Bene-Care is ready to assist you with understanding and implementing the new regulations.
The Obama Administration has postponed the Affordable Care Act (ACA) employer mandate penalties for one year, until 2015. The Department of the Treasury announced the delay on July 2, 2013, along with a similar delay for information reporting by employers, health insurance issuers and self-funded plan sponsors.
The delay does not affect any other provision of the ACA, including individuals’ access to premium tax credits for coverage through an Exchange. The Treasury plans to issue more formal information about the delay within a week.
One-Year Implementation Delay
The employer mandate provisions of the ACA are also known as the employer shared responsibility or pay or play rules. These rules impose penalties on large employers that do not offer affordable, minimum value coverage to their full-time employees and dependents. They were set to take effect on Jan. 1, 2014.
According to the Treasury, the delay of the employer mandate was required because of issues related to the reporting requirement. With the reporting rules delayed, it would be nearly impossible to determine which employers owed penalties under the shared responsibility provisions. Therefore, these payments will not apply for 2014.
The now-delayed reporting requirements are found in Internal Revenue Code sections 6055 and 6056. These rules apply to insurers, self-insuring employers and other parties that provide health coverage, along with certain employers with respect to health coverage offered to their full-time employees. The Administration’s decision is based on concerns voiced by businesses about the complexity of the requirements and the need for more time to implement them effectively.
Effects of the Delay
The additional year will give employers time to understand the employer mandate rules, to make decisions about providing health coverage and to adapt their reporting systems, without worrying about potentially significant penalties. It is unclear how the new deadline will impact guidance that has already been issued, such as the transition relief for non-calendar year plans and the optional safe harbor for determining full-time status.
The administration plans to use the additional implementation time to consider ways to simplify the new reporting requirements consistent with ACA. The Treasury also plans to discuss the rules with stakeholders, including employers that currently provide health coverage to employees, and then publish proposed rules implementing these provisions later this summer. It is the Treasury’s intention to minimize the reporting requirements.
The pay or play regulations issued earlier this year left many unanswered questions for employers. The IRS had highlighted several areas where it would be issuing more guidance. Presumably, the additional time will give the IRS and Treasury the opportunity to provide more comprehensive guidance on implementing these requirements.
Bene-Care Agency, LLC will continue to monitor developments and will keep you informed of the latest updates.
Beginning in 2014, the Affordable Care Act (ACA) imposes “pay or play” requirements on large employers. Under these rules, large employers that do not offer health coverage to their full-time employees and their dependents, or that offer coverage that is either unaffordable or does not provide minimum value, may be subject to a penalty. This penalty is also referred to as a “shared responsibility payment.”
On May 3, 2013, the Internal Revenue Service (IRS) released a proposed rule on ACA’s minimum value and affordability requirements. This proposed rule includes guidance on how health reimbursement arrangements (HRAs) and wellness program incentives are counted in determining the affordability of employer-sponsored coverage.
The regulation is not final. However, employers may rely on the proposed regulation until final regulations or other applicable guidance is issued.
The affordability of any health coverage offered by a large employer is a key point in determining whether the employer will be subject to a shared responsibility penalty. The coverage is considered affordable if the employee’s required contribution to the plan for self-only coverage does not exceed 9.5 percent of the employee’s household income for the taxable year.
“Household income” means the modified adjusted gross income of the employee and any members of the employee’s family, including a spouse and dependents. The IRS established three safe harbors for employers to use, which measure affordability based on the employee's W-2 wages, the employee's rate of pay or the federal poverty level for a single individual.
HRA contributions and wellness program incentives
The proposed regulation includes special rules for determining how HRAs and wellness program incentives are counted in determining the affordability of eligible employer-sponsored coverage. Employer contributions to health savings accounts (HSAs) do not affect the affordability of employer-sponsored coverage because HSA amounts generally may not be used to pay for health insurance premiums.
The proposed rule provides that amounts made newly available under an HRA that is integrated with an eligible employer-sponsored plan for the current plan year are taken into account only in determining affordability if the employee may either:
· Use the amounts only for premiums; or
· Choose to use the amounts for either premiums or cost sharing.
Treating amounts that may be used either for premiums or cost-sharing only toward affordability prevents double counting the HRA amounts when assessing minimum value and affordability of eligible employer-sponsored coverage.
Wellness Program Incentives
The proposed rule also contains clarification on affordability when premiums may be affected by wellness programs. Under the proposal, the affordability of an employer-sponsored plan is determined by assuming that each employee fails to satisfy the wellness program's requirements, unless the wellness program is related to tobacco use. This means the affordability of a plan that charges a higher initial premium for tobacco users will be determined based on the premium charged to non-tobacco users, or tobacco users who complete the related wellness program, such as attending smoking cessation classes.
Transition relief is provided in the proposed rule for plan years beginning before Jan. 1, 2015. Under this relief, if an employee receives a premium tax credit because an employer-sponsored health plan is unaffordable or does not provide minimum value, but the employer coverage would have been affordable or provided minimum value had the employee satisfied the requirements of a nondiscriminatory wellness program that was in effect on May 3, 2013, the employer will not be subject to the employer mandate penalty.
The transition relief applies for rewards expressed as either a dollar amount or a fraction of the total required employee premium contribution. Also, any required employee contribution to premium determined based upon assumed satisfaction of the requirements of a wellness program under this transition relief may be applied to the use of an affordability safe harbor.
Source: Internal Revenue Service
The Affordable Care Act (ACA) calls for the creation of state-based competitive marketplaces, known as Affordable Health Insurance Exchanges (Exchanges), for individuals and small businesses to purchase private health insurance. ACA requires the Exchanges to become operational in 2014. According to the Department of Health and Human Services (HHS), the Exchanges will allow for direct comparisons of private health insurance options based on price, quality and other factors, and will coordinate eligibility for premium tax credits and other affordability programs.
On April 30, 2013, HHS released three simplified and shortened versions of Exchange applications that will be used by individuals seeking to enroll in health insurance coverage through an Exchange in 2014. HHS has also included an Employer Coverage Tool that Exchanges will use to verify employer-sponsored coverage.
· The application for individuals who are applying for affordability programs is five pages long and will be used by single adults who are not eligible for employer-sponsored coverage.
· The application for individuals who are not applying for affordability programs is also five pages long and can be used by anyone who is not eligible for premium tax credits, cost-sharing reductions, Medicaid or CHIP coverage.
· A longer, 12-page application for those who are applying for affordability programs is also available for families and single adults who are offered coverage through an employer. The Employer Coverage Tool can be found in Appendix A (at the bottom) of this application.
These applications will be used in states with a federally facilitated Exchange (FFE). States that are operating their own Exchanges will have the option of using these applications or developing their own.
Enrollment in the Exchanges for eligible individuals and small businesses is expected to begin on Oct. 1, 2013.
Employer Coverage Tool
The Employer Coverage Tool can be found in Appendix A (at the bottom) of the 12-page paper application. This form is intended to assist employees in gathering information about health coverage offered by an employer.
Although the Employer Coverage Tool will not be submitted to the Exchange with the individual’s application, employees can use the information provided in this form to help them answer questions in the Exchange application.
The Employer Coverage Tool asks employers to provide information on their health plan’s eligibility requirements, applicable waiting periods, premium costs, whether the plan provides minimum value and whether any changes will be made to the plan for the new plan year. Employees will need this information to complete the Exchange application and to determine their eligibility for affordability programs (such as advance payment of premium tax credits, cost-sharing reductions, Medicaid and CHIP coverage).
In addition to the information required on the Employer Coverage Tool, applicants will be required to provide certain demographic and financial information, such as:
· The number and relationship of household members, if any (including a spouse, dependent child, unmarried partner and any other tax dependents or children in the household);
· Federal income tax filing status;
· Disability, if any;
· Income for the year;
· Average number of hours worked each week;
· Federal income tax deductions; and
· Health coverage (whether currently enrolled or eligible).
Implications for Employers
HHS anticipates that individuals who are applying for tax credits or cost-sharing reductions will ask their employers to complete this one-page form to help the Exchange verify whether the individual is:
· Enrolled in employer-sponsored coverage; or
· Eligible for employer-sponsored coverage that meets the affordability and minimum value standards.
This is significant because ACA’s shared responsibility penalty for large employers is triggered when a full-time employee receives a premium tax credit or cost-sharing reduction for coverage under an Exchange. Employees who are enrolled in employer-sponsored coverage or eligible for employer-sponsored coverage that meets the affordability and minimum value standards are not eligible for the premium tax credit or cost-sharing reductions.
A plan fails to provide minimum value if the plan’s share of total allowed costs of benefits provided under the plan is less than 60 percent of those costs. In addition, employer-sponsored coverage is not considered affordable if the employee’s cost for self-only coverage exceeds 9.5 percent of the employee’s household income for the tax year. Although the rule measures affordability based on household income, the Internal Revenue Service (IRS) established three safe harbors for employers to use, which measure affordability based on the employee's W-2 wages, the employee's rate of pay or the federal poverty level for a single individual.
Actions for Employers
In order to determine an employee’s eligibility for premium tax credits or cost-sharing reductions, and an employer's potential liability for pay or play penalties, it is important that the Exchange has accurate and complete information regarding the employer’s health coverage.
Employers should familiarize themselves with the information requested on the Employer Coverage Tool. In addition, employers may want to download the final template from an Exchange website and pre-populate it with information about their health coverage.
Please contact Bene-Care Agency, LLC for more information on the Exchanges.
The Affordable Care Act (ACA) includes provisions to encourage appropriately designed, consumer-protective wellness programs in group health coverage. Effective for plan years beginning on or after Jan. 1, 2014, ACA essentially codifies the existing HIPAA nondiscrimination requirements for health-contingent wellness programs, while also increasing the maximum reward that can be offered under these programs.
On May 29, 2013, the Departments of Labor, Health and Human Services and the Treasury (Departments) released final regulations that generally implement ACA’s nondiscrimination requirements for wellness programs. The final regulations clarify and reorganize the rules outlined in previous proposed regulations and are intended to ensure that, regardless of the type of wellness program, every individual participating in the program should be able to receive the full amount of any reward or incentive, regardless of any health factor.
The regulations apply to both grandfathered and non-grandfathered group health plans and group health insurance coverage for plan years beginning on or after Jan. 1, 2014.
Changes for Health-contingent Wellness Programs
The new rules contain provisions related to health-contingent wellness programs, which require individuals to satisfy a standard related to a health factor in order to obtain a reward. Consistent with the ACA, the regulations increase the permissible reward for meeting a health-related standard to 30 percent of the total cost of employee-only coverage (or 50 percent, if the program is designed to prevent or reduce tobacco use).
The final regulations formally adopt the proposed nondiscrimination rules for these programs, such as giving individuals an opportunity to qualify for the reward each year and providing an alternative standard or waiver for individuals with health conditions.
The rules also divide these programs into the following two categories:
· Activity-only wellness programs require an individual to perform or complete an activity related to a health factor in order to obtain a reward (for example, walking, diet or exercise programs).
· Outcome-based wellness programs require an individual to attain or maintain a certain health outcome in order to obtain a reward (for example, not smoking, attaining certain results on biometric screenings or meeting exercise targets).
The nondiscrimination rules will apply differently, depending on which type of program is offered. For example, outcome-based wellness programs must provide a “reasonable alternative standard” for obtaining the reward (or waiver of the standard) to a broader group of individuals than is required for activity-only programs.
Participatory Wellness Programs
The final rules continue to support participatory wellness programs, which are generally available without regard to an individual's health status. These include programs that reimburse for the cost of membership in a fitness center, that provide a reward to employees for attending a monthly, no-cost health education seminar, or that reward employees who complete a health risk assessment, without requiring them to take further action.
Participatory wellness programs comply with the nondiscrimination requirements without having to satisfy any additional standards, as long as participation in the program is made available to all similarly situated individuals, regardless of health status. There is no limit on financial incentives for participatory wellness programs.
Please contact Bene-Care Agency, LLC if you would like additional details on these wellness program requirements.
Source: Departments of Labor, Health and Human Services and the Treasury
Beginning Jan. 1, 2014, individuals and employees of small businesses will have access to insurance coverage through the Affordable Care Act’s (ACA) health insurance exchanges (Exchanges), which are also known as Health Insurance Marketplaces. Open enrollment under the Exchanges will begin on Oct. 1, 2013. ACA requires employers to provide all new hires and current employees with a written notice about ACA’s Exchanges. This requirement is found in Section 18B of the Fair Labor Standards Act (FLSA).
On May 8, 2013, the Department of Labor (DOL) released Technical Release 2013-02 to provide temporary guidance on the Exchange notice requirement. This temporary guidance will remain in effect until the DOL issues regulations or other guidance. According to the DOL, future regulations or other guidance will provide employers with adequate time to comply with any additional or modified requirements.
In connection with the temporary guidance, the DOL announced the availability of model Exchange notices for employers to use to satisfy the Exchange notice requirement. The DOL also set a compliance deadline for the Exchange notices. Employers must provide employees with an Exchange notice by Oct. 1, 2013.
In addition, the DOL’s temporary guidance includes a new COBRA model election notice, which has been updated to include information regarding health coverage alternatives offered through the Exchanges.
ACA’s Exchange notice requirement applies to employers that are subject to the FLSA. In general, the FLSA applies to employers that employ one or more employees who are engaged in, or produce goods for, interstate commerce. In most instances, a business must have at least $500,000 in annual dollar volume of sales or receipts to be covered by the FLSA.
The FLSA also specifically covers the following entities: hospitals; institutions primarily engaged in the care of the sick, the aged, mentally ill, or disabled who reside on the premises; schools for children who are mentally or physically disabled or gifted; preschools, elementary and secondary schools, and institutions of higher education; and federal, state and local government agencies.
The DOL’s Wage and Hour Division provides guidance relating to the applicability of the FLSA in general, including a compliance assistance tool to determine applicability of the FLSA.
Under the temporary guidance, the Exchange notice must:
· Include information regarding the existence of an Exchange, as well as contact information and a description of the services provided by an Exchange;
· Inform the employee that the employee may be eligible for a premium tax credit if the employee purchases a qualified health plan through the Exchange; and
· Contain a statement informing the employee that, if the employee purchases a qualified health plan through the Exchange, the employee may lose the employer contribution (if any) to any health benefits plan offered by the employer and that all or a portion of such contribution may be excludable from income for federal income tax purposes.
The DOL provided the following model Exchange notices:
· A model Exchange notice for employers who do not offer a health plan; and
· A model Exchange notice for employers who offer a health plan to some or all employees.
Employers may use one of these models, as applicable, or a modified version, provided the notice meets the content requirements described above.
Providing the Notice
Who Must Receive a Notice?
Employers must provide the Exchange notice to each employee, regardless of plan enrollment status or of part-time or full-time status. Employers are not required to provide a separate notice to dependents or other individuals who are or may become eligible for coverage under the plan but who are not employees.
What Is the Deadline for Providing the Notice?
ACA required employers to provide the Exchange notice by March 1, 2013. However, on Jan. 24, 2013, the DOL announced that employers would not be held to the March 1, 2013, deadline and that employers would not have to comply with the Exchange notice requirement until more guidance was issued.
The DOL’s temporary guidance sets a compliance deadline for providing the Exchange notices that matches up with the start of the first open enrollment period under the Exchanges.
Employers must provide the Exchange notice to both new hires and current employees as follows:
· New Hires – Employers must provide the notice to each new employee at the time of hiring beginning Oct. 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 days of an employee’s start date.
· Current Employees – With respect to employees who are current employees before Oct. 1, 2013, employers are required to provide the notice no later than Oct. 1, 2013.
Employers that decide to inform their employees about the Exchanges earlier than the Oct. 1, 2013, deadline are permitted to use the model notices and rely on the DOL’s temporary guidance.
Method of Providing Notice
The notice is required to be provided automatically, free of charge.
The notice must be provided in writing in a manner calculated to be understood by the average employee. It may be provided by first-class mail. Alternatively, it may be provided electronically if the requirements of the DOL’s electronic disclosure safe harbor are met. This safe harbor allows plan administrators to send certain disclosures electronically to:
Employees with work-related computer access
Other plan participants and beneficiaries who consent to receive disclosures electronically.
The safe harbor does not require the use of any specific form of electronic media. However, plan administrators are required to use measures reasonably calculated to ensure actual receipt of the material by plan participants and beneficiaries. Merely placing a disclosure on a company website available to employees will not by itself satisfy this disclosure requirement.
COBRA ELECTION NOTICE
Under COBRA, a group health plan must provide qualified beneficiaries with an election notice, which describes their rights to continuation coverage and how to make an election. The election notice must be provided to the qualified beneficiaries within 14 days after the plan administrator receives the notice of a qualifying event. The DOL has a model election notice that plans may use to satisfy the requirement to provide the election notice under COBRA.
According to the DOL, some qualified beneficiaries may want to consider and compare health coverage alternatives to COBRA continuation coverage that are available through the Exchanges. Qualified beneficiaries may also be eligible for a premium tax credit for an Exchange plan.
The DOL updated the model COBRA election notice to help make qualified beneficiaries aware of other coverage options available in the Exchanges. Use of the model election notice, appropriately completed, will be considered by the DOL to be good faith compliance with the election notice content requirements of COBRA.
Source: Department of Labor