PPACA defines a full-time employee as someone who is employed an average of at least 30 hours per week.  This definition applies regardless of the size of the employer or the way that that employer offers coverage.

While the 30-hour rule applies across the board, only employers who qualify as “applicable large employers” will be subject to the Employer Mandate.  So, although the calculation of full-time employees remains the same for all employers and health plans, the liabilities under PPACA vary depending on the circumstances of each employer.

Technical Release 2012-02, which states:

“…PHS Act section 2708 provides that, for plan years beginning on or after January 1, 2014, a group health plan or health insurance issuer offering group health insurance coverage shall not apply any waiting period that exceeds 90 days.(2) PHS Act section 2704(b)(4), ERISA section 701(b)(4), and Code section 9801(b)(4) define a waiting period to be the period that must pass with respect to an individual before the individual is eligible to be covered for benefits under the terms of the plan. In 2004 regulations, the Departments defined a waiting period to mean the period 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.(3)
(2)  PHS Act section 2708 applies to both grandfathered and non-grandfathered plans. See section 1251(a)(4)(A)(i) of the Affordable Care Act.
(3) 26 CFR 54.9801-3(a)(3)(iii), 29 CFR 2590.701-3(a)(3)(iii), 45 CFR 146.111(a)(3)(iii).”

Your client will be renewing their current management carve out coverage in November 2013.  If your question is will this client be subject to a tax/penalty for failing to offer employees coverage within the 90 day enrollment mandate under the management carve out coverage, the answer is no. The client will not be subject to a tax/penalty for failing to offer coverage within the 90 day mandate, because the provision only becomes effective for large group employers’ health benefit plans that are renewed on or after January 1, 2014.  However, health benefit plan described above will not be compliant upon renewal in November 2014.

The information provided in this response is for educational purposes only and does not constitute tax or legal advice.

The nondiscrimination clause in PPACA restricts employers from offering more generous health plans to their highest paid employees. There are many aspects of this provision that still need to be clarified through additional guidance from the IRS.  Therefore, enforcement of this provision has been waived for insured group health plans until formal guidance detailing enforcement processes is released by the IRS.

For guidance on the situation of the company you describe, you may consult our legislative alert on PPACA's Nondiscrimination Provisions. BenefitMall will keep you apprised of any information regarding this subject. Please access healthcareexchange.com for up-to-date information about PPACA implementation.

Yes. When calculating the number of full-time and full-time equivalent employees in order to determine whether an employer is subject to the Employer Mandate, employees who already have coverage are still counted in the calculation. Further, large applicable employers must offer affordable coverage that provides minimum value to all full-time employees even if those employees already have coverage through a spouse.

Section 1304 of the Patient Protection and Affordable Care Act (PPACA) considers your client to be a small employer group.  There are several advantages to being considered a small employer group.  

First, your client is not subject to the Shared Responsibility provisions of PPACA which will require large employers to provide affordable health benefits to employees.  Second, as a small business, your client may be able to make use of the Exchange system. Brokers and consumers can leverage the Exchange system and use it to their advantage in comparing plans.

If an employer has fewer than 25 employees, the employer may be eligible for the Small Business Health Care Tax Credit.  This tax credit subsidizes an employer’s contribution to the cost of his or her employees’ health insurance.  To qualify for the Small Business Health Care Tax Credit, employers must meet criteria relating to three aspects of their business:

1. Firm size: First, there are restrictions on the number of employees that an employer may have. A qualifying employer must have less than the equivalent of 25 full-time workers when totaling all individuals' hours of employment. When all part-time and full-time hours of employment are combined and divided by a full-time, 40-hour week, and if the number of employees needed to cover the total hours is less than 25 employees, the employer will qualify for the credit.

2. Provide health care coverage: Second, the employer must confirm that he or she covers at least 50% of the cost of health care coverage for employees. This is determined using the firm size equivalent number mentioned above. Next, the employer must know the cost required to cover a single full-time employee's insurance premium. The employer must then make the following calculation:

• Equivalent firm size multiplied by (X) = the cost paid for an individual premium and divided by (/) two.
• The above calculation is the percentage of health care coverage the employer must cover to qualify for the credit. Therefore, they do not have to pay full coverage for each employee. They could reach the required premium with some full coverage and some partial coverage of employees.

3. Wages paid: Lastly, employers must pay their workers an average of less than $50,000 per year to qualify.

The Small Business Health Care Tax Credit currently offers a maximum benefit of 35% of an employer’s premium contributions (25% for non-profits) to a health insurance plan this year. The credit become less generous for larger, higher wage employers and zeroes out at the 25/$50,000 threshold.  Starting in 2014, the maximum benefit will be 50% of an employer’s contributions (35% for non-profits).  The credit is only available to each employer in two separate years.  Further, starting in 2014, it will only be available to employers who purchase insurance on the SHOP Exchanges.

Claiming the Credit

• Small employers, whether businesses or tax-exempt organizations, will use the new Form 8941, Credit for Small Employer Health Insurance Premiums, to calculate the small business health care tax credit.
• For-profit small businesses will include the amount of the credit as part of the general business credit on their income tax returns.
• Tax-exempt organizations will include the amount of the credit on Line 44f of revised Form 990-T, Exempt Organization Business Income Tax Return. Form 990-T has been revised for the 2011 filing season to enable eligible tax-exempt organizations, even those that owe no tax on unrelated business income, to claim the small business health care tax credit.

Finally, many large employers have W-2 reporting requirements, which your small employer group client is exempt.

If an employer has determined that the employer mandate applies because he or she has at least 50 full-time or full-time equivalent (FTE) workers, there is a tax/penalty for not providing coverage to at least 95% of full-time employees.

The tax penalty is calculated on a monthly basis using only full-time employees, not FTE’s.  The monthly penalty is equal to $2,000 divided by 12, multiplied by the difference of the number of full-time employees employed during the applicable month minus the first 30 full-time employees. For example:

(Number of Full-Time Employees) – 30 x (2,000/12) = tax penalty

The Medical Inflation Rate, otherwise known as the Consumer Price Index for Medical Care is a statistical measurement of the changes in the cost of retail health care services in the United States. It is different from the more widely known Consumer Price Index in that it only measures the changes in the cost of health services. It is computed as a percentage change. It is monitored by the United States Bureau of Labor Statistics. For more information on the CPI Medical Care, please go here to the BLS web page

The most recent BLS publication is through March of 2013. The CPI for March 2013 was  a 1.5% annual increase. However the CPI Medical Care component was for the same period was a 3.9% increase. Historically, the CPI Medical Care component has increased faster than the CPI. For more detail on those figures, please go here.

The discrimination clause in PPACA that restricts employers from offering more generous health plans to their highest paid employees is technically in effect but will not be enforced for the foreseeable future.  The Internal Revenue Service has released multiple notices regarding the nondiscrimination rules but until formal guidance detailing enforcement processes is released by the IRS, there will be no penalties imposed.  Some have speculated that employers will have until 2015 to assess their companies’ compliance status.

BenefitMall will keep you apprised of any information regarding this subject.  Please access healthcareexchange.com for up-to-date information about PPACA implementation.

An employer may be subject to a tax penalty even if health insurance is offered, but does not meet the “affordability” thresholds.  The health benefits are deemed to be unaffordable if:

• The full time employee’s required contribution toward the plan premium for self-only coverage exceeds 9.5% of the employee’s reportable W-2 income, or
• The plan pays for less than 60%, on average, of covered health care expenses.

If an employer provides coverage that fails to meet the affordability threshold or the minimum value threshold, and a full-time employee obtains coverage via a state health benefit exchange and receives a premium subsidy, the employer will have to pay a tax penalty. 

The monthly tax penalty in this instance is equal to the lessor of, (1) the number of full-time employees who are receiving a premium subsidy through an exchange, times one-twelfth of $3,000, or (2) the penalty owed as if the employer offered no health insurance at all (number of FTE’s – 30 x $2,000/12).

Barring any other circumstances, there does not seem to be any reason why a 12 month look back period cannot be used for current ongoing variable hour employees as long as this look back period follows the rules below.

Look back: For ongoing employees, an employer may choose a look back period between three and 12 months.  Under the rules, the employer is given discretion to choose the length of the look-back measurement period provided it conforms with the length of time rules discussed above and that the determination is made on a uniform and consistent basis for all employees in the same category.

An applicable large employer may also use a look-back measurement period for new variable hour employees in certain circumstances.  A new employee is a variable hour employee if, based on the circumstances at the employee’s start date, it cannot be determined that the employee is reasonably expected to work on average at least 30 hours per week.

Administrative: Employers may impose an administrative period that begins immediately after the end of the look-back period and ends immediately before the stability period. The purpose of this administrative period, which may last up to 90 days, is to give employers time to determine employee eligibility for coverage, notify them of their eligibility, and enroll them in the plan.

Stability: The stability period begins immediately after the look-back period and any administrative period. Calculation of the stability period depends on the type of employee and whether he or she is determined to be a full-time employee during the look-back period.  If the employer determines that the ongoing employee was not a full-time employee during the look-back period, then the stability period must be no longer than the look-back period.

If a new variable hour or seasonal employee is determined to be a full-time employee, then the stability period must be the same as that for ongoing employees – either six consecutive calendar months or the length of the look-back period, whichever is longer. If a new variable hour or seasonal employee is determined not to be a full-time employee during the look-back period, then the stability period may be, at a maximum, one month longer than the look-back period. However, the stability period may not exceed the remainder of the employer’s look-back period for ongoing employees (plus any associated administrative period).

Keep in mind that an employer cannot select a look back period where they have the fewest number of employees.  For new variable hour and seasonal employees, the look-back period must begin on a date between the employee’s start date and the first day of the first calendar month following the employee’s start date.

The requirement that deductibles be capped at $2,000 for individuals and $4,000 for families unless other contributions are offered that offset any additional deductibles applies to the entire small group market both inside and outside the exchanges.

The Department of Health and Human Services (HHS) has issued a rule allowing waivers for this cap since some health insurers have found it impossible to offer plans within the $2,000 deductible that offer the federally mandated benefits.  HHS has ruled that a plan’s deductible may exceed the cap if the insurer cannot “reasonably reach” the actuarial value of benefits that PPACA mandates within the affordability threshold.  The “reasonability” standard is difficult to gauge and therefore it is difficult to estimate what plans would fall under the requirements to receive waivers from the federal government.   Given the ambiguity of this current federal regulatory approach, we should anticipate further federal guidance on this subject.

There are several conditions under which the employees would not have to pay a penalty.  If the employee meets any of the following conditions, he or she is not included in the individual mandate and does not have to pay a penalty:

1. The employee is part of a religion opposed to acceptance of benefits from a health insurance policy
2. The employee is an undocumented immigrant
3. The employee is a member of an Indian tribe
4. The employee’s family income is below the threshold for filing a tax return ($10,000 for an individual, $20,000 for a family in 2013)
5. The employee has to pay more than 8% of his or her income for health insurance, after taking into account any employer contributions or tax credits

If none of those exceptions apply, the employee must have been insured for the whole year through any combination of the following:

1. Medicare
2. Medicaid or Children’s Health Insurance Program
3. TRICARE
4. Veteran’s health program
5. Employer-provided health plan
6. Insurance that is bought by the individual that is at least at the “Bronze” level as described by the Affordable Care Act
7. A grandfathered health plan

If none of these conditions apply, the employee is subject to the individual mandate and will be assessed a penalty starting in 2014.

The regulations at 26 C.F.R. § 54.4980B-9 contain several questions and answers addressing COBRA obligations in the event of a stock sale or asset sale. A stock sale is defined as a transfer of stock in a corporation that causes the corporation to become a different employer or a member of a different employer. An asset sale is a transfer of substantial assets, such as a plant or division or substantially all the assets of a trade or business.

It is important to determine whether the employees of the selling company are “M&A qualified beneficiaries.” In the case of an asset sale, an individual is an M&A qualified beneficiary if the individual is a qualified beneficiary whose qualifying event occurred prior to or in connection with the sale and who is, or whose qualifying event occurred in connection with, a covered employee whose last employment prior to the qualifying event was associated with the assets being sold. In the case of a stock sale, an individual is an M&A qualified beneficiary if the individual is a qualified beneficiary whose qualifying event occurred prior to or in connection with the sale and who is, or whose qualifying event occurred in connection with, a covered employee whose last employment prior to the qualifying event was with the acquired organization.

The regulations stipulate that in the event of a stock sale, if the selling group ceases to provide any group health plan to any employee in connection with the sale, a group health plan maintained by the buying group has the obligation to make COBRA continuation coverage available to M&A qualified beneficiaries with respect to that stock sale. In the case of an asset sale, if the selling group ceases to provide any group health plan to any employee in connection with the sale and if the buying group continues the business operations associated with the assets purchased from the selling group without interruption or substantial change, then the buying group is a successor employer to the selling group in connection with the asset sale. If the buying group is a successor employer, a group health plan maintained by the buying group has the obligation to make COBRA continuation coverage available to M&A qualified beneficiaries with respect to that asset sale.

Therefore, the obligation of a buying group to provide COBRA continuation coverage is dependent on the selling group’s employees being M&A qualified beneficiaries.

Employer contributions to an HSA are taken into account in determining minimum value. There is a minimum value calculator available online to help employers determine whether they meet the 60 percent threshold.

For a plan year beginning in calendar year 2014, the annual deductible for a health plan in the small group market may not exceed $2,000 for self-only coverage or $4,000 for coverage other than self-only. A health plan’s annual deductible may exceed the applicable deductible limit if that plan may not reasonably reach the actuarial value of a given level of coverage without exceeding the annual deductible limit. A tool is available online to help employers determine actuarial value.

Navigators for state-based exchanges can apply through their state directly.  For the 17 states using a federally facilitated exchange or the 6 states using a hybrid state-federal exchange, grants are available from the Department of Health and Human Services.  An optional letter of intent to apply is due by May 1 and the application deadline is June 7, 2013 at 1:00PM EDT.  Funding notices of reward are expected to be released August 15.

Click here for the application for HHS Navigator Grant.

Under the proposed rule on coverage of preventive services, which was published on February 6, 2013, certain employers are exempt from having to provide contraceptive coverage. Specifically, any employer that is organized and operates as a nonprofit entity and is referred to in section 6033(a)(3)(A)(i) or (iii) of the Internal Revenue Code is considered an exempt religious employer. Those sections of the Internal Revenue Code refer to churches, their integrated auxiliaries, conventions or associations of churches, and religious orders.

The above does not, however, exempt certain other organizations, such as religious hospitals or charities. Under guidance issued on August 15, 2012, the Department of Health and Human Services provided for a temporary enforcement safe harbor. Under this safe harbor, which is in effect until the first plan year that begins on or after August 1, 2013, enforcement actions will not be taken against any employer, group health plan, or health insurance issuer for failing to cover some or all recommended contraceptive services in a non-grandfathered group health plan (or any group health insurance coverage provided in connection with such a plan) where the plan is established or maintained by an organization meeting all of the following criteria:

• The organization is organized and operates as a nonprofit entity;
• From February 10, 2012, onward, the group health plan established or maintained by the organization has consistently not covered all or the same subset of recommended contraceptive services, consistent with any applicable state law, because of the organization’s religious beliefs;
• The group health plan established or maintained by the organization (or another entity on behalf of the plan, such as a health insurance issuer or third party administrator) provides to participants a notice indicating that some or all contraceptive services will not be covered under the plan for the first plan year beginning on or after August 1, 2012; and
• The organization self-certifies that it satisfies the foregoing three criteria and documents its self-certification.

This temporary enforcement safe harbor is also available for insured student health insurance coverage arranged by nonprofit institutions of higher education with religious objections to contraceptive coverage that similarly meet the four criteria above. In addition, group health plans that took action to try to exclude or limit contraceptive coverage that was not successful as of February 10, 2012, are not for that reason precluded from eligibility for the temporary enforcement safe harbor.

Entities that fall within this temporary safe harbor should keep an eye out for finalization of the regulations on contraceptive coverage.[

As of this point in time, there is only s comparatively negligible tax/penalty for an employee rejecting employer sponsored group coverage during the time when an employee is offered coverage, thereby breaking the “Individual Mandate” provisions of the Patient Protection and Affordable Care Act. Because there are no longer any pre-existing exclusion options, there is nothing to stop an employee who declined coverage from deciding at a later date to apply for the same coverage when faced with an expensive diagnosis. There is also no significant financial penalty for an employee to subsequently cancel his or her employer sponsored health benefits after the expensive treatment is over. 

The applicable flat dollar tax/penaltyfor failing to carry adequate health insurance for 2014 for a tax filer with no dependents will be $95 and the amount for 2015 will increase to $325. This amount will increase over the years, rising to $695 in 2016, and will be further revised in 2017 according to the change in the federal cost of living inflation.

The tax/penalty for a family will be assessed at the rate of an individual, plus the dependent child at the 50% rate.  For example, in 2016 a couple with one child under 18 would be assessed a flat dollar penalty of $1,737.50 (two adults x $695 plus one child at $347.50 -- one half of adult penalty).

A family of four (one couple with two dependent children) would only be required to pay the 300% cap in 2016. Three hundred percent of the $695 flat amount for 2016 is equal to $2,085. This amount is less than the flat amount that could be charged if the cap were not in place (two adults + two children over 18 = $695 x 4 = $2,780).

The tax penalty cannot exceed “the national average premium for qualified health plans which have a bronze level of coverage” for the taxpayer’s family size. While this national average premium has not yet been established, the Congressional Budget Office has estimated that the yearly individual premiums for a Bronze plan may average between $4,500 and $5,000. The estimated yearly family premium for 2015 may be $12,000 and $12,500.

This is one of the more hotly contested provisions of the Patient Protection and Affordable Care Act. Many observers have predicted that this low barrier to no coverage would result in financial turmoil for insurance carriers who would see experience people only applying for coverage on the way to the hospital and canceling coverage once the expensive claim was paid. There have been efforts to significantly increase the tax/penalty for no coverage or for early disenrollment. The American Health Insurance Plans has formally requested that HHS increase the tax/penalty. You can go here to read more about this “mandate plus” effort. The issue remains unaddressed.

See also this website, which was used as a source for the answer

The views expressed in this Q&A do not necessarily reflect the official policy, position, or opinions of BenefitMall. This update is provided for informational purposes. Please consult with a licensed accountant or attorney regarding any legal and tax matters discussed herein.

The Patient Protection and Affordable Care Act (PPACA) and subsequent rules allows any individual to sign up for health insurance coverage with no waiting period, and allows any individual to drop the coverage with no early cancelation penalties.  Therefore, the traditional short term medical coverage is no longer considered necessary for an individual.  Any of the benefit plans mandated by PPACA offered by health insurance companies for an individual will take the place of short term medical coverage.   

The person asking this question should seek specific local benefit and legal advice. The information provided in this response is for educational purposes only and does not constitute legal advice.

Your client apparently qualifies as a large group employer and as such is subject to the “Shared Responsibility:” provisions of the Patient Protection and Affordable Care Act (PPACA).    Section 4980(H) defines the responsibilities of large group employers.  

In order to avoid the tax/penalties associated with the “Shared Responsibility” provisions, your client may contract with an insurance carrier or third party administrator to provide health insurance benefits that comply with the “Shared Responsibility, Minimum Value threshold and the Affordability Threshold.  We have written extensively about how to assist your client in addressing these issues. Please go here read more for more information on this subject.

Employers are considered “applicable large employers” under PPACA and are therefore subject to the Employer Mandate if they employ 50 or more “full-time” employees or a combination of “full-time” and part-time employees that equals 50 “full-time” equivalent employees.  “Applicable large employer” status is determined based on the actual hours of work performed by employees in the prior calendar year. To determine “applicable large employer” status, an employer must:

1. Count the number of “full-time” employees (including seasonal employees) who work on average 30 hours or more per week per month
2. Calculate the number of full-time equivalent employees by aggregating the number of hours worked by all non-full-time employees (including seasonal employees) and dividing by 120
3. Add the number of “full-time” employees and full-time equivalents calculated in steps (1) and (2) for each of the 12 months in the preceding calendar year, and
4. Add the monthly totals and divide by 12. If the average exceeds 50 full-time equivalents, the employer must also determine whether the seasonal employee exception applies
   The seasonal employee exemption exists for employers whose workforce exceeds 50 full-time employees for no more than 120 days or four calendar months during a calendar year if the employees in excess of 50 employed during that period were seasonal employees.  The four calendar months need not be consecutive.  Until further guidance is issued, employers may use a reasonable, good faith interpretation of a seasonal worker, but the IRS emphasizes that the category of seasonal worker is not limited to agricultural or retail workers. 

If an employer has 50 or more FTEs, and is thus subject to the employer-shared responsibility provisions, the employer must make an offer of coverage to at least 95% of its full-time employees and their dependents. Employers will be given a certain amount of room for error, in that they must offer coverage to at least 95% of full-time employees. If an employer meets the 95% threshold, the employer may avoid liability for a tax penalty if some of its employees do not have employer-sponsored coverage.  

The employer should seek specific local benefit and legal advice. The information provided in this response is for educational purposes only and does not constitute legal advice.

Employers are considered “applicable large employers” under PPACA and are therefore subject to the Employer Mandate if they employ 50 or more “full-time” employees or a combination of “full-time” and part-time employees that equals 50 “full-time” equivalent employees.  “Applicable large employer” status is determined based on the actual hours of work performed by employees in the prior calendar year. To determine “applicable large employer” status, an employer must:

1. Count the number of “full-time” employees (including seasonal employees) who work on average 30 hours or more per week per month
2. Calculate the number of full-time equivalent employees by aggregating the number of hours worked by all non-full-time employees (including seasonal employees) and dividing by 120
3.  Add the number of “full-time” employees and full-time equivalents calculated in steps (1) and (2) for each of the 12 months in the preceding calendar year, and
4. Add the monthly totals and divide by 12. If the average exceeds 50 full-time equivalents, the employer must also determine whether the seasonal employee exception applies

Per diem or non-hourly employees will be counted as full-time or part-time depending on the average hours of service worked either in the previous month or during the look-back period chosen by the employer.  If the employee’s per diem rate is based on an hourly rate, the employer should use the actual number of hours of service worked.  If the per diem rate is based on a non-hourly basis, the employer is permitted to use one of the three methods detailed below in the non-hourly hours of service rates.

The employer should seek specific local benefit and legal advice. The information provided in this response is for educational purposes only and does not constitute legal advice.

I am aware that there is a control group issue – so I believe that all 120 need to be counted together, but my question revolves around the fact that 100 of the 120 employees are seasonal, and they only work 9 months of the year.

During the 9 months they work, they work 40 hours/week, so about 1440 hours for the year. In determining large group status, do I need to count all 100 of the seasonal employees?  Do they all also count toward any penalty assessments?

Employers are considered “applicable large employers” under PPACA and are therefore subject to the Employer Mandate if they employ 50 or more “full-time” employees or a combination of “full-time” and part-time employees that equals 50 “full-time” equivalent employees.  “Applicable large employer” status is determined based on the actual hours of work performed by employees in the prior calendar year. To determine “applicable large employer” status, an employer must:

1. Count the number of “full-time” employees (including seasonal employees) who work on average 30 hours or more per week per month
2. Calculate the number of full-time equivalent employees by aggregating the number of hours worked by all non-full-time employees (including seasonal employees) and dividing by 120
3. Add the number of “full-time” employees and full-time equivalents calculated in steps (1) and (2) for each of the 12 months in the preceding calendar year, and
4. Add the monthly totals and divide by 12. If the average exceeds 50 full-time equivalents, the employer must also determine whether the seasonal employee exception applies

The seasonal employee exemption exists for employers whose workforce exceeds 50 full-time employees for no more than 120 days or four calendar months during a calendar year if the employees in excess of 50 employed during that period were seasonal employees.  The four calendar months need not be consecutive.  Until further guidance is issued, employers may use a reasonable, good faith interpretation of a seasonal worker, but the IRS emphasizes that the category of seasonal worker is not limited to agricultural or retail workers. 

If an employer has 50 or more FTEs, and is thus subject to the employer-shared responsibility provisions, the employer must make an offer of coverage to at least 95% of its full-time employees and their dependents. Employers will be given a certain amount of room for error, in that they must offer coverage to at least 95% of full-time employees. If an employer meets the 95% threshold, the employer may avoid liability for a tax penalty if some of its employees do not have employer-sponsored coverage.  

The employer should seek specific local benefit and legal advice. The information provided in this response is for educational purposes only and does not constitute legal advice.

The Department of Health and Human Services (HHS) has released a proposed rule on standards for Navigators and Non-Navigator Assistance personnel on April 3, 2013.  The proposed rule will be published in the federal register on April 5.

The regulation would create conflict-of-interest, training and certification, and meaningful access standards for Navigators and non-Navigator personnel working in both federally-facilitated Exchanges and State Partnership Exchanges.  The rule would also apply to non-Navigator assistance personnel working in state-based Exchanges funded by federal grants. 

Comments on the proposed rule are due by 5pm 30 days after the date of publication in the federal register.

Once comments are received, it is likely the rule will be made final and more information will be made available by HHS.

The employer should seek specific local benefit and legal advice. The information provided in this response is for educational purposes only and does not constitute legal advice.

What their  measurement period should be using 12 months? Would they be ok using 01/01/2012 – 12/31/2012?  So if those employees identified as eligible are not working for them 11/01/13, they need not worry about them – is that correct?  Or, do they need to use a measurement period more closer to our open enrollment date?

The calculation of the look-back period depends on whether the employee is (1) an ongoing employee, or (2) a new variable hour employee or seasonal employee.

Because these are ongoing employees, an employee may determine full-time status by using a look-back period of between three and 12 months.  Under the rules, the employer is given discretion to choose the length of the look-back measurement period provided it conforms with the length of time rules.  The determination must be made on a uniform and consistent basis for all employees in the same category.

What their stability period should be?

The stability period begins immediately after the look-back period and any administrative period.  Calculation of the stability period depends on the type of employee and whether he or she is determined to be a full-time employee during the look-back period.

Again, we are assuming these are ongoing employees.  If an employer determines that an ongoing employee worked full-time during the look-back period, then the stability period must be at least the greater of six consecutive calendar months or the length of the look-back period.  If the employer determines that the ongoing employee was not a full-time employee during the look-back period, then the stability period must be no longer than the look-back period.

What is the administrative period? Not quite sure how that fits into the formulas.

An employer may elect to add an administrative period that begins immediately after the end of the look-back period and ends immediately before the stability period.  This administrative period may last up to 90 days.  However, this administrative period cannot create a gap in coverage for ongoing employees who are enrolled in coverage because of full-time employee status.

Additionally, I need to clarify how to determine who is eligible as a FTE.   The look-back rule defines a FTE as an employee who performs, on average, at least 30 hours of service per week during a measurement period – at least 1560 hours in the case of a 12 month measurement period.  In all the research I have read, there is nothing to tell you how to come up with this number – how do you address on average of 30 hours?

PPACA defines a full-time employee as an individual who works on average at least 30 hours per week. 

Under the Patient Protection and Affordable Care Act (PPACA), a full-time employee, with respect to any month, is an employee who provides an average of 30 hours of service per week. 

Hours of service include:

- Each hour for which an employee is paid, or entitled to payment, for the performance of duties for the employer; and

- Each hour for which an employee is paid, or entitled to payment by the employer on account of a period of time during which no duties are performed due to

• Vacation,
• Holiday,
• Illness,
• Incapacity (including disability),
• Layoff,
• Jury duty,
• Military duty, or
• Leave of absence

Employers must also include part-time and seasonal employees in their calculation to determine whether they are a large employer and subject to the employer shared responsibility provisions.

If the resident managers in question meet the 30 hours of service per week threshold, they will likely be counted as full-time employees.  If they do not meet that threshold, they will likely still be included in the calculation, but they may not be entitled to an offer of coverage.

The employer should seek specific local benefit and legal advice. The information provided in this response is for educational purposes only and does not constitute legal advice.

There is no requirement in the Patient Protection and Affordable Care Act (PPACA) that requires an employer to disclose their methodology of calculating full-time equivalent employees to the employees themselves. 

While there is no formal requirement to disclose the methodology used in calculating FTEs, it is advisable to document the methodology used.  If an employer has a documented methodology used in calculating FTEs, it will be easier to defend the employer’s decision to offer coverage, or to refrain from offering coverage.  It will also show a good faith effort to comply with regulations and various safe harbors.

In determining the look-back period used in calculating FTEs, employers are permitted to use different time periods for different categories of employees, within statutory limits.  For example, an employer may use a different period of time for collectively bargained employees opposed to non-collectively bargained employees.  However, the employer must use the same look-back period for all employees within the category. 

The employer should seek specific local benefit and legal advice. The information provided in this response is for educational purposes only and does not constitute legal advice.

If the employer filed fewer than 250 W-2 forms for the pervious calendar year, they will not be required to report the cost of coverage, according to the transition relief as detailed by the IRS. If the employer filed over 250 W-2s in the previous calendar year, it is likely the employer will have to report the cost of health care coverage. 

While the employer will likely be required to report the cost of health care coverage, the employer will have to determine whether it is a large employer, and thus subject to the employer shared responsibility requirements of PPACA. The employer will also have to determine whether it can take advantage of the seasonal employee exemption, and thus be exempt from the requirement to offer coverage to at least 95% of its full-time employees.

The employer should seek specific local benefit and legal advice. The information provided in this response is for educational purposes only and does not constitute legal advice.

Section 9001 of the Patient Protection and Affordable Care Act imposes a 40% excise tax on a high cost employer-sponsored health plan.  Specifically, the excise tax will be imposed “if an employee is covered under any applicable employer-sponsored coverage at any time during a taxable period, and there is any excess benefit with respect to the coverage.”  An excess benefit is defined as “the aggregate cost of the applicable employer sponsored coverage of the employee for the month, over an amount equal to 1/12 of the annual limitation.”  The annual limitation for 2013 is $8,500 for an employee with self-only coverage, and $23,000 for an employee with coverage other than self-only coverage.  There are some exceptions to this requirement, including qualified retirees or those employed in certain high-risk professions.

The employer should seek specific local benefit and legal advice. The information provided in this response is for educational purposes only and does not constitute legal advice.

Because an employer does not know an employee’s household income, there are several safe harbors available. If the cost of coverage does not exceed 9.5% of the wages the employer pays to the employee that year, as reported in Box 1 of the W-2 form, the coverage will be deemed affordable. 

An employer can also use either of the two other design-based affordability safe harbors. The Rate of Pay safe harbor provides that coverage meets the affordability standard if the employee premium share does not exceed the total of the hourly rate of pay multiplied by 130 hours per month. Employers may also use the federal poverty line approach, where coverage meets the affordability standard if employee premium share does not exceed 9.5 percent of the federal poverty line for one person. The calculation can be done using the most recently published federal poverty guidelines as of the first day of the plan year.

The employer should seek specific local benefit and legal advice. The information provided in this response is for educational purposes only and does not constitute legal advice.

Large group employers will be subject to the “Shared Responsibility” tax/penalty on January 1, 2014, unless they can take advantage of the temporary relief for health benefit plans operating on a fiscal year basis.

For an employer that as of December 27, 2012 already offers health coverage through a plan that operates on a fiscal year, there is transition relief available. 

For any employees who are eligible to participate in the plan under its terms as of December 27, 2012, whether or not they take the coverage, the employer will not be subject to a potential payment until the first day of the fiscal plan year starting in 2014.

If the fiscal year plan was offered to at least one third of the employer’s employees, both full-time and part-time, at the most recent open season, or the fiscal year plan covered at least one quarter of the employer’s employees, then the employer also will not be subject to the tax penalty with respect to any of its full-time employees until the first day of the fiscal plan year starting in 2014, provided that those full-time employees are offered affordable coverage that provides minimum value no later than that first day. 

The employer should seek specific local benefit and legal advice.  The information provided in this response is for educational purposes only and does not constitute legal advice.

The Patient Protection and Affordable Care Act (PPACA) does not dictate the terms of the relationship between the State Health Benefit Exchanges and the Broker.  There are provisions that address the creation of Navigators, and the relationship of Navigators to Exchanges, but this provision does not directly address Brokers.   The relationship between each Exchange and the Broker community will be decided at the state Exchange level.   The federal government is on the record as understanding that the active participation of Brokers will be a contributing factor to the success of the Exchange initiative.

PPACA also requires that the federal government create a federally facilitated Exchange in each state that refuses to establish a state Exchange or a joint venture between the state and the federal government.  The rules detailing how those federal Exchanges will relate to the Broker community have not been issued.  We should be seeing these rules in the near future.  These federal Exchanges will have to be operational on October 1, 2013 to begin to handle the open enrollments of individuals and small employer group members for a January 1, 2014 effective date.

The employer should seek specific local benefit and legal advice.  The information provided in this response is for educational purposes only and does not constitute legal advice.

The Patient Protection and Affordable Care Act (PPACA) requires applicable large employers that are subject to the employer shared responsibility requirements, generally those with 50 or more full-time, or a combination of full-time and full-time equivalent (FTE) employees, to make an offer of coverage to virtually all of their full-time employees and their dependents, or pay a tax penalty. 

A full-time employee is defined as working on average 30 hours per week.  An employer is permitted to use a “look-back” period of between three and twelve months to determine whether the employee has worked an average of 30 hours per week.  Coverage does not need to be offered to anyone who is not a full-time employee – this could include part-time, seasonal, or per diem hours, depending on the number of hours of service the employee worked during the “look-back” period.

If the employer in the question employs 50 or more full-time or a combination of full-time and FTEs, the employer will likely have to offer coverage to virtually all full-time employees and their dependents, or pay the tax penalty.  The coverage offered must satisfy affordability thresholds, and must cover at least 60% of the total allowed cost of benefits.  The affordability and coverage thresholds must be met for coverage offered to the employee, but need not satisfy these requirements for the employee’s dependents.

For more information on the calculation of full-time and FTEs, please click here. For more information on the minimum value of employer sponsored health plans, please click here. 

The employer should seek specific local benefit and legal advice.  The information provided in this response is for educational purposes only and does not constitute legal advice.

According to Technical Release No. 2012-02, a group health plan and a health insurance issuer offering group health coverage may not use a waiting period that exceeds 90 days.  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 the plan can become effective. 

The guidance continues, “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 under the terms of a group health plan are generally permissible…unless the condition is designed to avoid compliance with the 90-day waiting period limitation.”

If the employee takes additional time to elect coverage, the employer will not be penalized. 

The employer should seek specific local benefit and legal advice.  The information provided in this response is for educational purposes only and does not constitute legal advice.

It appears that if an employer is subject to the employer shared responsibility provisions of the Patient Protection and Affordable Care Act (PPACA), that employer must offer coverage to at least 95% of its full-time employees and their dependents regardless of whether the employee is eligible for coverage through another source.

The employee in question would not be required to accept the employer’s coverage plan and could opt out to remain on Medicare. The employer shared responsibility provision simply requires that an offer of coverage be made to full-time employees.

The employer should seek specific local benefit and legal advice.  The information provided in this response is for educational purposes only and does not constitute legal advice.
 

The IRS has clarified that companies that have a common owner or are otherwise related generally are combined together for the purposes of determining whether or not they employ at least 50 full-time employees, or a combination of full- and part-time employees.  If the combined total meets the threshold, then each separate company is subject to the shared responsibility requirements.  It appears from the facts presented that the companies will likely be aggregated and subject to employer shared responsibility requirements.  According to the Q&A, it appears that the employer will have to offer coverage to virtually all of the full-time employees.

The employer should seek specific local benefit and legal advice.  The information provided in this response is for educational purposes only and does not constitute legal advice.

According to a Q&A issued by the IRS,

“All employers that employ at least 50 full-time employees or an equivalent combination of full-time and part-time employees are subject to the Employer Shared Responsibility provisions, including for-profit, non-profit and government entity employers.”

A regulation published in the Federal Register also states that the employer shared responsibility requirement,

“Applies to all common law employers, including an employer that is a government entity (such as Federal, State, local or Indian tribal government entities) and an employer that is an organization described in section 501(c) that is exempt from Federal income tax.”

How this will work in practice remains to be seen, but the guidance is very specific that government entities must comply with this requirement, or pay a tax penalty.

2.  Weren't certain exemptions made for unions?  If so, are governmental entities part of those exemptions?

Unions have been included in some exemptions; specifically, to the extent a union plan is self-insured, the plan is exempt from having to comply with essential health benefits requirements.  In terms of the employer shared responsibility requirements, unions are not exempt from having to comply with these provisions.

The employer should seek specific local benefit and legal advice.  The information provided in this response is for educational purposes only and does not constitute legal advice.

Pursuant to a review of the Gold Card website, it appears that the program charges for preventive services.  At this time, it would not comply with the provision of the Patient Protection and Affordable Care Act (PPACA) that requires health plans cover preventive services with no out of pocket expense to the patient.   The Gold Card website states, “With a Gold Card you are still required to pay a minimum payment at each medical appointment with the exception of prenatal and pediatric appointments.”  The management of the program may modify the list of services provided by the Gold Card and may remedy this issue. 

The employer should seek specific local benefit and legal advice.  The information provided in this response is for educational purposes only and does not constitute legal advice. 

The issue of affordability is a complex question.  Beginning in 2014, federal taxpayers with household incomes between 100 and 400 percent of the Federal Poverty Level will be eligible for premium tax credits for health insurance coverage purchased through a state health insurance Exchange for themselves and members of their family. The premium tax credits are paid in advance to the health insurance provider. This advance payment will reduce the monthly premiums owed by families to purchase coverage. The Congressional Budget Office estimates that when PPACA is fully phased in, individuals receiving premium tax credits will get an average subsidy of over $5,000 per year.

Small employers may also be able to receive a tax credit that can assist with the cost of health care coverage. 

For those who make more than 400% of the Federal Poverty Level, the issue of affordability may be significant.   There are recurring references to very large premium increases that are being driven by PPACA. If you would like to read more about that issue, go here. Please note that health insurance companies and self-funded plans will not be able to charge additional premiums based upon pre-existing health conditions. Their premium rating structure that is mandated by PPACA does not allow for additional premiums based upon pre-existing health conditions.

The employer should seek specific local benefit and legal advice.  The information provided in this response is for educational purposes only and does not constitute legal advice. 

On December 15, 2011, the US Department of Health and Human Services published a series of regulations proposed to regulate the business activities of state and federal health benefits exchanges.  The summary of the regulations states:

“We propose to require that the Exchange apply appropriate security and privacy protections when collecting, using, disclosing or disposing of personally identifiable information it collects. In addition, we propose to require contractual terms that impose these standards on contractors or sub-contractors that fulfill Exchange functions or access information from or on behalf of the Exchange.” 

It further provides:

“We expect Exchanges…to execute data use agreements that prevent the unauthorized use or disclosure of personally identifiable information and prohibit the Exchange or State agency from seeking to obtain or provide information that it will not, or does not reasonably expect to use.”

These regulations clearly contemplate the ability to share personally identifiable data with Navigators who will be subject to contractual obligations to apply satisfactory security and privacy provisions to the personally identifiable information. 

Because many Exchange websites are still being created, there is no clear answer as to whether websites will be designed in accordance with these regulations, although it is likely they will operate in compliance.  As a practical matter, it is difficult to foresee how Navigators and Brokers will be able to assist individuals without that electronic capability.  Likely, as Exchanges approach the October 1, 2013 operational deadline, the IT infrastructure will be better known.

The employer should seek specific local benefit and legal advice.  The information provided in this response is for educational purposes only and does not constitute legal advice. 

Certain employers are required to report the costs of certain health coverage on employee’s W-2 forms.  Hospital indemnity or specified illness (insured of self-funded), paid through salary reduction (pre-tax) or by employer should be reported. 

To the extent that an employer withholds funds for, contributes to or pays for the Cover Colorado premiums, the employer should treat that activity the same as it treats other health insurance premiums for the purposes of reporting on employee W-2s.

The employer should seek specific local benefit and legal advice.  The information provided in this response is for educational purposes only and does not constitute legal advice. 

The Patient Protection and Affordable Care Act (PPACA) will impose a $2,500 maximum annual contribution to a health flexible spending account beginning in 2013.  According to Notice 2012-40, issued on May 30, 2012 by the IRS, the limit will apply to employee pre-tax contributions.

Small and large group plans will also be subject to limits on cost sharing:

Small Employer Group Policies:

For non-grandfathered small group health insurance policies, the most current guidance is provided by a Frequently Asked Questions page issued jointly by the US Departments of Labor, Health and Human Services, and the Treasury on February 20, 2013 which states:

“The HHS final regulation on standards related to essential health benefits implements the deductible provisions described in section 1302(c)(2) for non-grandfathered health insurance coverage and qualified health plans offered in the small group market, including a provision implementing section 1302(c)(2)(C) so that such small group market health insurance coverage may exceed the annual deductible limit if it cannot reasonably reach a given level of coverage (metal tier) without exceeding the deductible limit.”

Section 1302(c)(2)(c) provides a maximum deductible for an individual covered by a small employer group policy of $2000 and family coverage of $4000.

That same page provides the following guidance for large group plans:

“With respect to self-insured and large group health plans, as explained in the preamble to the HHS final regulations, the Departments intend to engage in future rulemaking to implement PHS Act section 2707(b)… Until that rulemaking is promulgated and effective, the Departments have determined that a self-insured or large group health plan can rely on the Departments' stated intention to apply the deductible limits imposed by section 1302(c)(2) of the Affordable Care Act only on plans and issuers in the small group market.”

Finally, the W-2 reporting requirement is an ongoing requirement.  There is no termination date for the obligation.

The employer should seek specific local benefit and legal advice. The information provided in this response is for educational purposes only and does not constitute legal advice. 

Currently there is no penalty or tax consequence for dropping out of a health plan, although many industry insiders are urging the Department of Health and Human Services (HHS) to develop such a penalty that would address the issues you raise in your question. While the authors of the Patient Protection and Affordable Care Act (PPACA) originally contemplated a federal insurance program, that concept was struck from the Act once it became clear that many senators would not sign off on that aspect. The individual mandate was then included as an alternative.

There is also no provision in the legislation or subsequently issued regulations that calls for an open enrollment period where coverage must be obtained. Lately some commenters have called for dramatically increasing the tax/penalty for refusing to buy health insurance and for a new, significant tax/penalty for dropping out of a health insurance policy.  Whether HHS implements a tax penalty remains to be seen.

The employer should seek specific local benefit and legal advice. The information provided in this response is for educational purposes only and does not constitute legal advice. 

According to the Texas Department of Insurance, a small employer is defined as a business with two to 50 eligible employees. 

To be considered an eligible employee, someone must meet all of the following requirements:

• work at least 30 hours per week
• not be a temporary, part-time, or seasonal employee
• not be covered by another group health plan.

The employer should seek specific local benefit and legal advice.  The information provided in this response is for educational purposes only and does not constitute legal advice

Currently, a small group employer will be able to take advantage of the tax credit if they purchase a policy outside of the state health insurance Exchanges.  While the amount of the credit will increase in 2014, it is not clear whether coverage purchased by small employers must be done in the small business health options (SHOP) Exchanges.  The state and federal health benefits SHOP Exchanges for small group employers will not be operational until October 1, 2013 to provide enrollment for a January 1, 2014 effective date.  If you would like to learn more about the small employer group tax credit, please go here.

The employer should seek specific local benefit and legal advice.  The information provided in this response is for educational purposes only and does not constitute legal advice. 

If the companies have their tax returns filed under the same agent, they may have to report the cost of health care coverage on the employee’s W-2 forms.

According to a FAQ released by the IRS, the transition relief available to companies that file fewer than 250 W-2 forms in the previous calendar year will not be subject to aggregation rules.  Specifically, the FAQ states, “In addition, for purposes of this relief, the employer is determined without the application of any aggregation rules.”  The transition relief is subject to one caveat: “For purposes of this relief, the number of Forms W-2 the employer files includes any forms it files itself and any filed on its behalf by an agent under § 3504.” 

An agent under IRS code section 3504 is the following:
“Under section 3504, all provisions of law (including penalties) applicable with respect to employers are applicable to the agent and remain applicable to the employer. Accordingly, both the agent and employer are liable for the employment taxes and penalties associated with the employer’s employment tax obligations undertaken by the agent. Section 31.3504-1 of the Employment Tax Regulations provides that the IRS may authorize an agent to undertake the employment tax obligations of an employer with respect to income tax withholding and FICA taxes. The agent is required to file only one return for each tax return period using the agent’s own employer identification number (EIN) regardless of the number of employers for whom the agent acts.”

Thus, it appears that if the agent files all of the W-2 returns using the agent’s own EIN, all of W-2s may be aggregated, and the employer may be subject to the W-2 reporting requirements for each company, even though individually they would not be subject to the W-2 reporting requirement.

The employer should seek specific local benefit and legal advice.  The information provided in this response is for educational purposes only and does not constitute legal advice.

The Patient Protection and Affordable Care Act (PPACA) does allow for individuals to maintain their primary care provider, as long as that provider is in the health plan’s network.  PPACA does contain other provisions that govern out-of-network benefits, in particular, emergency services must be provided without prior approval. 

An HMO can restrict the choice of primary care physicians to one who is in network.  If a physician is not in the health plan’s network, the patient would be subject to reduced, out-of-network benefits.
The employer should seek specific local benefit and legal advice.  The information provided in this response is for educational purposes only and does not constitute legal advice. 
 

The US Department of Labor provides an FAQ page that clarifies the ERISA requirement that plan administrators furnish plan information to participants and beneficiaries, and to submit reports to government agencies. 

The Patient Protection and Affordable Care Act (PPACA) refers to plan information as the new Summary of Benefits and Coverage (SBC).   In the final regulations issued on SBCs, applicants, enrollees, and policyholders or certificate holders, should be given a copy of the SBC.  Specifically, the guidance states:

“PHS Act section 2715(d)(3) places the responsibility to provide an SBC on ‘‘(A) a health insurance issuer (including a group health plan that is not a self-insured plan) offering health insurance coverage within the United States; or (B) in the case of a self-insured group health plan, the plan sponsor or designated administrator of the plan (as such terms are defined in section 3(16) of ERISA)…. In addition, consistent with the statute, the final regulations hold the plan administrator of a group health plan responsible for providing an SBC.”

The responsibility falls equally on the insurance carrier and on the plan sponsor.   As most small group employers are the plan sponsor, it is important to have this function clearly defined in the benefit contract, and have the insurer provide the SBC.

The employer should seek specific local benefit and legal advice.  The information provided in this response is for educational purposes only and does not constitute legal advice. 

In an effort to avoid adverse selection, many provisions of PPACA apply both to plans sold within and outside of state health benefit Exchanges.  Some of these provisions include:

• New and grandfathered group health plans will be prohibited from denying coverage for a preexisting health condition
• Individual and group health plans will be prohibited from basing eligibility for coverage on health status-related factors
• Individual and group health plans will be subject to nondiscrimination rules
• Group health plans and grandfathered plans will be prohibited from imposing a waiting period greater than 90 days
•  Individual and small group plans will be required to determine premiums using adjusted community rating rules 
•  Individual and small group plans must cover essential health benefits 
•  Health plans that provide essential health benefits will not be able to impose annual cost-sharing requirements that exceed the out-of-pocket limits applicable to high deductible health plans

As stated, some of these provisions apply to grandfathered plans offered outside Exchanges, and to new plans.  Others apply only to small groups, but are not required of large groups.  However, health plans offered outside of Exchanges will certainly have to comply with some PPACA requirements and will not be able to opt out of these requirements.

To date, all guidance issued on determining whether an employer qualifies as a large employer with over 50 full-time equivalent employees does not distinguish between union and non-union employees.  There also has not been any distinction made between union and non-union employees as to whether an employer must offer the individual coverage.  It appears that if an employer is subject to employer shared responsibility requirements, and thus must offer coverage to virtually all of its full time employees that the coverage must be offered regardless of an employee’s potential to obtain coverage through a union.

It does not appear that there is anything in PPACA that would prohibit employer-sponsored HRAs to fund deductibles or copays in 2014.

A recent FAQ issued by the Department of Labor suggests that stand-alone HRAs that are not integrated into other group health coverage will not be permitted after January 1, 2014.  The rationale behind this logic is that the Patient Protection and Affordable Care Act prohibits annual dollar limits on essential health benefits.  HRAs thus conflict with this provision.

The FAQ also clarifies that employer-provided HRAs will not be considered integrated, and thus will not be permitted, if the HRA:

• Provides coverage through individual policies or individual market coverage; or
• Credits amounts to an individual when the individual is not enrolled in the other, major medical coverage.

If an HRA does not meet these requirements, it appears that the HRA may still be used to reimburse expenses incurred after 2014.

In a bulletin issued by the IRS, the treatment of HRAs in calculating minimum value is addressed.  The guidance states that HHS intends to propose that,

“[I]n calculating the actuarial value of the combined HDHP and HSA or combined employer-sponsored plan and HRA, the calculation would assume that the employer contribution to the HSA or amount first made available under an HRA is used by the employee to pay for cost-sharing. Accordingly, an appropriate portion of these amounts would be credited to the numerator of the actuarial value calculation. This means that any current year HSA contributions and amounts first made available under an HRA could be used to determine the actuarial value of an employer-sponsored plan. Generally, the employer would receive the same credit for HSA contributions in the numerator of the actuarial value calculation as it would receive for the same amount of first-dollar insurance coverage. The same rule would apply for amounts first made available under an HRA.”

An additional bulletin on the treatment of HRAs in actuarial value is available here.
 

To date, there have not been any updates to Section 2716 of PPACA that prohibits discrimination in favor of highly compensated employees.  On December 22, 2010, the federal government issued Notice 2011-1 which states compliance with the non-discrimination provisions of the Protection and Affordable Care Act (PPACA) are suspended for insured group health benefit plans until an undefined date. The notification was issued by the Internal Revenue Service (IRS) in conjunction with the Department of Labor and the Department of Health and Human Services. The IRS has not issued any further notice or guidance on this issue. 

Section 2708 of PPACA mandates that insurance issuers may not impose a waiting period that exceeds 90 days.  According to a Technical Release issued by the Department of Labor,

“Consistent with PHS Act section 2708, 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 under the terms of a group health plan are generally permissible under PHS Act section 2708, unless the condition is designed to avoid compliance with the 90-day waiting period limitation.”

Thus, there may be varying conditions for eligibility in terms of waiting periods, so long as the variation is not done in an attempt to avoid compliance with the provision.

Employers that filed fewer than 250 W-2 forms in the previous year are exempt from the requirement to report health care costs on their employee’s Tax Year 2012 W-2 forms.  This transitional relief will apply to future calendar years until the IRS publishes additional guidance. 

CompuPay remains dedicated to providing you with additional information as soon as it becomes available.  It is always advisable to contact your CompuPay representative directly regarding changes to W-2 reporting.  To find contact information for your CompuPay representative, please click here for the list of client services contact numbers, or simply call 800-362-9591.

According to a proposed regulation released on December 28th by the Internal Revenue Service, a large employer subject to the employer shared responsibility provision of the Patient Protection and Affordable Care Act must provide minimum essential coverage to at least 95% of its full-time employees and their dependents.  The rule clarifies that a dependent is defined as a child under the age of 26, but not a spouse.

Employers that do not provide coverage to dependents may be able to avoid paying a tax penalty, if they are taking steps to provide dependent coverage for plans that begin in 2014.  The guidance states that if an employer takes steps during its plan year to provide dependent coverage, if the employer plan only covered employees prior to 2014, will not be assessed a tax penalty solely on account of a failure to offer coverage to the dependents.

Employers that filed fewer than 250 W-2 forms in the previous year are exempt from the requirement to report health care costs on their employee’s Tax Year 2012 W-2 forms.  This transitional relief will apply to future calendar years until the IRS publishes additional guidance.

On January 30, 2013, the Treasury Department and IRS released final regulations on the premium tax credit affordability test for related individuals.  This guidance clarifies that an eligible employer-sponsored plan is affordable for related individuals if the portion of the annual premium the employee must pay for self-only coverage does not exceed 9.5% of the taxpayer’s household income. 

There are also three separate safe harbors an employer can utilize to determine if the plan is affordable.  The three methods are as follows:

1. Form W-2 Safe Harbor: compare the amount of employee contribution for self-only coverage for your lowest plan that meets minimum value with the amount of the employee’s current W-2 wages.  Coverage will be deemed affordable if the amount of the employee contribution is less than 9.5% of reported wages.

2. Federal Poverty Line Safe Harbor: if the cost of self-only coverage under the employer-sponsored plan does not exceed 9.5% of the federal poverty level for a single individual, coverage will be deemed affordable.

3. Rate of Pay Safe Harbor: Take the hourly rate of pay for each hourly employee who is eligible to participate in the plan year, multiply that amount by 130 hours per month, and determine if the cost of coverage is 9.5% of the total rate of pay.

To date there has not been any guidance issued that outright prohibits health reimbursement accounts (HRAs).  However, a recent FAQ issued by the Department of Labor suggests that stand-alone HRAs that are not integrated into other group health coverage will not be permitted after January 1, 2014.  The rationale behind this logic is that the Patient Protection and Affordable Care Act prohibits annual dollar limits on essential health benefits.  HRAs thus conflict with this provision.

The FAQ also clarifies that employer-provided HRAs will not be considered integrated, and thus will not be permitted, if the HRA:

• Provides coverage through individual policies or individual market coverage; or
• Credits amounts to an individual when the individual is not enrolled in the other, major medical coverage.

If an HRA does not meet these requirements, it appears that the HRA may still be used to reimburse expenses incurred after 2014.

To date, many provisions of the Patient Protection and Affordable Care Act (PPACA) have been delayed, amended, or implemented as written.  Because some provisions have changed, employers will not be required to comply with these provisions.  An example of a provision that has been indefinitely delayed includes the written notice an employer must give to employees about state health benefit Exchanges, scheduled to be implemented by March 1, 2013.  Recent guidance issued by the Department of Health and Human Services (HHS) indefinitely delayed this provision, perhaps until late summer or early fall of 2013.

Employers will have to comply with other provisions as written.  One preeminent provision due to take effect on January 1, 2014 impacts large employers.  The employer shared responsibility provision requires large companies with over 50 full-time equivalent employees to provide virtually all of those employees, and their dependent children under age 26, with minimum essential coverage.  While January 1, 2014 seems like a hard deadline, the rule has become nuanced.  Recently released regulations state that while employers must provide this coverage to their full-time employees by January 1, if the employer did not cover dependents and takes affirmative steps to implement coverage for dependents in 2014, that employer will not be penalized for failing to provide dependent coverage in 2014.

The automatic enrollment provision of PPACA requires that for plan years beginning n or after January 1, 2014, a group health plan or health insurance issuer offering group health insurance coverage shall not apply any waiting period that exceeds 90 days.  To date, it appears that employers must comply with this provision beginning on January 1, 2014.

PPACA is a complex law, with countless provisions that are becoming increasingly nuanced as the law moves towards full implementation.  Employers will be required to comply with some provisions, but not others, in 2014.  The best advice is for employers to remain vigilant of guidance issued by HHS, the Department of Labor, and the Internal Revenue Service, and to work with various professionals to determine whether they are required to comply with those provisions. 

Guidance was issued in May, 2012, about when carriers must submit their annual calculations.  Carriers must provide a report to the Department of Health and Human Services by June 1st of each year on how it used its premium revenue.  The first report was due on June 1, 2012.  Without further clarification from HHS, it appears as though calculations should be submitted by June 1.

According to a paper issued by the Congressional Research Service, health insurers that do not meet minimum medical loss ratio (MLR) requirements must issue a rebate to policyholders by August 1 each year following the calendar year used in calculating the MLR.  Thus, the issuer must issue the 2012 rebate by August 1, 2013, and the 2013 rebate by August 1, 2014.

Currently, there are no regulations or guidelines that apply specifically to a Professional Employer Organization (PEO).

The general provisions of the Patient Protection and Affordable Care Act (PPACA) apply to a Professional Employer Organizations (PEO), just as they would apply to any employer of a similar size.

PPACA does have one provision that directly impacts many PEOs that directly handle other employer’s payroll services.   Employers may delegate the completion of employee W-2 forms to their PEO.  When that occurs, a PEO is obligated to comply with the PPACA requirement that certain employers must include the cost of an employee’s health benefit on the employee’s W-2.  

The IRS offers a Frequently Asked Questions page on their website that highlights the key points of the W-2 issue.  In addition, more information about the IRS interim rules in this subject may be found in Notice 2011-28 and the instructions for the 2011 Form W-2.  You may go here to read more on the new PPACA W-2 filing requirements.

In addition to that direct requirement, a prudent PEO should be conversant on a host of general PPACA issues that will have substantial impact on their clients.   A short list of those general issues should include:  the Individual Mandate,  employer “Shared Responsibility” provisions , Essential Health Benefits requirements, state or federal health benefits exchanges, non-discrimination testing, the small group employer tax credit, and the auto enrollment requirements.

Under the employer responsibility section of the Patient Protection and Affordable Care Act, section 4980, part-time workers are to be counted in setting the threshold for employer responsibility.  The statute states,

“Solely for the purposes of determining whether an employer is an applicable large employer under this paragraph, an employer shall, in addition to the number of full-time employees for any month otherwise determined, include for such month a number of full-time employees determined by dividing the aggregate number of hours of service of employees who are not full-time employees for the month by 120.”

Thus, full-time equivalent employees are the aggregate number of part-time employees whose hours of service are totaled and divided by 120.

The Emergency Medical Treatment and Active Labor Act (EMTALA) provides that if the urgent care center is part of a hospital facility, the urgent care center must provide emergency care to all patients, regardless of the individual’s ability to pay.  If the urgent care center is not part of a hospital facility, the center has the ability to deny care based upon the inability or prior refusal to pay.

The Patient Protection and Affordable Care Act does not directly address urgent care centers except to clarify appeals processes for insurers, and to provide grant opportunities for community health centers to fund urgent care clinics.

It appears that the employee may remain on Medicare and opt out of the employer-sponsored coverage.

As of January 1, 2014, every individual must obtain appropriate insurance coverage or pay a tax/penalty.  Coverage must meet affordability and minimum value requirements.  Likewise, certain employers must offer appropriate coverage to virtually all of their full-time employees and their dependents, or pay a tax/penalty.

For those over the age of 65 who are still working, employers are prohibited from dropping that individual from the employer’s group health plan without violating the federal Age Discrimination in Employment Act (ADEA).  Individuals over 65 must be offered health benefits that are equal to benefits offered to other employees, however, this is not the case for retirees.

If an individual wants to stay on Medicare, it does satisfy minimum essential coverage, and will meet affordability thresholds.  The only time an employer will be penalized for an employee not accepting appropriate coverage is if the individual applies for and receives a subsidy through an Exchange. If the employer is subject to the employer mandate and does not provide coverage, the employer will still be assessed a penalty even if the employee in question is covered through other means. 

In 2014, employers with more than fifty full-time employees must offer health insurance coverage that meets affordability criteria to at least 95% of their employees, or pay a tax/penalty.  The employer in this situation would be required to provide appropriate coverage to 95% of their employees, or pay the tax/penalty.  

As long as an employer offers appropriate coverage to their employees, it is irrelevant if the employees accept or reject the coverage in favor of their spouse’s coverage. The employer’s responsibility is solely to offer coverage, not mandate each employee accepts the coverage. 

Employers are also responsible for providing coverage that meets affordability and the minimum value thresholds in the Patient Protection and Affordable Care Act (PPACA).

As long as the employee contribution remains at or below 9.5% of the employee’s wages paid by the employer, the employer-sponsored health insurance benefit will be deemed “affordable.” If an employee rejects the employer sponsored health benefit and seeks coverage through a state health benefit Exchange, and receives a premium subsidy, the action will not subject the employer to the $3,000 shared responsibility.

Coverage must also meet minimum value thresholds.   An employer-sponsored health benefit plan will not meet the minimum value threshold if the plan’s share of the total allowed costs of benefits provided under the plan is less than 60 percent.   The total costs include the employee contribution to premiums, deductibles, co-pays and any other out of pocket expenses for the health benefits.  If a full-time employee of a large employer (generally defined as 50 and above FTEs) rejects the employer sponsored health benefit, and accesses an individual policy via a state health benefit Exchange and receives a premium subsidy, and the employer sponsored health benefit does not meet or exceed at least 60% of the actuarial estimate of average costs, the employer may be liable for a shared responsibility tax/payment for the coverage purchased through the Exchange. 

The insurance carrier can assist in the determination of the minimum value threshold for an employer sponsored health benefit plan.

The Patient Protection and Affordable Care Act (PPACA) requires that a transitional reinsurance program be established in every state.  The program, called the Risk Adjustment Program (RAP) will apply to insurers and third party administrators in the individual market and to the small employer group market.  Guidance issued by the Center for Consumer Information & Insurance Oversight (CCIIO) states, “Section 1343 of the Affordable Care Act directs States, or HHS on behalf of a State, to operate a risk adjustment program that includes all non-grandfathered plans in the individual and small group market both inside and outside of the Exchange market.”

The program applies both to the individual and small employer group markets.  According to a rule published on March 23, 2012 by the Department of Health and Human Services (HHS), for the purposes of the RAP assessment, a small group is defined as averaging up to 100 full-time equivalent employees (FTE).  The fee generated from the individual market and the small employer group market will be kept as two separate pools. 

Finally, the RAP applies to all licensed insurers and third party administrators handling self-funded plans, offered both within and outside of state health benefit Exchanges.

A proposed rule that was recently issued provides some additional guidance on this issue.

On December 28th, the Internal Revenue Service issued a proposed regulation that clarifies the employer shared responsibility requirements.  The rule provides some transition relief for employers that already offer health coverage through a fiscal year plan.  The rule stipulates that if an employee is eligible to participate in the plan as of December 27, 2012, the employer will not be subject to a potential payment until the first day of the fiscal plan year beginning in 2014.  Also, if the fiscal year plan was offered to at least one third of the employer’s employees at the most recent open season or the fiscal year plan covered at least one quarter of the employees, the employer will not be subject to any payments until the first day of the fiscal plan year in 2014.

There is no definitive answer to this question.   There is a reference in the Patient Protection and Affordable Care Act (PPACA) that addresses black lung disease and workers compensation, called the Black Lung Benefits Act, aimed at facilitating claims and obtaining benefits from injured coal workers, PPACA is largely silent on workers compensation issues.  The Department of Health and Human Services and The Department of Labor have not addressed this issue via their rule making authority, and their websites are silent on the issue.

The pre-existing exclusion prohibition does not take effect until 2014.   We can only assume that this issue will be addressed by the federal regulatory agencies by that time.

It appears that a Medicare eligible person can participate in Exchanges.

As of 2014, every individual must have minimum essential coverage.  Various government sponsored programs qualify as minimum essential coverage, including Medicare and Medicaid.  Qualified health plans (QHP) sold through Exchanges will also qualify as minimum essential coverage.

While PPACA makes it clear that individuals will not be forced to purchase coverage through an Exchange, some individuals will not be eligible to purchase coverage through Exchanges.  These individuals include those not legally present in the U.S. and those who do not satisfy residency requirements.

While it does appear the Medicare eligible person can participate in Exchanges, that individual will not be eligible for any premium credits.  Any individual who is eligible for employer sponsored coverage, Medicare or Medicaid will not be granted a premium subsidy.  The electronic eligibility software that all exchanges must have in place by 2014 will automatically defer an age appropriate person to Medicare coverage.

The short answer to your question is yes, but there are details that have yet to be addressed.

The US Departments of Health and Human Services, Labor, and the Treasury issued regulations that address your issue.  The most current federal regulations on this issue provides:

“(4) Form--(i) An SBC provided by an issuer offering group health insurance coverage to a plan (or its sponsor), may be provided in paper form. Alternatively, the SBC may be provided electronically (such as by email or an Internet posting) if the following three conditions are satisfied--

    (A) The format is readily accessible by the plan (or its sponsor);

    (B) The SBC is provided in paper form free of charge upon request;

and

    (C) If the electronic form is an Internet posting, the issuer timely advises the plan (or its sponsor) in paper form or email that the documents are available on the Internet and provides the Internet address.

    (ii) An SBC provided by a group health plan or health insurance issuer to a participant or beneficiary may be provided in paper form.

Alternatively, the SBC may be provided electronically (such as by email or an Internet posting) if the requirements of this paragraph (a)(4)(ii) are met.

    (A) With respect to participants and beneficiaries covered under the plan, the SBC may be provided electronically if the requirements of 29 CFR 2520.104b-1 are met.

    (B) With respect to participants and beneficiaries who are eligible but not enrolled for coverage, the SBC may be provided electronically if--

    (1) The format is readily accessible;

    (2) The SBC is provided in paper form free of charge upon request; (3) In a case in which the electronic form is an Internet posting, the plan or issuer timely notifies the individual in paper form (such as a postcard) or email that the documents are available on the Internet, provides the Internet address, and notifies the individual that the documents are available in paper form upon request.” (Emphasis Added.)

Thus, it appears as though the employer may be provided electronically as long as the format is readily accessible, a paper copy can be provided without charge, and the email notification is made in a timely manner. 

CMS has provided further technical information on the issue.

The Center for Consumer Information and Insurance Information has an FAQ on the issue.

No.  The “Shared Responsibility” clause of the Patient Protection and Affordable Care Act (PPACA) mandates that employers with 50 or more full time equivalent employees shall provide affordable health benefits to employees as of January 1, 2014.  There is no requirement for employers to provide appropriate coverage to their employees in 2013. 

For more information on the Shared Responsibility Clause, you may go here.

The Patient Protection and Affordable Care Act (PPACA) does not require your client to provide coverage for employees at this time.  The Individual Mandate provision requirement contained in PPACA does not become effective until 2014.   If the employee in question is the only employee of the company, the small group exemption that applies to companies with 49 or fewer full-time equivalent employees (FTE) comes into play, and the employer is not obligated to provide coverage, or risk a tax/penalty.  At this time, there is nothing in the body of PPACA or related guidance and regulations that will require your client to, or prohibit your client from, providing an individual policy to the one employee in his company.

If you would like to learn more about how PPACA applies to small groups, HHS has a fact sheet that you can access here.

If you would like to learn more about the “Shared Responsibility” mandate in PPACA, the IRS has an FAQ on their website which you can access here.

PPACA gives states the flexibility to amend the current definition of a small employer group for the purpose of purchasing health care coverage through a state health benefits exchange.  States are free to determine the appropriate number between 50 and 100 employees for the calendar year 2014.  By 2016, all states must redefine a small employer group to 100 or fewer employees.  

To date, it does not appear that either New York or the federal government has defined how many employees constitute a small employer group. 

 PPACA contains provisions that require health insurance companies to spend minimum percentages and disclose how much of their health insurance premium is spent on claims and health care improvement activities pursuant to established Medical Loss Ratio (MLR) requirements.   Specifically, insurance companies must comply with MLR standards that mandate small group insurers spend at least 80%, and large group insurers spend 85% of the premium dollar on health care claims and quality improvement programs.  BenefitMall has written extensively about this issue.  Click here for additional background.

The funds received by an employer-sponsored group health plan in the form of a rebate check, may be subject to Title 1 of ERISA and qualified as plan assets.  For those health plans that are covered by ERISA, the rebate of an employee’s contribution will become a plan asset in proportion to the percentages or the amount they paid. 

Employers have three options on what they can do with the proceeds of a rebate check:

1. An employer can reduce the employees’ portion of the annual health insurance premium for the next policy year.

2. An employer can reduce the employees’ portion of the annual premium for the next policy year, but only for only those employees who were covered by the group health policy on which the rebate was based.

3. An employer can provide a refund check to each of the employees who were covered by the group health policy on which the rebate was based.  The amount of the check written to an employee should be pro-rated according to the amount that the employee contributed to the premium paid for the health benefit of the employee.

How an employer chooses to proceed in applying or expending the plan's portion of a rebate is subject to ERISA's general standards of fiduciary conduct.

How does an employer determine how much of the rebate check should be returned to which covered employees?

The US Department of Labor issued a guidance that provides considerable insight on this issue.   The guidance provides the following:

“Thus, if the employer paid the entire cost of the insurance coverage, then no part of the rebate with respect to this particular policy would be attributable to participant contributions.

However, if participants paid the entire cost of the insurance coverage, then the entire amount of the rebate would be attributable to participant contributions and considered to be plan assets.

 If the participants and the employer each paid a fixed percentage of the cost, a percentage of the rebate equal to the percentage of the cost paid by participants would be attributable to participant contributions.

If the employer was required to pay a fixed amount and participants were responsible for paying any additional costs, then the portion of the rebate under such a policy that does not exceed the participants' total amount of prior contributions during the relevant period would be attributable to participant contributions.

Finally, if participants paid a fixed amount and the employer was responsible for paying any additional costs, then the portion of the rebate under such a policy that did not exceed the employer's total amount of prior contributions during the relevant period would not be attributable to participant contributions.”

In most cases, the employee in this scenario cannot go to an exchange and get coverage, and is not eligible for a premium subsidy.

Is the Employee Eligible for a Premium Subsidy?

To facilitate low to moderate income individuals who are not eligible for coverage, Exchanges offer premium subsidies in the form of tax credits.  To be eligible for a premium subsidy, individuals must not have access to other coverage and have incomes from 100% to 400% of the federal poverty level (FPL).  Here, because the employee has access to coverage, the employee is not eligible for a premium subsidy.

One issue for employers to note concerns PPACA’s affordability threshold as it relates to coverage.  According to PPACA as written, employees must accept their offer of job-based coverage, even if that coverage is more costly or less comprehensive than other plans.  However, premium costs must be less than 9.5% of the employee’s income.  Thus, employee coverage that exceeds this threshold will not be deemed affordable.  If coverage is not affordable, that employee will qualify for a premium subsidy and the employee could receive coverage through the Exchange.  Once one employee is certified under an Exchange, the tax penalty can be levied against the employer. 

If the Employee is not Eligible for a Subsidy, may they still Obtain Coverage via an Exchange?
Just as the employee is not eligible to receive a premium subsidy, the employee is not entitled to receive coverage from an Exchange because they are eligible to receive coverage through an employer plan.  Qualified individuals must be offered coverage through the Exchange.  A qualified employee is defined as an individual employed by a qualified employer who has been offered health insurance coverage by such qualified employer through the SHOP.

Because the employer in this scenario is not offering coverage through the SHOP, the employee would not be classified as a qualified employee. 

The employee is also not eligible to go to the Exchange as a qualified individual, defined as an individual who has been determined eligible to enroll in a qualified health plan in the individual market offered through the Exchange.  Qualified individuals are defined as US citizens and legal immigrants who are not incarcerated and who do not have access to affordable employer coverage.  Therefore, the employee in this scenario would not be a qualified individual and cannot access coverage through the Exchange.

Could the Employer be Subject to a Tax Penalty?
Finally, the employer in this situation would not be subject to a tax liability.  Large employers must provide coverage for their full-time employees beginning in 2014.  If an employer offers coverage that satisfies the minimum essential coverage threshold, as in this example, the employer will not be subject to a tax penalty.  The tax penalty will only be assessed if both a) the coverage offered fails to meet the minimum essential coverage threshold AND b) one full time employee is certified to claim the tax credit.  Therefore, no tax penalty will be assessed if the employer provides coverage that satisfies minimum essential coverage.

Under the Patient Protection and Affordable Care Act (PPACA), insured group health plans were to be subject to nondiscrimination requirements effective with their first plan year beginning after September 23, 2010, i.e., January 1, 2011 for calendar-year plans.  On December 22, 2010, however, the Internal Revenue Service issued Notice 2011-1 stating that insured plans will not have to comply with the new nondiscrimination requirements until further guidance is issued.  The Internal Revenue Service has not issued any further notices on the issue.

The Patient Protection and Affordable Care Act (PPACA), and subsequent regulations call for the following charges that will be levied against insurance carriers in addition to the $1 Patient Care Fee contemplated in the question: 

The “Premium Stabilization Program" Fees
On December 7, 2012, the US Department of Health and Human Services (HHS) released proposed regulations that provide guidance on the premium stabilization programs created by PPACA.  The intent of the premium stabilization programs is to provide insurers with a higher degree of revenue stability and decrease the impact of adverse actuarial risk. 

Temporary Transitional Reinsurance Program (TTRP) - Effective 2014 through 2016
PPACA mandates that each state shall create and operate a temporary transitional reinsurance program (TTRP).  If a state refuses to do so, the federal government shall establish a TTRP for the state.  The purpose of the TTRP is to provide certainty and help stabilize the premiums charged in the individual market to alleviate the need to charge extra premium for individuals enrolling in 2014 with “unmet” medical needs.

The charge will be levied on all insurance and self-funded health plans on a per capita basis.  The TTRP will not apply to Medicare and Medicaid programs, or to most Flexible Spending Accounts, Health Savings Accounts, EAP plans, wellness programs and disease management programs. 

The regulation establishes that HHS shall hold and distribute the funds to the individual insurance plans.   HHS will be responsible for estimating the amount needed to conduct this program, for collecting the funds and for distributing the funds to the individual insurance carriers.  States that establish their own programs will have to conduct their programs consistent with the federal program.

HHS has initially estimated the first year’s administrative expenses for this program to be approximately $20.3 million. This produces an estimated per member annual contribution rate of $0.11 for the administration of the reinsurance program.

HHS also estimates that the program will cost an additional $5.25 per member per month (PMPM) in benefit year 2014. This estimated fee on an annual basis will increase plan costs for employers by $63 per member and will apply to insured and self-funded health plans in both the small and large group markets.

Risk Adjustment Program (RAP) – Effective 2014 with no termination date
The Risk Adjustment Program (RAP) is intended to offset the impact of adverse selection in the individual and small group insurance markets.  It will apply to individual and small group plans offered both inside and outside the state and federal health benefit exchanges.  The program will transfer funds from lower risk plans to higher risk health plans.  States have the flexibility of establishing their own RAP or the federal government will operate one within a defaulting state. 

The RAP is predicated on the concept that premiums should reflect benefits, not the health status of the persons covered by the health plan.  HHS intends to create a process utilizing demographic characteristics, recorded diagnoses, and additional variables of an individual that will compute an estimated cost of the health care services for the individual’s risk score.  HHS will then average all the individual risk scores to develop the health plan’s average actuarial risk score. A health plan’s average risk score and its specific cost factors relative to averages within the state will determine whether the plan is assessed a charge or receives payments or funds from other plans.

HHS estimates that it will require approximately $20 million to operate the RAP, and that the PMPM would fee will be no more than $1 per member for 2014.

Temporary Risk Corridor Program (TRCP) - Effective 2014 through 2016
The Temporary Risk Corridor Program (TRCP) will be operated by HHS and is designed to lessen the risk of Qualified Health Plans (QHP) having to anticipate premiums for 2014 given the difficult actuarial issues in the current environment.  As of 2014, the PPACA provision prohibiting adverse selection based on pre-existing conditions will become effective.  Anticipating the cost of this change is difficult in of itself.  The TRCP regulation proposes that QHPs will be permitted to include profits and taxes within its risk corridor calculations consistent with the Medical Loss Ratio (MLR) calculations.  The regulation further anticipates that the MLR rebate calculations for 2014-2016 will need to be amended to allow reinsurance funds, risk corridor payments and risk adjustment payments and credits to be included in the MLR calculations.  The administrative costs of this program have not been disclosed by HHS.

The risk sharing issues discussed above involve complex actuarial issues.  If you desire more information on this topic, CCIIO has a webpage on Risk Adjustment issues in PPACA.   For a detailed discussion on PPACA risk sharing actuarial issues, CCIOO has issued an interim White Paper on the issue located here.

The Cost of Operating the State and Federal Health Benefits Exchange Fees
PPACA mandates that all exchanges must be financially self-supporting by 2015.  The legislation anticipates that there will be no further federal funds for the ongoing operational costs of the health benefits exchanges.  

At this time, none of the states that have chosen to establish a state health benefits exchange have released estimates on the fee they will levy to cover the cost of their respective state health benefits exchanges. 

Section 1311(d)(5)(A) of PPACA authorizes a federal health benefits exchange to charge a user fee to QHPs to generate revenues to cover the cost of its operations.  On November 30th of last year, HHS issued new regulations concerning the operation of the federal health benefits exchanges that will be established in the states that refuse to establish their own state health benefits exchange.  The regulation provides that the federal health benefits exchange will levy a fee of 3.5% of premiums to cover the operating expenses of the federal health benefits exchange.  The fee is subject to change based upon future costs.

As of this posting, there has not been any guidance issued by the IRS or the Department of Labor that answers this question.

Phone calls to these two agencies were met with the response that the issue is yet to be clarified, but that a clarification will be forthcoming.

This issue should be addressed before it becomes a problem in 2014.  We will continue to monitor these agencies’ guidance and notice websites and will update you when clarification has been issued.

The Patient Protection and Affordable Care Act amended the Fair Labor Standards Act (FLSA) to require all employers notify their employees no later than March 1, 2013, of specific information concerning state health benefits exchange opportunities.  The amendment mandates employers to inform their  employees of the following:

·        The existence of a state or federal health benefit exchange in their state;

·        A description of the services offered by the exchange;

·        Contact information for the exchange’s customer service personnel;

·        Information on how an employee may be eligible for federal premium tax credits or a cost-sharing reduction if the employer's plan does not meet certain requirements;

·        Information detailing that if that if an employee purchases a qualified health plan through an exchange, the employee may lose any employer contributions toward the cost of employer sponsored health benefit coverage;

·        Information that some or all of the employer contribution to employer-sponsored health benefit plans may be excluded for federal income tax purposes; and

·        An explanation of appellate rights.

The law also provides readability and accessibility standards.

On March 27, 2012, HHS issued final regulations concerning the establishment of health benefits exchanges and exchange standards for employers, including notice requirements.   It is interesting to note that at this time, there is no penalty provided for failing to comply with the notification requirements.   Further additional information will be forthcoming from the U.S. Department of Labor prior to the March 1, 2013, deadline.

Yes, currently there appears to be an inconsistency but this might be explained in part because the IRS rules have not been finalized.

Reporting the Cost of Aggregate Healthcare on Employee W-2 Forms:

HSAs are not to be included in the aggregate reportable costs for the employee’s W-2 in box 12 using code DD. 

Employers may report the cost of HRAs on Form W-2, Box 12, Code DD, but the reporting is optional. 

The inclusion of this information does not change the requirements with respect to taxable income or the tax exclusion for amounts paid for medical care or coverage. 

Calculating the Excise Tax Assessed Against High-Cost Health Plans:

HSAs are to be included in determining the amount of high cost health plans that will be assessed the excise tax.

Supplemental guidance issued on calculating the excise tax indicates that HRAs should be included in the calculations. 

Thus, although some of this information will be omitted for the purpose of calculating taxable income, the information will be included in determining whether the plan is subject to the excise tax.

Inconsistency in Guidance

It appears that the IRS treatment of HSAs is inconsistent across the board in that they are not to be reported as aggregate reportable coverage for the purpose of calculating taxable income, yet they are to be included in excise tax calculations. 

The treatment of HRAs is more consistent, in that they can be reported as taxable income at the employer’s discretion and are to be used in the excise tax calculations. 

At this point in time, the two interim IRS rules that govern aggregate reportable coverage and the calculation of the excise tax appear not to be consistent.  We will provide further guidance once the IRS has clarified this issue. 

IRS Notice 2011-28 addresses this issue.  

In general, Section 6051 (a) of the Patient Protection and Affordable Care Act (PPACA) requires that “the aggregate cost of applicable employer-sponsored coverage must be included in the information reported on a W-2 form.”  The amount to be reported is defined as any coverage under any group health plan made available to the employee by an employer which is excludable from the employee’s gross income, or would be so excludable if it were employer-provided coverage. 

In terms of COBRA specific compliance, a Q&A of the Miscellaneous Excise Tax Regulations provides that if topics relating to COBRA continuation coverage that are not specifically addressed, an employer must operate in good faith compliance with a reasonable interpretation of statutory requirements.

The guidance issued by the IRS clearly states that employers who provide coverage under a self-insured group health plan that is subject to federal continuation coverage requirements must report the cost of coverage on the W-2.  Specifically, federal continuation requirements include COBRA requirements.  The question then becomes how the employer calculates the reportable cost for a period under the COBRA applicable premium method. 

A good faith reading of the requirements can be interpreted as follows: if the employee terminates and goes on COBRA coverage for part of the year, the employer has two options.  The employer can report the cost of COBRA coverage for the balance of the months of the year or report only the amount provided for the months in which the employee actively was employed.   An employer must use one or the other reporting method for all terminating employees.

If the retiree receives no salary for the year, the employee will not receive a Form W-2.  If no W-2 is issued for the purposes of reporting income, there is no obligation to report the value of health coverage to a retired employee. 

BenefitMall will issue a comprehensive checklist that Brokers, Employers, and other individuals can utilize to ensure they are compliant with various upcoming PPACA provisions.  This checklist will clearly outline what provisions will be implemented in 2013, and what you need to know to stay in compliance.  Stay tuned for the 2013 Checklist!

The Employer Shared Responsibility provisions of the Patient Protection and Affordable Care Act (PPACA) and subsequent regulations only apply to employers with 50 or more full time equivalent employees.  Employers with fewer than 50 full time equivalent employees do not have to provide health care coverage to employees.  Employers with 50 or more full time equivalent employees must provide appropriate coverage or pay a tax penalty.  Because your employer group consists of less than 50 full time equivalent employees, the employer will not be subject to the employer shared responsibility provisions, and will not be assessed a tax/penalty for not providing health benefits to each employee.

Specifically, Sections 1513 and 10106 of PPACA, (P.L. 111-148), as amended by§1003 of the Health Care and Education Reconciliation Act of 2010 (P.L. 111-152) and Internal Revenue Code §4980H(c)(2) mandate that employers employing 50 or more full time equivalent personnel must provide “affordable” health benefits to employees working more than 30 hours per week.  Most employers with at least 50 full-time equivalent employees will be subject to tax/penalties beginning in 2014 if one or more of their full-time employees obtain a premium credit through a state health benefits exchange.  If your employer has less than 20 full time equivalent employees, that employer is not required to provide appropriate health care coverage to their employees.

The only exception that exists in the body of statutes, rules, guidances and bulletins emanating from the Patient Protection and Affordable Care Act is that if a worker works full time for less than 120 days, it is exempt from the calculations, and that the calculations are based upon the number of hours worked within a month.  If the person worked 30 hours or more for 10 months, then they are working that number of hours for 10 months.  The ten months clearly exceeds the 120 day exclusion, therefore those persons are included in the total number of persons employed for each of those months.    The penalties are dependent on being calculated for each month, and upon a total being divided by 12.  There are no examples offered that use a divisor of anything but 12, representing 12 months of the year.

I was unable to locate any specific data in the PPACA or in the rules to date that specifically referred to limiting discounts offered by chamber plans, association plans or fraternal plans.I called the US Chamber of Commerce and talked with their government relations personnel.   They said that there is nothing in the health care reform legislation that would make this arrangement illegal.  They also said things could change with each new version of the rules, but nothing to date. 
I have a response for Question #46 Concerning Association Plans being rendered illegal by PPACA. I have repeatedly looked for any content in PPACA and the rules concerning association plans and have not been able to find any references specific to those kinds of plans.

I finally gave up and called a trusted source of information on health care reform.  The reference below is from Jean Holliday who is a senior staffer at the NC Department of Insurance.   I have known Jean for over 20 years.  She has been a very active participant in the NAIC deliberations and negotiations with HHS on the health insurance reform initiatives.   I trust her opinion implicitly.   She states:

I am not familiar with anything in the ACA or state insurance laws which prohibits the delivery of health insurance coverage through an association or blanket policy…however, it’s possible that if the association or blanket plan is using individual underwriting on health status for access to the insurance, then it’s  possible, depending on the type of insurance coverage we are talking about, that they will be prohibited from that type of underwriting in 2014.

It is based upon the employee premium total. 

The Patient Protection and Affordable Care Act provides the following:
SEC. 5000A. REQUIREMENT TO MAINTAIN MINIMUM ES21 SENTIAL COVERAGE.
(1) INDIVIDUALS WHO CANNOT AFFORD COVERAGE-
‘(A) IN GENERAL- Any applicable individual for any month if the applicable individual’s required contribution (determined on an annual basis) for coverage for the month exceeds 8 percent of such individual’s household income for the taxable year described in section 1412(b)(1)(B) of the Patient Protection and Affordable Care Act. For purposes of applying this subparagraph, the taxpayer’s household income shall be increased by any exclusion from gross income for any portion of the required contribution made through a salary reduction arrangement.

Additional substantiation of this position can be found in a Congressional Research Office publication on the same topic.  The following is taken from the Congressional Research Office document titled “Individual Mandate and Related Information Requirements under ACA” that may be accessed here.  The document provides:
“Certain other individuals (and their dependents) may be exempt from the penalty, including any individual whom the Secretary of HHS determines to have suffered a hardship with respect to the capability to obtain coverage under a qualified health plan. In addition, individuals (and their dependents) whose household income is less than the filing threshold for federal income taxes for the applicable tax year will not be subject to a penalty, as well as those whose required contribution for self-only coverage10 for a calendar year exceeds 8% of household income.11 After 2014, the 8% will be adjusted to reflect the excess rate of premium growth above the rate of income growth for the period.12

10 Required contribution is defined as (1) in the case of an individual eligible to purchase minimum essential coverage through an employer (other than through the exchange), the portion of the annual premium that is paid by the individual for self-only coverage, or (2) for individuals not included above, the annual premium for the lowest cost bronze plan available in the individual market through the exchange in the state in which the individual resides, reduced by the amount of the premium credit for the taxable year.
11 Household income is defined as the modified adjusted gross income (MAGI) of the taxpayer, plus the aggregate
MAGI of all other individuals for whom the taxpayer is allowed a deduction for personal exemptions for the taxable year. Modified adjusted gross income is defined as adjusted gross income increased by foreign earned income (section 911 of the IRC) and any amount of tax-exempt interest received or accrued by the taxpayer during the taxable year.
12 Originally, under ACA Section 10108, all employers, regardless of the number of employees, who offered minimum essential coverage and contributed toward that coverage, had to also provide “free choice vouchers” to employees who met certain income and other conditions. Section 10108 was repealed by Department of Defense and Full-Year Continuing Appropriations Act, 2011, P.L. 112-10.”

No, apparently PPACA does not amend COBRA obligations.   Mr. Taylor has an interesting question.   The US Department of Labor has a resource page that explains how PPACA impacts COBRA coverage.  The information page states ( see Q3 below) that PPACA does not eliminate COBRA or change the COBRA rules.

The answer is yes, that is a correct statement.

http://www.gpo.gov/fdsys/pkg/PLAW-11...111publ148.pdf

Section 1302, paragraph C which may be found on page 166 in the link above:
(2) ANNUAL LIMITATION ON DEDUCTIBLES FOR EMPLOYERSPONSORED
PLANS.—

(A) IN GENERAL.—In the case of a health plan offered in the small group market, the deductible under the plan shall not exceed—
(i) $2,000 in the case of a plan covering a single individual; and
(ii) $4,000 in the case of any other plan.
(B) INDEXING OF LIMITS.—In the case of any plan year beginning in a calendar year after 2014—
(i) the dollar amount under subparagraph (A)(i) shall be increased by an amount equal to the product of that amount and the premium adjustment percentage under paragraph (4) for the calendar year; and
(ii) the dollar amount under subparagraph (A)(ii) shall be increased to an amount equal to twice the amount in effect under subparagraph (A)(i) for plan years beginning in the calendar year, determined after application of clause (i). If the amount of any increase under clause (i) is not a multiple of $50, such increase shall be rounded to the .next lowest multiple of $50.
(C) ACTUARIAL VALUE.—The limitation under this paragraph shall be applied in such a manner so as to not affect the actuarial value of any health plan, including a plan in the bronze level.

The status of a New Hampshire state health benefit exchange is undefined at this time.  There are no references to any commission structure having been established for a New Hampshire state health benefit exchange.  There isn’t a clear cut answer to the question because the State of New Hampshire has not passed legislation authorizing the establishment of a state health benefits exchange and attempts on the part of the Governor and Insurance Commissioner to move forward have been forestalled by the state legislative branch.  

I was not able to locate via a literature search any references to any action that would indicate that a decision has been made to establish a commission structure for Brokers selling insurance through a state health benefits exchange in the State of New Hampshire.  

New Hampshire Exchange Legislative History:

On July 14, 2011, New Hampshire Governor John Lynch allowed a bill that addressed a state health benefit exchange and a separate bill that prohibited the implementation of a federal individual mandate to purchase health insurance to pass into law without his signature or veto.

Chapter 420-N

The preamble to CHAPTER 420-N - FEDERAL HEALTH CARE REFORM 2010 provides: 

“This bill establishes an oversight committee to provide legislative oversight, policy direction and recommendations for legislation with respect to the Patient Protection and Affordable Care Act of 2009 Public Law 111-148, as amended by the Health Care and Education Reconciliation Act of 2010, Public Law 111-152. This bill requires the insurance commissioner to obtain approval from the oversight committee before implementing any of the federal changes. This bill also directs the insurance commissioner to decline certain exchange planning grant funds and to indicate to the Secretary of the Department of Health and Human Services that the money is to be used to reduce the federal budget deficit.”

Pursuant to Chapter 420-N, the state created the Joint Health Care Reform Oversight Committee consisting of three members appointed by the House and three members appointed by the Senate.  The bill also requires that the Insurance Commissioner return the planning grant funds received from the US Department of Health and Human Services (HHS) and the insurance commissioner must request and receive permission from the oversight committee before undertaking any activities to implement the federal health care reform provisions.  This effectively limits the ability of the Governor or the Insurance Commissioner to take independent action towards establishing a state health benefits exchange.  

Pursuant to the act, the initial $666,000 initial funding of the $1,000,000 state health benefit exchange planning grants that New Hampshire has received from the HHS has been returned.  A subsequent request by the New Hampshire Insurance Commissioner to use the balance of the HHS planning grants to hire consultants to implement a state health benefits exchange was rejected by the Joint Health Care Reform Oversight Committee. 

The second bill, Senate Bill 148, prohibited the implementation of a mandate to force individuals to purchase health insurance or to be subject to a fine for failing to do so.

Later in 2011, the New Hampshire Senate Commerce Committee voted to approve and hold over Senate Bill 163 to establish a state-run health insurance exchange until the next legislative session.  In 2012, the bill was unanimously approved by the Commerce Committee but was then promptly tabled in the Senate.    Another bill, House Bill 1297 was submitted on April 24, 2012 that would prohibit the establishment of a New Hampshire state health benefits exchange.  It was referred to committee.

Looking Forward:

The Patient Protection and Affordable Care Act (PPACA) requires that each state have a state health benefit exchange.   If a state refuses to establish a state health benefit exchange, the federal government is authorized to create and operate an exchange for the state.   The federal legislation does not provide any detail on the issue and rules have not been created to actualize the provisions in the statute.   Further complicating the issue, the drafters of the PPACA omitted to make provision for any funding for the development or operation of a federal exchange in a state.

Given the current status of a Democrat Governor and Republican majorities in the New Hampshire State House and State Senate, it will be very difficult to pass any legislation authorizing an exchange.  The upcoming election may change the partisan split, but until that happens, I would be surprised if a commission structure will be contemplated or established.

Yes, it appears that §1513 of the Patient Protection and Affordable Care Act (PPACA) that amended §4980 of the Internal Revenue Code could result in the non-deductible excise tax described above.   Beginning in 2014, irrespective of whether or not a large employer offers coverage, a large employer could be potentially liable for the tax penalty if one of its full-time employees obtains coverage through an exchange and receives a federal premium credit.  While the legislation does not specifically reference the scenario of an employee that rejects the employer sponsored health benefit it does specifically state that any full time employee of a large employer who accesses health insurance through a state health insurance exchange and receives a federal premium subsidy will result in the employer being taxed as part of the employer’s “shared responsibility”.

When does this provision become effective?

Beginning in 2014, individuals who are not offered employer-sponsored coverage and who are not eligible for Medicaid or other programs may be eligible for federal premium credits for health insurance coverage through a state health insurance exchange. These individuals will generally have income between 138 percent and 400 percent of the federal poverty level (FPL

Which employers are potentially subject to this provision?

For the purposes of this amendment, a large employer is generally defined as being an employer that employs 50 or more employees.  The determination of an employer’s status as an “applicable large employer” is made on a controlled group basis applying the aggregation rules of The Internal Revenue Code (IRS Code) §§ 414(b), (c), (m), and (o), and it is based on full-time equivalent employees. An employee who in any month works an average of at least 30 hours or more per week is counted as one employee. All other employees are counted on a pro-rated basis. As explained below, the amount of any excise tax penalty is determined based only on “full-time” employees. The number of full-time equivalent employees is important only for the purpose of establishing whether an employer is an applicable large employer.

As with most of the law, there are exceptions.   The IRS Code referenced in the PPACA defines a large employer as, “An employer (including any predecessor employer) is an “applicable large employer” if it employed an average of at least 50 full-time employees during the preceding calendar year.”   An employer is not an applicable large employer, however, if the employer’s workforce exceeds 50 full-time employees for 120 days or less during the calendar year and the employees that cause the employer’s workforce to exceed 50 full-time employees are “seasonal workers.” The Act defines a “seasonal worker” narrowly to mean “a worker who performs labor or services on a seasonal basis” (as defined by the Secretary of Labor). 1

Which employees are potentially covered under §1513?

Individuals who are full time employees are covered under the amendment in §1513.   The amendment covers full time employees.  A full-time employee is defined as those individuals working 30 hours per week or more.  It does not cover part time employees, even if that part-time worker receives a premium credit.   Note that part time employees are included in the total of employees that determines if an employer is a large employer (see above).   Seasonal employees are not included in the total to determine if an employer is a large employer, but are included in the definition of a full time employee for the period of time that a seasonal employee is employed full time (see above). Employees who are eligible for Medicaid are not subject to this provision.   Temporary agency employees are viewed as being employees of the agency unless the agency employee is covered by a contract directly between the employer and the temporary agency employee.

The Safe Harbor

Individuals who are offered employer-sponsored coverage can only obtain premium credits for exchange coverage if, in addition to the other criteria above, they also are not enrolled in their employer’s coverage, and their employer’s coverage meets either of the following criteria: the individual’s required contribution toward the plan premium for self-only coverage exceeds 9.5 percent of their household income OR the plan pays for less than 60 percent, on average, of covered health care expenses. 

We recently wrote a blog for BenefitMall recently on the interim final Safe Harbor rule that assists employers in determining which employees could be eligible for a federal premium subsidy in a state health insurance exchange.  

The IRS Notice 2011-28  Interim Guidance on Informational Reporting to Employees of the Cost of Their Group Health Insurance Coverage is the current controlling authority on this topic. Employers will not have to report the cost of employer provided health insurance on their employee’s W-2s for the tax year 2011.  It is optional for tax year 2011 W-2s.

IRS Notice 2011-28 states, “As explained above, this notice provides interim guidance that generally is applicable beginning with 2012 Forms W-2. In addition, employers may rely on the guidance provided in this notice if they voluntarily choose to report the cost of coverage on 2011 Forms W-2, even though this reporting is not required for tax year 2011.“

There is an exemption for employers who issue less than 250 w-2s. 
The IRS Notice 2011-28 states, “This notice also provides additional transition relief for certain employers and with respect to certain types of employer-sponsored coverage. This transition relief will continue at least through the tax year 2012 Forms W-2 which are required to be furnished to employees in January 2013. In other words, those employers to which the additional transition relief applies (which includes smaller employers that are required to file fewer than 250 2011 Forms W-2) will not be required to report the cost of health coverage on any forms required to be furnished to employees prior to January 2014. This transition relief will continue until the issuance of further guidance.”.  

The IRS has a FAQ page on this topic at:
http://www.irs.gov/pub/irs-drop/n-11-28.pdf
The IRS  notice can be found at:
http://www.irs.gov/pub/irs-drop/n-11-28.pdf

The Comprehensive 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011 eliminated new information reporting requirements that were created by previous legislation.

The Patient Protection and Affordable Care Act of 2010 expanded information reporting to include payments to corporations, “amounts in consideration of property,” and “other gross proceeds” made in the course of a trade or business (including operation of a governmental entity), beginning in 2012. The new law repeals these requirements. You are not required to file Form 1099-MISC for these payments for any year.
 

Existing information reporting requirements remain in effect. Payments of $600 or more for nonemployee compensation made in the course of a trade or business are generally required to be reported on Form 1099-MISC. Certain payments to corporations are required to be reported. See the Instructions for Form 1099-MISC for more information.

The Small Business Jobs Act of 2010 provided that anyone receiving rental income from real estate would be treated as receiving income from a trade or business of renting property; therefore, information return requirements applicable to small businesses would be in effect. This provision also is repealed; you are not considered to be in a trade or business solely because you receive rental income. See Publication 527 for more information on rental income and expenses.

“PHS Act section 2715(d)(4) generally provides that if a group health plan or health insurance issuer makes any material modification in any of the terms of the plan or coverage involved (as defined for purposes of section 102 of the Employee Retirement Income Security Act (ERISA)) that is not reflected in the most recently provided summary of benefits and coverage, the plan or issuer must provide notice of such modification to enrollees not later than 60 days prior to the date on which such modification will become effective.

Accordingly, it is the view of the Departments that group health plans and health insurance issuers are not required to comply with the 60-day prior notice requirement for material modifications in PHS Act section 2715 (d)(4) until plans and issuers are required to provide the summary of benefits and coverage explanation pursuant to the standards issued by the Departments.(1) The Departments have not yet issued the standards.”

Therefore, the new regulation you are questioning is not yet required until the carriers are required to comply as well.

Resource: http://www.dol.gov/ebsa/faqs/faq-aca5.html

After several hours of legal research, we cannot find any legal precedent in PPACA that would require “private equity control groups" to offer identical medical benefits to all the employees/employers under the umbrella group.  Unfortunately, PPACA itself does not appear address this nuisance in the final statutory language.  However, you need to proceed cautiously and seek out additional legal counsel before making any changes. 

The answer to this question may depend based upon how “controlling” and how much shared “ownership” there are between the various corporate entities that fall under this umbrella.  Additional factors that could influence the answer include:  do the businesses over-lap in terms of governance or services offered?; do they have different tax identification numbers or share the same EIN; and historically how have they offered health insurance to their employees in the past (e.g., separately, through a MEWA, etc.). 

The drafters of PPACA went to considerable lengths to try to prohibit the establishment or continuation of companies that have multiple benefit plans with differing levels of coverage and cost.  The concern was that there would be plans for the lower wage employees and plans for management and white collar employees.   There is no exemption in PPACA or in any of the rules issued by HHS/DOL/IRS that exempt holding companies from this prohibition, and specifically did not provide an exemption for private equity control companies.

One could argue that if one or more companies have over-lapping ownership, shared governance structures, and are related businesses, the companies might have to offer identical benefit plans – unless, perhaps, the companies can maintain their grandfather status.  I say perhaps, because neither the HHS/DOL/IRS have ruled on the issue. 

Given the original intent of the legislation, and the ideological leanings of the current administration, we don't see them ruling in favor of a holding company-private equity ownership company having one set of benefits/costs and the subsidiary having a different benefit plan/cost.  It just runs against the grain of what they have done to date.

It would be beneficial if the questioner could tell us if the benefit plans of the controlling companies and their respective subs are grandfathered.  Generally speaking, the federal government, the NAIC, and other key public policymakers need to hammer out the details on how the insurance reforms will apply to difference scenarios like yours.  It is difficult to provide you with a clear answer because some many co-founding variables needs to sorted through.  We hope that we have provided a couple insights that might help you definitely answer your question. 

BenefitMall will keep you posted if any additional details emerge on this subject. Please note that this is not legal advice, and we recommend that you seek legal counsel before implementing any of PPACA reforms. 

On   January 31, 2010, Senior District Judge Roger Vinson of The United States District Court for the Northern District of Florida, Pensacola Division ruled in favor of the Attorney General of the State of Florida and 25 other state Attorneys General who had challenged the constitutionality of the Patient Protection and Affordable Care Act (PPACA).  Judge Vinson found that the provision of the PPACA that mandates that individuals must purchase health insurance to be an unconstitutional action on the part of the Federal Government.  He concurrently ruled that since the DOJ’s own testimony repeatedly had stated that the mandated purchase clause was inherent and integral to the overall success of the PPACA, and that the Severability Clause that had provided that if one part of the PPACA was found to be unconstitutional the remainder of the PPACA would continue in effect was deleted late in the hurried re-drafting process, Judge Vinson declared that all of the provisions of the PPACA to be void.  

The US Department of Justice (DOJ) initially took no action to respond to his order.  Then, over 4 weeks later, the DOJ attorneys asked Judge Vinson for a clarification of his order.

Judge Vinson responded to the request for clarification.   In his own words, “My order of January 31, 2011 (“Order”), granted summary judgment for the plaintiffs (in part); held the “individual mandate” provision of The Patient Protection and Affordable Care Act (the “Act”) unconstitutional; and declared the remainder of the Act void because it was not severable.

The defendants have now filed a motion to “clarify” this ruling (doc. 156) (“Def. Mot.”).  During the four-plus weeks since entry of my order, the defendants have seemingly continued to move forward and implement the Act. In their response in opposition to the defendants’ motion, the plaintiffs have asserted that “[i]f the Government was not prepared to comply with the Court’s judgment, the proper and respectful course would have been to seek an immediate stay, not an untimely and unorthodox motion to clarify” (doc. 158 at 2)(‘Pl. Resp.’).”[1]

The primary argument on the part of the DOJ is that the mandate to purchase health insurance is a valid exercise of the Constitutional authority of Congress to regulate Interstate Commerce.[3]  The specific points that they raise in their request to overturn Judge Vinson’s findings are:[4]

·         The mandated coverage provision regulates the practice of obtaining health care services without insurance, a practice that shifts substantial costs to other participants in the health care market.

·         The mandated coverage provision is essential to the Act’s guaranteed-issue and community-rating insurance reforms.

·         The mandated coverage provision is a necessary and proper means of regulating interstate commerce. 

·         Congress can regulate participants in the health care market even if they are not currently “active” in the insurance market. 

·         The mandated coverage provision regulates economic activity as part of a broad regulation of interstate commerce. 

·         The interstate market for health care services differs from other markets in critical respects.

·         Private or government insurance is the principal means used to pay for health care services, and the federal government’s involvement in health

          care financing is pervasive.

·         As a class, people who endeavor to pay for health care services through means other than insurance shift significant costs to other participants in the interstate health care market.

·         Before the Affordable Care Act, the percentage of people with private health insurance steadily decreased.

·         The mandated coverage provision is also independently authorized by Congress’s taxing power to provide for the general welfare. 

·         The District Court impermissibly departed from controlling doctrine in declaring the PPACA invalid in its entirety and in awarding relief to parties without standing.

Both sides of this argument have precedent and merit.   The U.S. Supreme Court has held in the past that Congress can regulate activities that in essence are not part of interstate commerce if they have a substantial effect on interstate commerce. For example, in Wickard v. Filburn,[5] the Supreme Court held that Congress had the authority to regulate the cultivation of wheat that was not directly a part of interstate commerce that farmers grew for their own home consumption.  More recently in Gonzales v. Raich,[6] the Court ruled that Congress had the authority to prohibit the cultivation and possession of small amounts of medical marijuana for personal consumption. Even though these individuals were not personally engaged in commerce, the matter still fit within the overall commerce clause. 

In both of those cases, Congress sought to regulate individuals engaged in traditional agricultural/economic activities. The fact that they did so for personal consumption did not detract from the underlying economic nature of these activities, especially as Congress has sought to regulate them as a part of a comprehensive inter-state regulatory scheme.  Critics of this position maintain that the PPACA is not of that nature.

Balancing those two cases are two recent decisions, United States v. Lopez[7] and United States v. Morrison.[8]  In both cases, the Supreme Court rejected the notion that Congress has unlimited authority to regulate non-commercial behavior based upon the thin line of justification of simply calling it Interstate Commerce.  In both cases, the Supreme Court's stated reason for declaring the acts to be unconstitutional was the belief of a majority of Justices that the Commerce Clause is a limited grant of power and one that cannot be infinitely expanded.    This is a classic conservative approach to the limits of powers and authorities of the federal government.   It remains to be seen which of these arguments will be found to be more convincing at the 11th Circuit Appellate Court.  We will continue to follow this case for you.

On a tangential note, a request was filed by the plaintiffs with the U.S. Supreme Court to hear this case on an accelerated basis.   If the request had been approved, the case would have been immediately remanded to the Supreme Court and skipped the 11th Circuit Appellate Court review.  In order for this to happen, four Justices must to agree to approve the request.    As of last week, the U.S. Supreme Court Justices responded to other requests, but not this case.   Justices are generally very reluctant to approve a request to skip the appellate court review.   Only in cases of where time is of the essence are these requests approved.   While considerable sums of money and time is being spent
implementing many clauses of the PPACA, these activities by themselves as of yet have not been found to be a compelling argument to move the case to the U.S. Supreme Court on an expected basis. 

Stay tuned to this webpage for further developments.

First, let’s review what has not changed for 2011. The Internal Revenue Department released IRS Procedure 2010-22 (http://www.irs.gov/pub/irs-drop/rp-10-22.pdf) on 24 May 2010 which stated that the maximum contribution amounts for 2011 are unchanged from 2010 and remain at $3,050 for a single individual and $6,150 for a family.

The catch-up contribution of $1,000 for those aged 55 and older also remains the same. The deductibles and out of pocket maximum high deductible health insurance policies that are purchased in conjunction with an HSA that allow the account holder to deposit and invest funds that can be withdrawn and used for allowed health care expenses.

The minimum deductible for 2011 for a HDHP remains unchanged at $1,200 for self-only coverage and $2,400 for family coverage. The 2011 maximum out-of-pocket for HDHPs remains unchanged at $5,950/$11,900 for self/family coverage. The roll-over provision for HSAs remains in place. Funds not spent in 2010 in an HSA can be retained in the HAS for 2011. So what has changed? Starting in 2011, over-the-counter drugs will no longer be allowed to be paid via an HSA. The only drugs that will be included as covered drugs will be insulin and prescription drugs. This change does not affect the ability to use an HSA to pay for other health care expenses such as medical devices, eye glasses, contact lenses, co-pays and deductibles.

Now, to the question at hand, the Health and Human Services website at (http://www.healthcare.gov/law/provisions/fsa_hra/index.html) provides the following “Beginning January 1, 2011, the costs of over-the-counter medications will be reimbursed under a Flexible Spending Account (FSA) or Health Reimbursement Account (HRA) only if the medications are purchased with a doctor’s prescription.” Based upon that statement, in which there is no exclusion for existing HSAs, the answer to the question appears to be that the change is effective for all HSAs, not just those initiated on or after 1 Jan 2011. Any existing HSA will have to comply with the change effective on 1 Jan 2011.

No.  Each plan within a cafeteria style plan has to stand on its own merits.  If one of the plans in a cafeteria style benefit program changes to the point that it forfeits its grandfathered status, and the other options in the cafeteria style program change within the posted guidelines, only the one plan that exceeded the guidelines would forfeit  its grandfathered status.

First, we are only addressing self funded plans.  Until further notice, insured health plans were relieved of compliance with the Patient Protection and Affordable Care Act (PPACA) restrictions necessary to preserve grandfathered status by the IRS Notice 2011-1.   The grandfathering guidelines now only apply to self-funded health benefit plans.

In order to retain grandfathered status, a self-funded health benefit plan must make certain that changes, if any, remain within the guidelines set forth in the PPAC A.  Those guidelines are:

• Cannot Significantly Cut or Reduce Benefits.  For example, if a plan decides to no longer cover care for people with diabetes, cystic fibrosis or HIV/AIDS.
• Cannot Raise Co-Insurance Charges.  Typically, co-insurance requires a patient to pay a fixed percentage of a charge (for example, 20% of a hospital bill).  Grandfathered plans cannot increase this percentage.
• Cannot Significantly Raise Co-Payment Charges.  Frequently, plans require patients to pay a fixed-dollar amount for doctor’s office visits and other services. Compared with the copayments in effect on March 23, 2010, grandfathered plans will be able to increase those co-pays by no more than the greater of $5 (adjusted annually for medical inflation) or a percentage equal to medical inflation plus 15 percentage points.  For example, if a plan raises its copayment from $30 to $50 over the next 2 years, it will lose its grandfathered status.
• Cannot Significantly Raise Deductibles.  Many plans require patients to pay the first bills they receive each year (for example, the first $500, $1,000, or $1,500 a year). Compared with the deductible required as of March 23, 2010, grandfathered plans can only increase these deductibles by a percentage equal to medical inflation plus 15 percentage points.  In recent years, medical costs have risen an average of 4-to-5% so this formula would allow deductibles to go up, for example, by 19-20% between 2010 and 2011, or by 23-25% between 2010 and 2012.  For a family with a $1,000 annual deductible, this would mean if they had a hike of $190 or $200 from 2010 to 2011, their plan could then increase the deductible again by another $50 the following year. 
• Cannot Significantly Lower Employer Contributions.  Many employers pay a portion of their employees’ premium for insurance and this is usually deducted from their paychecks. Grandfathered plans cannot decrease the percent of premiums the employer pays by more than 5 percentage points (for example, decrease their own share and increase the workers’ share of premium from 15% to 25%).
• Cannot Add or Tighten an Annual Limit on What the Insurer Pays.  Some insurers cap the amount that they will pay for covered services each year.  If they want to retain their status as grandfathered plans, plans cannot tighten any annual dollar limit in place as of March 23, 2010.  Moreover, plans that do not have an annual dollar limit cannot add a new one unless they are replacing a lifetime dollar limit with an annual dollar limit that is at least as high as the lifetime limit (which is more protective of high-cost enrollees). 
• Note that the guidelines all address decreasing benefits or increasing costs to participants.  None of the guidelines prohibit increasing a benefit.  Therefore, it is reasonable to conclude that a health plan can decrease the deductible and maintain grandfathered status.  Under separate provisions, a grandfathered plan annually must notify the plan participants that the health plan is grandfathered and notify participants of any changes in benefits, favorable or otherwise.

  Source

Paragraph (g)(1) of 26 CFR 54.9815-1251T, 29 CFR 2590.715-1251, and 45 CFR 147.140 of the interim final regulations issued jointly by the IRS and HHS, set forth requirements for determining when changes to the terms of a plan or health insurance coverage cause the plan or coverage to cease to be a grandfathered health plan. If the health plan does not meet the requirements for grandfathering, the health plan loses its grandfathered state. The rules do not specify what notifications must be made once a health plan loses its grandfathered status. There is only one section that mandates notifications and they do not become effective until 2 years after the enactment of the Act. However, pursuant to ERISA and state insurance statutes and regulations, the sponsor of the health plan is responsible for notifying the participants in the health plan of the terms and conditions that the sponsor would have otherwise made prior to the passage of the PPACA. This notification process is usually prepared for the plan sponsor by the plan administrator if it is a self-funded plan; or the insurance company, if the health plan is insured The new mandates that apply to all health plans would be considered to be benefit changes, nothing more, nothing less. There is no reference in PPACA or in the rules adopted by the IRS and HHS that apply to grandfathering that address notifications for non-grandfathered plans. To that extent, the old requirements remain in force. Note that pursuant to the new the § 2715 of the PHSA plan or the issuer (as applicable) must notify enrollees of material changes to the coverage reflected in the most recent summary no less than 60 days in advance of the effective date of such coverage. Failure to comply may result in a $1,000 penalty for each failure. (New § 2715 of the PHSA) There is one aspect of PPACA that will impact future plan descriptions distributed to plan participants. By March 20, 2012, the plan administrator or the insurance company must prepare and distribute a paper or electronic summary of coverage to all applicants and all enrollees, both at the time of initial enrollment and annual enrollment. This is in addition to the Summary Plan Description or Evidence of Coverage otherwise required by ERISA. The summary comply with specific uniform standards to be developed by the Secretary of HHS, including: : • A limit of no more than four pages in length. • Print no smaller than 12 point font. • Written in a culturally and linguistically appropriate manner,. • Consisting of specific content related to the covered benefits, exclusions, cost sharing, and continuation. HHS must establish these standards by March 20, 2011. As stated above, the summary must be provided by March 20, 2012.