New FAQs Address Summary of Benefits and Coverage Template and Other Affordable Care Act Topics

New FAQs Address Summary of Benefits and Coverage Template and Other Affordable Care Act Topics

The U.S. Department of Labor has released its latest set of FAQs regarding implementation of various provisions of the Affordable Care Act. Highlights of the FAQs are presented below.

Summary of Benefits and Coverage (SBC)
Group health plans are required to provide, without charge, a standard SBC form explaining plan coverage and costs to employees at specified times during the enrollment process and upon request. (For insured group health plans, the notice requirement may be satisfied if the issuer furnishes recipients with a timely and complete SBC.)

The new FAQs provide that the updated SBC template (and sample completed SBC) made available in April 2013 continues to be authorized until further guidance is issued. The FAQs also confirm that certain safe harbors and other enforcement relief with respect to providing the SBC continue to apply.

Effect of Health FSA Carryovers on ‘Excepted Benefits’ Status
Excepted benefits provided under a group health plan generally are exempt from the Affordable Care Act’s market reforms. Health FSAs may constitute excepted benefits if, among other requirements, the arrangement is structured so that the maximum benefit payable to any employee participant in the class cannot exceed a certain amount.

The latest set of FAQs explains that unused carryover amounts remaining at the end of a plan year in a health FSA (permitted under the modified “use-or-lose” rule) should not be taken into account when determining if the health FSA satisfies the maximum benefit payable limit to constitute excepted benefits.

Other topics addressed in the FAQs include the application of cost-sharing limits to out-of-network items and services, and preventive coverage related to tobacco cessation interventions. For more on the Affordable Care Act, including previously released questions and answers, please visit our Health Care Reform section.

Employers Face Significant Penalties for Reimbursing Employees’ Individual Health Insurance Policy Premiums

Employers Face Significant Penalties for Reimbursing Employees’ Individual Health Insurance Policy Premiums

New guidance from the IRS explains the consequences when an employer does not establish a health insurance plan for its own employees, but instead chooses to reimburse those employees for some or all of the premiums they pay for individual health insurance, either inside or outside the Health Insurance Marketplace (Exchange).

Such arrangements are described as “employer payment plans,” which are considered group health plans subject to the Affordable Care Act’s market reforms (including the annual dollar limit prohibition and preventive services requirements). Employer payment plans also include arrangements under which an employer uses its funds to directly pay the premium for an individual health insurance policy covering an employee. The term generally does not include arrangements under which an employee may choose either cash or an after-tax amount to be applied toward health coverage.

Consistent with prior FAQs, the new guidance confirms that employer payment plans cannot be integrated with individual policies to satisfy the Affordable Care Act market reforms. Accordingly, such arrangements fail to satisfy the market reforms and may be subject to a $100 per day excise tax per applicable employee ($36,500 per year, per employee) under the federal tax code.

Visit our section on HSAs, FSAs, & Other Tax-Favored Accounts to learn about how these types of programs are affected by the Affordable Care Act.

Updated COBRA and CHIP Model Notices for Employers

Reminder: Updated COBRA and CHIP     Model Notices for Employers

Employers and group health plan     administrators who have not done so already will want to download the U.S.     Department of Labor’s revised COBRA Model General Notice, COBRA Model Election Notice, and CHIP     Model Notice. The updated model notices reflect that coverage is     now available through the Health Insurance Marketplace (Exchange) and     provide information on special enrollment rights.

COBRA Notice Requirements
Federal COBRA generally requires group health plans sponsored by employers     with 20 or more employees in the prior year to     offer employees, spouses, and dependents a temporary extension of health     coverage when group coverage would otherwise end due to certain qualifying events.

Plan administrators are required to distribute a number of specific notices     to comply with COBRA, including:

  • A general notice describing COBRA rights,          to be provided to an employee and his or her spouse who become covered          under the plan within 90 days after the date group health plan          coverage begins; and
  • An election notice informing eligible          employees, spouses, and dependents of the right to continue coverage          and how to elect COBRA, to be provided within 14 days after          receiving notice of a qualifying event.

                                                                         Required   CHIP Notice
Employers that provide coverage in states with premium assistance through   Medicaid or the Children’s Health Insurance Program (CHIP) must inform   employees of potential opportunities for assistance in obtaining health   coverage annually before the start of each plan year. The notice   may generally be provided concurrent with the furnishing of:

  • Materials notifying employees of health plan        eligibility;
  • Materials given to employees in connection with        an open season or election process conducted under the plan; or
  • The summary plan description (SPD).

For information on other federal   notice requirements, and to download additional model notices available for   employers and group health plans, check out our Benefits Notices Calendar.

Certificates Showing Prior Health Coverage for Employees No Longer Required Beginning December 31, 2014

Certificates Showing Prior Health Coverage for Employees No Longer Required Beginning December 31, 2014

Federal law currently requires employer-sponsored group health plans to issue documents demonstrating an employee’s prior health coverage (called “certificates of creditable coverage“) that can be used to reduce the pre-existing condition exclusion period that a plan can apply to the individual. However, these certificates are becoming unnecessary as the Affordable Care Act prohibits pre-existing condition exclusions for plan years beginning on or after January 1, 2014.

As a result, the requirement to issue certificates of creditable coverage will be eliminated as of December 31, 2014. This effective date accounts for individuals needing to offset a pre-existing condition exclusion under plans beginning December 31, 2013, so that they will still have access to the certificate for proof of coverage through December 30, 2014.

Employers must continue to provide certificates of creditable coverage until December 31, 2014. (Note: A health insurance issuer, rather than the employer, may be responsible for providing certificates of creditable coverage if there is an agreement between the two that makes the issuer responsible.) A certificate must be issued automatically and free of charge when an individual:

  • Loses coverage under a plan;
  • Becomes entitled to elect COBRA continuation coverage;
  • Loses COBRA continuation coverage; or
  • Makes a request for a certificate while the individual has health coverage or within 24 months after coverage ends.

Check out our Benefits Notices Calendar for other notices required to be provided by employers and group health plans.

Final Rules on 90-Day Waiting Period Limitation for Group Health Plans

Final Rules on 90-Day Waiting Period Limitation for Group Health Plans

Final rules address the requirement in the Affordable Care Act that group health plans limit any waiting period to 90 days beginning with plan years starting on or after January 1, 2014. A waiting period is the period of time that must pass before coverage for an employee or dependent who is otherwise eligible to enroll under the terms of a group health plan can become effective.

Key Highlights of the Final Rules
Under the final rules, eligibility conditions that are based solely on the lapse of a time period are permissible for no more than 90 days. Other conditions for eligibility are generally permissible, such as:

A requirement that employees complete a certain number of cumulative hours of service before becoming eligible for coverage is also generally allowed, as long as the requirement does not exceed 1,200 hours. Other highlights of the final rules include:

  • Employers are not required to offer coverage to any particular individual or class of individuals (including, for example, part-time employees).
  • All calendar days are counted for purposes of the 90-day limit, including weekends and holidays, beginning on the individual’s enrollment date.
  • A former employee who is rehired may be treated as newly eligible for coverage upon rehire and, therefore, may be required to meet the plan’s eligibility criteria and satisfy the waiting period anew, if reasonable under the circumstances.

For plan years beginning in 2014, plans may comply with either the previously proposed regulations or the final rules (effective for plan years beginning on or after January 1, 2015).

Be sure to review our Summary by Year for other key changes under the Affordable Care Act taking effect in 2014.

5 Must-Know Facts About ‘Pay or Play’

5 Must-Know Facts About ‘Pay or Play’

Recently issued final rules provide important guidance on the ‘pay or play‘ provisions under Health Care Reform. These provisions require large employers–generally those with at least 50 full-time employees, including full-time equivalents–to offer affordable health insurance that provides a minimum level of coverage to full-time employees (and their dependents), or pay a penalty tax if any full-time employee receives a premium tax credit for purchasing individual coverage on a Health Insurance Marketplace.

Below are five things employers should know about the ‘pay or play’ rules:

1. The requirements are delayed for certain large employers.
Employers with 100 or more full-time employees (including full-time equivalents) are subject to the ‘pay or play’ requirements starting in 2015. However, the rules will not apply until 2016 for employers with 50 to 99 full-time employees (including full-time equivalents) who certify that they meet certain eligibility criteria related to workforce size and maintenance of workforce, hours of service, and previously offered health coverage.

2. Affiliated employers are generally combined to determine their workforce size.
Companies that have a common owner or are otherwise related generally are combined and treated as a single employer, and so would be combined for purposes of determining whether or not they collectively employ at least 50 full-time employees (including full-time equivalents). If the combined total meets the threshold, then each separate company is subject to the ‘pay or play’ provisions, even those companies that individually do not employ enough employees to meet the threshold.

3. There are two methods employers may use to determine whether an employee is full-time.
An employee is considered full-time for a calendar month if he or she averages at least 30 hours of service per week (or 130 hours of service in a calendar month). The final rules provide two methods for determining whether an employee has sufficient hours of service to be a full-time employee:

  • One method is the monthly measurement method under which an employer determines each employee’s status by counting the employee’s hours of service for each month.
  • The second method is the look-back measurement method, under which an employer may determine the status of an employee during a future ‘stability period’ based upon the hours of service of the employee in a prior ‘measurement period.’ (This method may be used only for purposes of determining and computing liability, and not for determining whether the employer is subject to the ‘pay or play’ requirements.)

The final rules describe approaches that can be used for various circumstances, such as for employees who work variable hour schedules, seasonal employees, and employees of educational organizations.

4. An employer may be liable for a penalty for 2015 under two circumstances.
For 2015 (and for employers with non-calendar-year plans, any calendar months during the 2015 plan year that fall in 2016), an employer that is subject to the ‘pay or play’ requirements may be liable for a penalty if:

  • The employer does not offer health coverage or offers coverage to fewer than 70% of its full-time employees (and their dependents, unless transition relief applies), and at least one of the full-time employees receives a premium tax credit; or
  • The employer offers health coverage to at least 70% of its full-time employees (and their dependents, unless transition relief applies), but at least one full-time employee receives a premium tax credit, which may occur because the employer did not offer coverage to that employee or because the coverage the employer offered that employee was either unaffordable to the employee or did not provide minimum value.

5. Transition relief may be available to certain employers subject to the rules for 2015.
The final rules extend to 2015 a package of limited transition rules that applied to 2014 under the proposed regulations, including:

  • Employers First Subject to Requirements: Employers can determine whether they had at least 100 full-time or full-time equivalent employees in the previous year by reference to a period of at least six consecutive months, instead of a full year.
  • Non-Calendar Year Plans: Employers with plan years that do not start on January 1 will be able to begin compliance at the start of their plan years in 2015 rather than on January 1, 2015, and the conditions for this relief are expanded to include more plan sponsors.
  • Dependent Coverage: The policy that employers offer coverage to their full-time employees’ dependents will generally not apply in 2015 to employers that are taking steps to arrange for such coverage to begin in 2016.
  • Look-Back Measurement Method: On a one-time basis, in 2014 preparing for 2015, plans may use a measurement period of six months even with respect to a stability period of up to 12 months.

Our Employer Shared Responsibility section features additional information regarding ‘pay or play.’ Questions and Answers are also available from the Internal Revenue Service.

PPACA Penalty Q&A

Employees Without Health Insurance May Face Penalties–5 Q&As

The individual mandate under Health Care Reform, which is expected to go into effect on January 1, 2014, requires individuals of all ages (including children) to have minimum essential health coverage for each month, qualify for an exemption, or make a payment when filing his or her federal income tax return. Below are five important things to know about the requirement.

1. What counts as minimum essential coverage?
Minimum essential coverage includes employer-sponsored coverage (including COBRA coverage and retiree coverage), coverage purchased in the individual market, Medicare Part A coverage and Medicare Advantage, Children’s Health Insurance Program (CHIP) coverage, and certain other types of coverage.

Minimum essential coverage does not include coverage providing only limited benefits, such as coverage only for vision care or dental care, workers’ compensation, or disability policies.

2. If an employee receives coverage from a spouse’s employer, will that employee have minimum essential coverage?
Yes. Employer-sponsored coverage is generally minimum essential coverage. If an employee enrolls in employer-sponsored coverage for himself and his family, the employee and all of the covered family members have minimum essential coverage.

3. Do an employee’s spouse and dependent children have to be covered under the same policy or plan that covers the employee?
No. An employee, his or her spouse, and dependent children do not have to be covered under the same policy or plan. However, the employee, spouse, and each dependent child for whom the employee may claim a personal exemption on his or her federal income tax return must have minimum essential coverage or qualify for an exemption, or a payment will be owed.

4. A company’s health plan is “grandfathered.” Does the employer’s plan provide minimum essential coverage?
Yes. Grandfathered group health plans provide minimum essential coverage.

5. What is the amount of the individual mandate penalty?
The amount of any payment owed takes into account the number of months in a given year an individual is without minimal essential coverage or an exemption. For 2014, the penalty is the higher of:

  • 1% of the individual’s yearly household income (the maximum penalty is the national average yearly premium for a bronze plan); or
  • $95 per person for the year, or $47.50 per child under 18 (the maximum penalty per family using this method is $285).

The fee increases every year. In 2015, the penalty is 2% of income or $325 per person.

For more information, you may review additional questions and answers from the IRS. Be sure to visit our Summary by Year to review other key changes under Health Care Reform that are coming next year.

Changes to “Use-or-Lose” Rule for Health FSAs

Changes to “Use-or-Lose” Rule for Health FSAs

According to new agency guidance, employers may now allow employees to carryover up to $500 of unused amounts in a health flexible spending arrangement (FSA) to use in the following plan year.

The “use-or-lose” rule requires that amounts in an employee’s health FSA that are not spent by the end of a plan year be forfeited. However, an employer’s cafeteria plan can provide for a grace period, whereby an employee is permitted to use amounts remaining from the previous year to pay expenses incurred for certain qualified benefits during the period of up to 2 1/2 months immediately following the end of the plan year.

New Guidance Details Changes
The agency guidance explains that an employer may, at its option, amend its cafeteria plan document to provide for a carryover to the immediately following plan year of up to $500 of any amount remaining unused as of the end of the plan year in a health FSA. The carryover may be used to pay or reimburse medical expenses under the health FSA incurred during the entire plan year to which it is carried over.

The carryover of up to $500 does not count against or otherwise affect the indexed $2,500 salary reduction limit applicable to each plan year. A cafeteria plan that incorporates the carryover provision may not also provide for a grace period in the plan year to which unused amounts may be carried over.

An employer may adopt this carryover provision to health FSAs for the current cafeteria plan year and/or subsequent plan years by amending the plan document in the manner and within the time frames described in the agency guidance.

Model HIPAA Notice of Privacy Practices Now Available

New model notices are available to help health plans comply with the Health Insurance Portability and Accountability Act (HIPAA) Privacy Rule. The Privacy Rule generally requires covered entities, including health plans, to develop and distribute a notice informing individuals of the entity’s privacy practices and of the individual’s privacy rights with respect to his or her personal health information (PHI).

Note: Group health plans providing benefits only through one or more contracts of insurance with issuers or HMOs, and that do not create or receive PHI–other than summary health information or enrollment information–are not required to develop this notice.

The model notices reflect changes made by the HIPAA final omnibus rule that became effective in March. Covered entities were required to revise their notices to reflect those changes by September 23, 2013, and must redistribute the notice as provided in the final omnibus rule. You can visit our HIPAA section for more information.

New Guidance on Health Care Reform Rules for HRAs & Other Arrangements

A new set of Q&As provides additional guidance regarding how the prohibition on annual dollar limits and the requirement to cover preventive services under Health Care Reform apply to health reimbursement arrangements (HRAs) and certain other employer healthcare arrangements. The following are key highlights that may be of interest to employers:

  • A group health plan, including an HRA and an employer      payment plan, cannot be integrated with individual market coverage.
    • An HRA or employer payment plan used to purchase       coverage on the individual market will therefore fail to comply       with the annual dollar limit prohibition and the preventive services       requirements.
  • An HRA that is integrated with a group health plan      will generally comply with the annual dollar limit and preventive services      requirements if the group health plan with which the HRA is integrated      complies with those requirements.
    • An HRA will be integrated with a group health plan for       purposes of the annual dollar limit prohibition and the preventive       services requirements if it qualifies under either of two integration       methods described in the Q&As.
  • A health flexible spending arrangement (FSA) that does      not qualify as excepted benefits is not integrated with a      group health plan, and thus will fail to meet the preventive services      requirement.
    • Effective retroactively as of September 13, 2013, a       health FSA that is not offered through a cafeteria plan (a plan which meets specific       requirements to allow employees to receive certain benefits on a pre-tax       basis) is subject to the annual dollar limit prohibition and will fail to       comply with this requirement.
  • Effective for taxable years beginning after December      31, 2013, an employer is prohibited from providing a qualified health plan      offered through a Health Insurance Exchange as a benefit under the      employer’s cafeteria plan.

The agency guidance applies for plan years beginning on or after January 1, 2014, with certain exceptions, but may be applied for prior periods. Visit our section on HSAs, FSAs, & Other Tax-Favored Plans for more information on these types of arrangements.