohibit discrimination in favor of highly compensated employees. These rules currently apply to self-insured health plans and arrangements that allow employees to pay their premiums on a pre-tax basis. The nondiscrimination requirements for fully insured health plans have been delayed indefinitely.

Employers should also confirm that any health plan rules do not violate other federal laws that prohibit discrimination. In addition, employers with insured plans should confirm that carve-out designs comply with any minimum participation rules imposed by the carrier.

Health Plan Design – General Rules

Nondiscrimination Tests

In general, a health plan will not have problems passing any applicable nondiscrimination test when the employer treats all of its employees the same for purposes of health plan coverage (for example, all employees are eligible for the health plan, and the plan’s eligibility rules and benefits are the same for all employees). However, treating employees differently may make it more difficult for a health plan to pass the applicable nondiscrimination tests. Examples of plan designs that may cause problems with nondiscrimination testing include:

  • Only certain groups of employees are eligible to participate in the health plan (for example, only salaried or management employees);
  • The health plan has different employment requirements for plan eligibility (for example, waiting periods and entry dates) for different employee groups;
  • Plan benefits or contribution rates vary based on employment classification, years of service or amount of compensation (for example, management employees pay a lower premium or receive additional benefits); or
  • The employer maintains separate health plans for different groups of employees.

Before implementing one or more of these plan designs, employers should confirm that the arrangement will comply with any applicable rules that prohibit discrimination in favor of highly compensated employees. Under currently applicable law, if a health plan is discriminatory, highly compensated employees will lose certain tax benefits under the plan. […]

By |April 19th, 2019|Compliance, Employee Benefits, Medical, Section 125, Uncategorized|Comments Off on Treating Employees Differently- Health Plan Rules

Association Health Plan Rules Struck Down by Federal Court

Overview

A federal judge ruled on March 28, 2019 that parts of the Trump administration’s 2018 final rule on association health plans (AHPs) were invalid. The court directed the Department of Labor (DOL) to reconsider how the remaining provisions of the final rule are affected.

In its ruling, the court stated that the final rule was an “end-run” around the Affordable Care Act (ACA) and that the DOL exceeded its authority under ERISA.

The court specifically struck down two parts of the rule:

  • The provision defining “employer” to include associations of disparate employers; and
  • The provision expanding membership in these associations to include working owners without employees

Action Steps

Employers and business owners without employees that have joined an AHP, or are considering doing so, should review how their plans may be affected by the court’s ruling. These employers can also monitor developments from the DOL on any changes made to the rule. […]

By |April 1st, 2019|Compliance, Employee Benefits, Legislation, Medical|Comments Off on Association Health Plan Rules Struck Down by Federal Court

Get a Nasty Letter 226-J from the IRS? Enforcement for 2016 Pay Or Play Rules Begins

The Internal Revenue Service (IRS) began issuing enforcement letters related to employers’ compliance with the employer shared responsibility rules under the Affordable Care Act (ACA) for the 2016 calendar year. These letters, known as Letter 226-J, inform employers of their potential liability for an employer shared responsibility penalty, if any, for 2016.

The IRS only sends these letters to employers that are subject to the employer shared responsibility rules, known as applicable large employers (ALEs). The determination of whether an ALE may be liable for a penalty, and the amount of the proposed penalty in Letter 226-J, are based on information from Forms 1094-C and 1095-C filed by the ALE and the individual income tax returns filed by the ALE’s employees.

What You Need To Do

Employers that receive a Letter 226-J must respond to the letter, either agreeing with the proposed penalty or disagreeing with part or all of the proposed amount. The IRS provides an employer response form, Form 14764, for employers to use for this purpose. The IRS maintains a website on understanding Letter 226-J for employers who receive an enforcement letter.

Background

The ACA’s employer shared responsibility rules require ALEs to offer affordable, minimum value health coverage to their full-time employees or pay a penalty. These rules, also known as the “employer mandate” or “pay or play” rules, only apply to ALEs, which are employers with, on average, at least 50 full-time employees, including full-time equivalent employees, during the preceding calendar year.

The employer shared responsibility rules took effect for most ALEs beginning on Jan. 1, 2015. However, some ALEs may have had additional time to comply with these requirements. An ALE may be subject to a penalty only if one or more […]

By |December 31st, 2018|Compliance, Employee Benefits, Health Care Reform|Comments Off on Get a Nasty Letter 226-J from the IRS? Enforcement for 2016 Pay Or Play Rules Begins

DOL Releases Final Rule Expanding Association Health Plans

DOL Releases Final Rule Expanding Association Health Plans

The U.S. Department of Labor (DOL) has issued a final rule expanding the opportunity of unrelated employers of all sizes (but particularly small employers) to offer employment-based health insurance through Association Health Plans (AHPs). Significantly, the final rule applies “large group” coverage rules under the Affordable Care Act (ACA) to qualifying AHPs.

The final rule confirms that AHPs may be formed by employers in the same trade, industry, line of businesses, or profession. They may also be formed based on a geographic test such as a common state, city, county or same metropolitan area (even if the metropolitan area includes more than one State).

The final rule contains staggered effective dates:

  • All associations (new or existing) may establish a fully insured AHP beginning September 1, 2018.
  • Existing associations that sponsored an AHP on or before the date the final rule was published may establish a self-insured AHP beginning January 1, 2019.
  • All other associations (new or existing) may establish a self-insured AHP beginning April 1, 2019.

We will expand upon these issues in future alerts. In the meantime, highlights of the final rule are as follows:

  • Existing bona fide associations may continue to rely on prior DOL guidance.   The final rule provides an additional mechanism for AHPs to sponsor a single ERISA-covered group health plan.
  • AHPs may self-insure under the final rule; however, the DOL anticipates that many AHPs will be subject to state benefit mandates. States retain the authority to adopt minimum benefit standards, including standards similar to those applicable to individual and small group insurance policies under the ACA, for all AHPs.
  • The primary purpose of the association may be to offer health coverage to its members; […]
By |June 21st, 2018|Employee Benefits, Health Care Reform, Human Resources, Medical|Comments Off on DOL Releases Final Rule Expanding Association Health Plans

DOL Finalizes Rule to Expand Association Health Plans

On June 19, 2018, the Department of Labor (DOL) released a final rule that gives small businesses more freedom to join together as a single group to purchase health insurance in the large group market or to self-insure. These benefit arrangements are called association health plans (AHPs).

By forming AHPs, small employers can avoid certain Affordable Care Act (ACA) reforms that apply to the small group market. According to the DOL, this will provide small employers with more affordable health insurance options.

However, in exchange for lower premiums, AHPs may cover fewer benefits. Most AHPs will not be subject to the ACA’s essential health benefits (EHB) reform, which requires small group plans to cover a core set of items and services, such as mental health care and maternity and newborn care.

ACTION STEPS

Small employers may want to consider banding together to form an AHP as a more affordable health insurance option. Employers should carefully review the AHP’s benefit design to make sure it is appropriate for their workforce. Because AHPs are regulated at the federal and state level, the availability of these plans will also depend on a state’s regulatory approach.

Background

On Oct. 12, 2017, President Donald Trump signed an executive order that directed the DOL to consider issuing regulations that would permit more employers to form AHPs as a way to expand access to more affordable health coverage. The DOL was specifically instructed to consider expanding the conditions that must be satisfied to form an AHP that is treated as a single plan under the Employee Retirement Income Security Act (ERISA).

Currently, the criteria that must be satisfied for a group of employers to sponsor a single ERISA plan are very narrow. As a result, most […]

By |June 21st, 2018|Compliance, Employee Benefits, Medical, U.S. Department of Labor|Comments Off on DOL Finalizes Rule to Expand Association Health Plans

IRS Issues Affordability Percentage Adjustment for 2019

In Rev. Proc. 2018-34, the IRS released the inflation adjusted amounts for 2019 relevant to determining whether employer-sponsored coverage is “affordable” for purposes of the Affordable Care Act’s (“ACA’s”) employer shared responsibility provisions and premium tax credit program. As shown in the table below, for plan years beginning in 2019, the affordability percentage is 9.86% of an employee’s household income or applicable safe harbor.

Code Section 4980H(a) 4980H(b) 36B(b)(3)(A)(i)
Description Potential annual penalty for failure to offer coverage to at least 95% (70% in 2015) of full-time employees (calculated per full-time employee, minus 30 (80 in 2015))[1] Potential annual penalty if coverage is offered but is not affordable or does not provide minimum value (calculated per full-time employee who receives a subsidy)[2] Premium credits and affordability safe harbors

Section 4980H penalties may be triggered by a full-time employee receiving a PTC

2019 $2,500* $3,750* 9.86%
2018 $2,320 $3,480 9.56%
2017 $2,260 $3,390 9.69%
2016 $2,160 $3,240 9.66%
2015 $2,080 $3,120 9.56%
2014** $2,000 $3,000 9.50%

* Estimated based on premium adjustment percentage in the 2019 Notice of Benefit and Payment Parameters

**No employer shared responsibility penalties were assessed for 2014.

 

Under the ACA, applicable large employers (ALEs) – generally those with 50 or more full-time equivalent employees on average in the prior calendar year – must offer affordable health insurance to full-time employees to avoid an employer shared responsibility payment. Coverage is “affordable” if the employee’s required contribution for self-only coverage under the employer’s lowest-cost minimum value plan does not exceed 9.5% (as indexed) of the employee’s household income for the year. In lieu of household income, employers may rely on one or more of the following safe harbor alternatives when […]

By |June 7th, 2018|Employee Benefits, Employee Communications, Health Care Reform|Comments Off on IRS Issues Affordability Percentage Adjustment for 2019

New Jersey Enacts State Individual Mandate and Reinsurance Program

On May 30, 2018, New Jersey Gov. Phil Murphy signed two bills into law that are designed to stabilize and reduce health insurance premiums in the individual market.

These new laws are among the first state laws passed in response to changes made to the federal ACA. New Jersey is only the second state to enact its own health insurance individual mandate. Individuals in New Jersey should ensure that they are in compliance with the state individual mandate beginning in 2019.

State Individual Mandate

Effective beginning in 2019, the New Jersey Health Insurance Market Preservation Act imposes a state individual mandate that largely mirrors the ACA’s federal individual mandate requirement. The ACA’s individual mandate penalty has been effectively eliminated beginning in 2019.

New Jersey’s individual mandate requires most individuals in the state (and their family members) to be covered under minimum essential coverage for each month of the year, beginning in 2019. Individuals that don’t obtain acceptable health insurance coverage will be penalized.

Notably, the new law provides that the state individual mandate penalty will not be enforced for any tax year in which the ACA’s federal premium tax credits become unavailable.

Minimum Essential Coverage

For purposes of the New Jersey individual mandate, the term “minimum essential coverage” (MEC) has the same definition as under the ACA.

MEC […]

By |June 4th, 2018|Employee Benefits, Health Care Reform, Legislation, Medical|Comments Off on New Jersey Enacts State Individual Mandate and Reinsurance Program