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IRS Issues Affordability Percentage Adjustment for 2020

The Internal Revenue Service (IRS) has released Rev. Proc. 2019-29, which contains the inflation adjusted amounts for 2020 used to determine whether employer-sponsored coverage is “affordable” for purposes of the Affordable Care Act’s (ACA) employer shared responsibility provisions and premium tax credit program. As shown in the table below, for plan years beginning in 2020, the affordability percentage for employer mandate purposes is indexed to 9.78%.  Employer shared responsibility payments are also indexed.

Code Section 4980H(a) 4980H(b) 36B(b)(3)(A)(i)
Description Coverage not offered to 95% (or all but 5) of full-time employees. Coverage offered, but unaffordable or is not minimum value. Premium credits and affordability safe harbors.
2020* $2,580 $3,870 9.78%
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%

*Section 4980H(a) and (b) penalties for 2019 and 2020 are projected.

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

Under the ACA, applicable large employers (ALEs) must offer affordable health insurance coverage to full-time employees. If the ALE does not offer affordable coverage, it may be subject to an employer shared responsibility payment. An ALE is […]

By |July 24th, 2019|Health Care Reform, Human Resources, Legislation, Medical, Uncategorized|Comments Off on IRS Issues Affordability Percentage Adjustment for 2020

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

HHS Proposes Revisions to ACA Section 1557 Regulations

At the end of May, the Department of Health and Human Services (HHS) released a proposed rule to revise regulations previously released under Section 1557 of the Affordable Care Act (ACA). The HHS goal with the proposed rule is to remove what the department views as redundancies and inconsistencies with other laws, as well as reduce confusion.

Changes in Compliance with Section 1557 Proposed Rule 

ACA Section 1557 applies to “covered entities” – i.e., health programs or activities that receive “federal funding” from HHS (except Medicare Part B payments), including state and federal Marketplaces. Examples include hospitals, health clinics, community health centers, group health plans, health insurance issuers, physician’s practices, nursing facilities, etc.

Under current rules, “covered entities” include employers with respect to their own employee health benefit programs if the employer is principally engaged in providing or administering health programs or activities (i.e., hospitals, physician practices, etc.), or the employer receives federal funds to fund the employer’s health benefit program. Group health plans themselves are subject to the rule if they receive federal funds from HHS (e.g., Medicare Part D Subsidies, Medicare Advantage). In other words, employers who aren’t principally engaged in providing health care or health coverage generally aren’t subject to these rules directly unless they sponsor an employee health benefit program that receives federal funding through HHS, such as a retiree medical plan that participates in the Medicare Part D retiree drug subsidy program.

The most prominent proposed change is to the provision in Section 1557 which provides protections against discrimination on the basis of race, color, national origin, sex, age, and disability in certain health programs or activities. HHS’ proposed regulation would revise the definition of discrimination “on the basis of sex” that […]

By |June 11th, 2019|Compliance, Human Resources, Medical|Comments Off on HHS Proposes Revisions to ACA Section 1557 Regulations

District Court Judge in Texas Strikes Down the ACA – But Law Remains in Effect for Now

On Friday, December 14, a federal judge in Texas issued a partial ruling that strikes down the entire Affordable Care Act (ACA) as unconstitutional. The White House has stated that the law will remain in place, however, pending the appeal process. The case, Texas v. U.S., will be appealed to the U.S. Court of Appeals for the Fifth Circuit in New Orleans, and then likely to the U.S. Supreme Court.

The plaintiffs in Texas (a coalition of twenty states) argue that since the Tax Cuts and Jobs Act zeroed out the individual mandate penalty, it can no longer be considered a tax. Accordingly, because the U.S. Supreme Court upheld the ACA in 2012 by saying the individual mandate was a legitimate use of Congress’s taxing power, eliminating the tax penalty imposed by the mandate renders the individual mandate unconstitutional. Further, the individual mandate is not severable from the ACA in its entirety. Thus, the ACA should be found unconstitutional and struck down.

The court in Texas agreed, finding that the individual mandate can no longer be fairly read as an exercise of Congress’s Tax Power and is still impermissible under the Interstate Commerce Clause—meaning it is unconstitutional. Also, the court found the individual mandate is essential to and inseverable from the remainder of the ACA, which would include not only the patient protections (no annual limits, coverage of pre-existing conditions) but the premium tax credits, Medicaid expansion, and of course the employer mandate and ACA reporting.

Several states such as Massachusetts, New York and California have since intervened to defend the law. They argue that, if Congress wanted to repeal the law it would have done so. The Congressional record makes it clear Congress was voting only […]

By |December 18th, 2018|Compliance, Employee Communications, Health Care Reform, Legislation, Wellness|Comments Off on District Court Judge in Texas Strikes Down the ACA – But Law Remains in Effect for Now

IRS Extends Deadline for Furnishing Form 1095, Extends Good-Faith Transition Relief

The Internal Revenue Service (IRS) has released Notice 2018-94, extending the deadline for furnishing 2018 Forms 1095-B and 1095-C to individuals from January 31, 2019 to March 4, 2019, as well as penalty relief for good-faith reporting errors.

The due date for filing the forms with the IRS was not extended and remains February 28, 2019 (April 1, 2019 if filed electronically). Despite the repeal of the “individual mandate” beginning in 2019 as part of the Tax Cuts and Jobs Act, the ACA’s information reporting requirements remain in effect, as the IRS uses the reporting to administer the employer mandate and premium tax credit program. The IRS is studying whether and how the reporting requirements under section 6055 (relating to insurance companies and self-insured plans) should change, if at all, for future years.

The instructions to Forms 1094-C and 1095-C allow employers to request a 30-day extension to furnish statements to individuals by sending a letter to the IRS with certain information, including the reason for delay.   However, because the Notice’s extension of time to furnish the forms is as generous as the 30-day extension contained in the instructions, the IRS will not formally respond to requests for an extension of time to furnish 2018 Forms 1095-B or 1095-C to individuals.

Employers may still obtain an automatic 30-day extension for filing with the IRS by filing Form 8809 on or before the forms’ due date. An additional 30-day extension is available under certain hardship conditions. The Notice encourages employers who cannot meet the extended due dates to furnish and file as soon as possible and advises that the IRS will take such furnishing and filing into consideration when determining whether to abate penalties […]

By |December 3rd, 2018|Health Care Reform, Human Resources, Legislation, Private Health Care Exchange|Comments Off on IRS Extends Deadline for Furnishing Form 1095, Extends Good-Faith Transition Relief

Medical Loss Ratio Rebates

Medical Loss Ratio Rebates Under the Affordable Care Act

The U.S. Department of Health and Human Services (“HHS”) has provided guidance on the Affordable Care Act’s (“ACA’s”) medical loss ratio (“MLR”) rule, which requires health insurers to spend a certain percentage of premium dollars on claims or activities that improve health care quality or provide a rebate to policyholders.  HHS has released amended and final regulations (the “Regulations”), which govern the distribution of rebates by issuers in group markets.  At the same time, the U.S. Department of Labor (“DOL”) issued Technical Release 2011-04 (“TR 2011-04”), which clarifies how rebates will be treated under the Employee Retirement Income Security Act of 1974 (“ERISA”).

Medical Loss Ratio Rule

The MLR rule requires health insurance companies in the group or individual market to provide an annual rebate to enrollees if the insurer’s “medical loss ratio” falls below a certain minimum level—generally, 85 percent in the large group market and 80 percent in the small group or individual market.  For these purposes, the numerator of the MLR equals the insurer’s incurred claims and expenditures for activities that improve health care quality, and the denominator equals the insurer’s premium revenue minus federal and state taxes and licensing and regulatory fees.

Defining Group Size

For purposes of the MLR rule, the Affordable Care Act defines “small” and “large” group markets by reference to insurance coverage sold to small employers or large employers. The Affordable Care Act defines a small employer as one that employs 1-100 employees and a large employer as one that employs 101 or more employees. However, states are permitted to limit the definition of a small employer to one that employs 1-50 employees.

Rebates under ERISA

TR 2011-04 clarifies that insurers must provide any […]

By |October 6th, 2018|Health Care Reform, Medical, U.S. Department of Labor|Comments Off on Medical Loss Ratio Rebates

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