In 2016, applicable large employers with 50 or more full‑time‑equivalent employees must file new reporting forms with the IRS, as required by IRC Section 6056. Employers will need to report employer‑sponsored coverage that was offered to full‑time employees during 2015. The purpose of the reporting is to administer and enforce the employer mandate, also known as employer shared responsibility. While employers with 50 to 99 full‑time‑equivalent employees may be eligible for relief delaying compliance until 2016, they will still be required to report certain information for 2015. On Aug. 14, 2014, the IRS will host a webinar summarizing employer requirements under Section 6056.
As reported in the last edition of Compliance Corner, CMS recently issued guidance related to the reinsurance contributions that are first payable Jan. 15, 2015. Plan sponsors of self-insured plans must report the average enrollment count by Nov. 15, 2014, unless they have an agreement with a TPA or administrative services carrier to do so on their behalf.
REGTAP is hosting a series of webinars to educate contributing entities, including plan sponsors of self-insured plans. The recently issued guidance was also presented in a webinar entitled “The Transitional Reinsurance Program: Submission of Annual Enrollment and Contributions Through Pay.gov.” The slide deck for that webinar is now available online at www.regtap.info. The next webinar in the series, “The Transitional Reinsurance Program: Submission of Supporting Documentation Through Pay.gov,” will be presented Aug. 11–13 and Aug. 15. The same material will be presented all four days, and attendees may register for the date of their choice. Individuals who are new to REGTAP will need to first register for a website ID and password before registering for the presentation.
On Aug. 1, 2014, CMS published a document containing several FAQs relating to the interaction of Medicare and marketplace coverage. The FAQs do not contain additional requirements for employers, but may be of general interest, particularly for employers with Medicare‑eligible employees and employers that are purchasing coverage through SHOPs.
The FAQs clarify that individuals who are covered by Medicare cannot enroll in individual market coverage, since the Social Security Act prohibits the sale or issuance of individual coverage to a Medicare beneficiary. However, if the individual was first covered under the individual plan and later enrolls in Medicare, the individual can remain on the individual plan, although he or she may lose any premium tax credits or cost-sharing subsidies for which they were eligible. Also, and importantly for employers, Medicare beneficiaries whose employers purchase SHOP coverage are treated the same as any other person with employer group health plan coverage.
The FAQs also clarify that coverage under Medicare Part B alone does not constitute minimum essential coverage for purposes of PPACA’s individual mandate. The FAQs address many other issues as well, including the interaction between marketplace coverage and Medicare late enrollment penalties and coordination of benefits between Medicare and marketplace coverage.
On July 24, 2014, the IRS released three separate revenue procedures, proposed regulations, and final and temporary regulations addressing a number of factors affecting premium tax credits available to individuals through the health insurance marketplace.
Within the guidance, the IRS finalized rules regarding the health insurance premium tax credit, effective July 28, 2014, and published in the Federal Register the same day. The guidance also included temporary regulations regarding reconciling the premium tax credit with advance credit payments. The IRS simultaneously issued proposed rules regarding the health insurance premium tax credit, which propose to incorporate both the final and temporary regulations within the section of the tax code (Section 36(b)) pertaining to the individual mandate and eligibility for premium tax credits.
The additional guidance contained within several Revenue Procedures provides relief for a number of complex premium tax credit situations. For instance, although married taxpayers generally must file a joint return to claim the premium tax credit, the regulations extend a 2014 IRS exception for certain married victims of domestic abuse who live apart, file returns as “married filing separately” and meet a number of other requirements. The relief is available for up to three consecutive years for any individual and is also available to victims of spousal abandonment. Definitions of domestic abuse and spousal abandonment are included. Guidance is also provided on how to allocate advance credit payments in various complex situations, such as divorced or separated taxpayers and midyear changes in dependent status.
Additionally, the guidance contained information regarding the indexing of certain percentages. For example, in computing the premium tax credit, taxpayers determine the amount they must contribute by multiplying an “applicable percentage” (which increases with income) by their household income. Beginning in 2015, the applicable percentage is to be adjusted based on the excess of the projected growth rate of employer‑sponsored health insurance premiums over the projected growth rate of per‑capita gross domestic product. The regulations describe the bases for the adjustments and explain that the “affordability percentage,” which is used to determine whether employer‑sponsored coverage is “affordable,” is updated in the same manner for plan years beginning in 2015. On point with this, Rev. Proc. 2014-37 provided details on the indexing methodology and updated applicable percentage tables for 2015, which included an increase in the affordability percentage from 9.5 percent to 9.56 percent.
It is true that this increased affordability percentage affects both employees (who are ineligible for premium tax credits if offered employer‑sponsored coverage that is affordable and provides minimum value) and employers (who are potentially liable for shared responsibility penalties if they do not offer affordable, minimum value coverage to full‑time employees). However, contrary to what numerous outlets are reporting, the guidance released by the IRS does not appear to have actually adjusted the safe harbor percentages that an employer may use to determine affordability under the mandate. It is unclear at this time whether the IRS will be issuing an update to reflect the affordability safe harbor that employers may use when determining whether coverage is affordable. This would require the IRS to amend the regulations for the affordability safe harbor so that employers may substitute 9.56 percent of Form W‑2 wages for the 9.5 percent of W‑2 wages that had previously been set as safe harbor. This guidance did not amend those regulations. Therefore, employers who have already set their contribution cost for 2015 at the lower 9.5 percent value will have some cushion and should watch for additional guidance prior to raising the cost to 9.56 percent.
The guidance also included Rev. Proc. 2014‑46, which provides the national average premium to be used to determine maximum individual shared responsibility payments for 2014. In other words, the IRS provided the dollar amount that an individual will be capped at for failing to maintain health insurance in 2014. The caps are $2,448 per person ($204 per month) and $12,240 for a family of five ($1,020 per month). A family of five is the maximum number of individuals in the shared responsibility family. While many are aware that the penalty for the first year of coverage starts at $95 per person, the penalty assessed can actually rise to as much as 1 percent of taxable income, within the cap set by the IRS. In other words, this cap limits the total possible penalty to the annual premium for the national average of what it would cost to purchase a bronze‑level health plan. Note that the penalty amounts are calculated on a month‑by‑month basis, and are ultimately reported by taxpayers on their income tax returns.
Finally, the IRS also released draft Form 8962 (Premium Tax Credit), which taxpayers will use to calculate their premium tax credit and reconcile the actual credit amount with advance payments, and draft Form 8965 (Health Coverage Exemptions), which taxpayers will use if they claim specified exemptions from the individual mandate.
On July 21, 2014, CMS issued a bulletin and user manual relating to electronic opt‑out procedures for self‑insured non‑federal governmental entities. As background, prior to PPACA, self‑insured, non‑federal governmental plans could elect to opt out of certain HIPAA portability and Public Health Services Act (PHSA) requirements. PPACA, however, generally eliminated the right to opt out of certain HIPAA portability requirements, including pre‑existing condition exclusions limitations, special enrollment periods and some nondiscrimination prohibitions. The opt‑out remains available for certain mandates, including benefits for newborns and mothers, mental health and substance use disorder benefits, coverage for reconstructive surgery following mastectomies, and coverage of dependent students on leaves of absence that are medically necessary.
CMS previously issued guidance stating that beginning Jan. 1, 2015, the opt‑out must be performed electronically. The bulletin describes the electronic opt‑out election requirements and process, including a reminder of the requirement to notify affected enrollees of the opt‑out and its consequences. According to the bulletin, the notice can be satisfied by including a prominent statement in the SPD at open enrollment annually or by email so long as the DOL electronic disclosure requirements are met. The user manual provides detailed information on the system that will be used to submit the opt‑out election.
Employers that sponsor self‑insured, non‑federal governmental plans should review the bulletin and user manual, particularly if they want to opt out of some of the HIPAA and PHSA requirements described above. Such employers should also know that opt‑out elections must be renewed before the first day of each plan year.
On Aug. 7, 2014, CMS provided additional guidance – in the form of FAQs – on PPACA’s reinsurance contribution requirements. As background, group health plans are required to report enrollment calculations to CMS annually from 2014 through 2016. The first report is due by Nov. 15, 2014, and will be completed through www.pay.gov. Plans will be assessed a fee per covered life. For 2014, that fee is $63. Payment is broken into two installments, with the first payment due by Jan. 15, 2015. For fully insured plans, the insurer is generally responsible for the filing and payment of the contribution. For self‑insured plans, that responsibility lies with the employer as plan sponsor.
The fee is generally calculated by counting the number of covered lives throughout the plan year, although the permitted counting methods allow calculation of covered lives based on enrollment only in the first nine months of a calendar year. According to FAQ #3542, if a covered life terminates coverage in the fourth quarter of a benefit year, the contributing entity cannot omit this covered life from its annual enrollment count for that plan.
According to FAQ #3539, there are no exemptions from the reinsurance contribution requirement specifically available to religious organizations. Thus, unless a religious organization is otherwise exempt from the requirement, the organization must file and pay the reinsurance contribution for any self‑insured plans that it sponsors.
According to FAQ #3540, a TPA or carrier that provides self‑insured, self‑administered coverage to its own employees is exempt from making reinsurance contributions for the 2015 and 2016 benefit years.
Lastly, according to FAQ #3541, if a plan provides minimum value, but not necessarily a broad range of services and treatments provided in various settings, it is still deemed to be major medical coverage, and therefore would be subject to the reinsurance contribution requirement.
Two developments recently occurred relating to same-sex marriage bans in the jurisdiction of the Tenth Circuit, which includes Colorado, Kansas, Oklahoma, New Mexico, Wyoming and Utah. First, on July 18, 2014, the U.S. Supreme Court issued an order granting a stay in KitchenÂ v.Â Herbert, No. 13-4178 (10th Cir. Jun. 25, 2014), a case in which the U.S. Court of Appeals for the Tenth Circuit struck down Utah’s same-sex marriage ban as unconstitutional. The state of Utah plans to appeal the Tenth Circuit’s decision to the Supreme Court, and petitioned the Supreme Court to stay the circuit decision pending appeal. The court’s order granted the stay, meaning same-sex marriages may not take place in Utah until the issue is fully resolved by the courts. The Supreme Court could hear the case as early as its next session thisÂ fall.
Also on July 18, 2014, the Tenth Circuit, in Bishop v. Smith, Opinion No. 14-5003 (10th Cir. July 17, 2014) struck down as unconstitutional Oklahoma’s ban on same-sex marriage. The court relied on their decision in KitchenÂ v.Â Herbert in holding that Oklahoma’s ban violated the equal protection and due process clauses of the U.S.Â Constitution.
While still unclear, it is likely that the Utah case will eventually be decided by the U.S. Supreme Court. In the meantime, the Tenth Circuit’s decision in these two cases becomes precedent for other states in the circuit. Thus, if challenged, state laws within the Tenth Circuit that ban same-sex marriage will be viewed as unconstitutional. NFP Benefits Compliance will continue to monitor developments on states and sameâ€‘sexÂ marriage.
On July 14, 2014, the EEOC released guidance related to the Pregnancy Discrimination Act (PDA). As background, the PDA applies to employers with 15 or more employees. It prohibits an employer from discriminating against an applicant or employee in terms of employment, leave privileges or fringe benefits based on pregnancy, childbirth or related medical conditions.
The new guidance provides that an employee who has a pregnancy-related impairment is entitled to a reasonable accommodation under the ADA. Examples of an accommodation include a leave of absence beyond what an employer would normally provide under a sick leave policy, allowing the employee to telecommute, temporarily reassigning an employee to light duty or allowing the employee more frequent breaks. An accommodation is reasonable if it does not create an undue hardship on the employer. Undue hardship is defined as an action requiring significant difficulty or expense.
An employer is not required by the PDA to provide parental leave related to newborn care for the period of time after the employee is no longer impaired (i.e., baby bonding time). However, if an employer provides such time for new mothers, it must also provide such for new fathers. Please note that while PDA does not require leave time related to newborn care, an employer may have an obligation to provide such leave under FMLA.
The guidance also states that an employer can violate the PDA by providing group health insurance that excludes coverage of prescription contraceptives. This appears to be in conflict with the recent U.S. Supreme Court decision ruling that certain closely held for-profit corporations with religious objections are not required to provide such coverage. (Burwell v. Hobby Lobby Stores, Inc., (U.S. 2014, 2014 WL 2921709). See the July 1, 2014, edition of Compliance Corner.) One of the five EEOC commissioners, Commissioner Lipnic, issued a dissent detailing how the EEOC guidance related to group health coverage of contraceptives is in disagreement with the U.S. Supreme Court ruling.
A second commissioner, Commissioner Barker, issued a separate dissent questioning the EEOC’s guidance related to accommodation. As background, on July 1, 2014, the U.S. Supreme Court issued certiorari to the case of Young v. UPS, (No. 11-2078 (Fourth Cir. Jan. 9, 2013). The case involves a female employee who requested light duty during her pregnancy when she had a lifting restriction. UPS denied the light duty because the employee did not qualify under its light duty policy or as disabled under the ADA. Two lower courts granted summary judgment for UPS. The Supreme Court has agreed to review the case in its next term. Commissioner Barker stated his opinion that the guidance related to light duty and accommodation should have been withheld pending the court’s decision in Young v. UPS.
It seems likely that additional guidance is forthcoming on these issues. NFP Benefits Compliance will keep you updated with any developments. In the interim, employers should take note of their obligations under the PDA and provide accommodation when it is reasonable to do so. A closely held for-profit entity that has religious objections to providing contraceptive coverage should consult with legal counsel forÂ guidance.
On July 16, 2014, HHS sent letters to the insurance commissioners of the five U.S. territories, clarifying the applicability of certain PPACA provisions to the territories. As background, the insurance reforms of Title I of PPACA were adopted as amendments to the Public Health Services (PHS) Act. The PHS Act defined “states” to include the U.S. territories, and HHS relied upon that definition of “state” in determining that the insurance market reforms applied to the territories as well.
After reviewing the statutory language and the implications for the territories, HHS determined that the definition of “state” found in Title I of PPACA is actually the controlling definition. The definition does not include the territories. This means the territories are exempt from certain state insurer requirements under the PHS Act. Specifically, individual or group health insurance issuers in the territories are not subject to the guaranteed availability, community rating, single risk pool, rate review, medical loss ratio or essential health benefits requirements.
Although health insurers in the territories are exempt from the PHS Act requirements at issue, the new interpretation of “state” under the PHS Act does not make the territories exempt from all the provisions of PPACA. In the letter, HHS distinguished between the rules governing health insurance issuers and group health plans. They explained that their new analysis applies only to health insurance issuers as they are governed by the PHS Act. It does not affect the PHS Act requirements that apply to group health plans. As a result, the PHS Act, ERISA and IRC requirements applicable to group health plans still apply. Specifically, group health plans in the territories are still subject to the other PPACA protections, including the prohibition on lifetime and annual limits, the prohibition on rescissions, coverage of preventive health services and the revised internal and external appeals processes.
The effective date of the new interpretation is immediate and prospective only in application.
New HHS Website Provides Employer Solutions for Compliance with Required Accommodations for Nursing MothersPosted by admin on August 18, 2014 | No Comments »
HHS recently launched a new website intended to provide employers with a library of online resources with cost-effective tips and solutions for any industry setting in order to comply with the nursing mothers accommodation requirements under health care reform.
As background, PPACA amended the FLSA to require employers to provide breaks for mothers to express breast milk each time a non-exempt employee has a need to do so. In addition, the employer must provide a place, other than a bathroom, that is private and free from intrusion from co-workers for mothers to express breast milk. Employers with fewer than 50 employees are not required to provide the breaks “if such requirement would impose an undue hardship by causing the employer significant difficulty or expense when considered in relation to the size, financial resources, nature or structure of the employer’s business.”
This new website provides welcome clarification on this topic, addressing topics such as:
- Employer solutions
- Industry solutions
- Time and space solutions
- FAQs for employers
- Business case for breastfeeding support
- Laws protecting nursing moms
- Support for employers
Finally, the new website includes a sample breastfeeding policy for employers to utilize.