Reform Q&A

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  1. Yes, a small group may exclude out-of-state employees but this could affect the group’s participation.  Therefore, if not allowing the out-of-state employees to enroll, the group may not meet participation and may not be quoted.  If purchasing a plan though SHOP, all full-time employees must be offered coverage, and if all the criteria are met, the group may be entitled to a tax credit.
  2. The answer to your question is yes.  If a small employer offers more than one plan to its employees, the uniform percentage requirement may be satisfied in one of two ways. The first is on a plan-by-plan basis, meaning that the employer’s premium payments for each plan must individually satisfy the uniform percentage requirement. The amounts or percentages of premiums paid toward each plan do not have to be the same, but they must each satisfy the uniform percentage requirement if each plan is tested separately. 

The other permissible method to satisfy the uniform percentage requirement is through the reference plan method. Under the reference plan method, the employer designates one of its plans as a reference plan. Then the employer determines a level of employer contributions for each employee such that, if all eligible employees enrolled in the reference plan, the contributions would satisfy the uniform percentage requirement as applies to that reference plan, and the employer allows each employee to apply the minimum amount of employer contribution determined necessary to meet the uniform percentage requirement toward the reference plan or toward coverage under any other available plan.

Example: Employer has four FTEs with average annual wages of $23,000. Employer offers two plans under a composite billing system with different tiers of coverage. Plan X is $4,000 per year for employee-only coverage and $10,000 for family coverage, and Plan Y is $7,000 per year for employee-only and $12,000 for family coverage. Employer designates Plan X as the reference plan. Employer offers to pay 50% of the premium for employee-only coverage under Plan X, which is $2,000. In the event that an employee elects family coverage under Plan X or either employee-only or family coverage under Plan Y, Employer would make the same contribution ($2,000) toward that coverage and satisfy the uniform percentage requirement.

 

Yes, below describes the three types of controlled groups.

Generally, there are three types of controlled groups:

  1. parent-subsidiary groups (one business owns 80 percent or more of another business or businesses); 
  2. brother-sister groups (five or fewer common owners; the common owners must own at least 80 percent of each business; and the combined identical ownership must be 50 percent or more); and 
  3. combined ownership groups (each organization is a member of either a parent-subsidiary or brother-sister group and at least one corporation is: the common parent of a parent-subsidiary and a member of a brother-sister group). 

Accordingly, any of the organizations that are “controlled groups” are treated as a single employer under PPACA.  Thus, an employer cannot simply divide its organization into separate organizations to avoid the Employer Mandate under PPACA. 

 

The Affordable Care Act’s nondiscrimination rule for insured plans that have lost grandfather status prohibits discrimination in favor of highly compensated individuals using rules comparable to those in Code Section 105(h) that apply to self-funded group health plans. 

The rule was supposed to apply for plan years beginning on or after September 23, 2010.  However, on December 22, 2010, the IRS and Departments of Labor and Health and Human Services announced that compliance with the new nondiscrimination provision will not be required (and thus, any sanctions for failure to comply will not apply) until after regulations or other administrative guidance has been issued.  In order to provide insured group health plan sponsors time to implement any changes required as a result of any regulations or other guidance, the Departments anticipate that the future guidance will not apply until plan years beginning a specified period after issuance of the regulations.

Fully insured plans that provide a more generous premium subsidy levels to highly compensated employees may violate PPACA non-discrimination rules.  Fortunately, the IRS has stated employers are not required to comply with the non-discrimination provisions until guidance or regulations are issued.  Before that time, employers are advised to consult with an attorney and/or their health insurance carrier for clarification regarding the practice of providing different premium subsidy for differing groups of employees. 

It is not necessary to give equal benefits to all employees.  Just remember to base benefit eligibility on tenure, full-time or part-time status, exempt/nonexempt status, job group or even department.  Do your due diligence to ensure your benefits do not discriminate.

The Health Insurance Portability Accountability Act (HIPAA) makes it illegal to assess health insurance premiums based on health factors.  It is not permissible to charge some employees more than any other similarly situated individuals based on medical conditions, claims experience, receipt of health care services, genetic information or disability.  HIPAA does allow an employer to make distinctions in benefits that are offered and in the cost of benefits when those distinctions are not discriminatory.  

Plans may differ among employees only on “bona fide employment-based classifications”, as stated in this site paragraph (d), (http://www.gpo.gov/fdsys/pkg/CFR-2010-title29-vol9/xml/CFR-2010-title29-vol9-sec2590-702.xml) consistent with the employer’s usual business practice.

 

According to the SB 1446, if the group is grandfathered under PPACA reform, then no, they will not be able to take advantage of this new law.  However, if they are grandfathered under PPACA they may continue indefinitely as long as the criteria are met for grandfathering.  

http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201320140SB1446

This bill would allow a small employer health care service plan contract or a small employer health insurance policy that was in effect on December 31, 2013, that is still in effect as of the effective date of this act, and that does not qualify as a grandfathered health plan under PPACA, to be renewed until January 1, 2015, and to continue to be in force until December 31, 2015. The bill would exempt those health care service plan contracts and health insurance policies from various provisions of state law that implement the PPACA reforms described above and would require that the contracts and policies be amended to comply with those provisions by January 1, 2016, in order to remain in force on and after that date. The bill would require that these provisions be implemented only to the extent permitted by PPACA.

 

We believe it is responsible to use the safe harbors, as it is not permissible for an employer to ask an employee for his/her spouse’s income.  The employer is entitled to rely only on the amounts it pays an employee in making an affordability determination.

  1. Yes, they can get coverage elsewhere but they will not be entitled to any subsidy if they purchase in the marketplace.
  2. No, there is no penalty to a small group, whether the employee takes coverage or not.  However, the employer is still subject to the minimum participation guidelines of 75% in Maryland to qualify for offering the group plan.
  3. Yes, effective 1.1.14 everyone must have healthcare coverage or they will be penalized on their 2014 personal tax return due April 15, 2015.
 

The employer will certify as part of the transmittal under section 6056 regulations.   Below shown from http://www.irs.gov/irb/2014-9_IRB/ar05.html

(4) Certification of Eligibility for Transition Relief. The applicable large employer certifies on a prescribed form that it meets the eligibility requirements set forth in paragraphs (1) through (3). The forthcoming final regulations under section 6056 are expected to provide that an applicable large employer, or an applicable large employer member, that otherwise qualifies for the transition relief described in this section XV.D.6 will provide this certification as part of the transmittal form it is required to file with the IRS under the section 6056 regulations, in accordance with the instructions to that transmittal form. See section III of the preamble regarding section 6056.

In addition, an excerpt from the federal register site – https://www.federalregister.gov/articles/2014/03/10/2014-05050/information-reporting-by-applicable-large-employers-on-health-insurance-coverage-offered-under

C. Reporting for Applicable Large Employers With Fewer Than 100 Full-Time Employees Eligible for Transition Relief Under Section 4980H

To assist applicable large employers that are in the smaller size range, such as those with at least 50 full-time employees but fewer than 100 full-time employees (including full-time equivalent employees), in transitioning into compliance with section 4980H, the final regulations provide transition relief from section 4980H for 2015 (plus, in the case of any non-calendar plan year that begins in 2015, the portion of the 2015 plan year that falls in 2016). See section XV.D.6 of the preamble to the final regulations under section 4980H for a description of eligibility conditions for transition relief. (Note section 4980H does not apply to employers with fewer than 50 full-time employees (including full-time equivalent employees). Employers eligible for this section 4980H transition relief will still report under section 6056 for 2015 in accordance with these final regulations. 

 

Yes, you are correct.   Below is an excerpt from the attached IRS pdf.

D. New Employees: Safe Harbor for Variable Hour and Seasonal Employees

If an employer maintains a group health plan that would offer coverage to the employee only if the employee were determined to be a full-time employee, the employer may use both a measurement period of between three and 12 months (the same as allowed for ongoing employees) and an administrative period of up to 90 days for variable hour and seasonal employees.  However, the measurement period and the administrative period combined may not extend beyond the last day of the first calendar month beginning on or after the one-year anniversary of the employee’s start date (totaling, at most, 13 months and a fraction of a month). These periods are described in greater detail below.

1. Initial Measurement Period and Associated Stability Period

For variable hour and seasonal employees, employers are permitted to determine whether the new employee is a full-time employee using an “initial measurement period” of between three and 12 months (as selected by the employer).  The employer measures the hours of service completed by the new employee during the initial measurement period and determines whether the employee completed an average of 30 hours of service per week or more during this period.  The stability period for such employees must be the same length as the stability period for ongoing employees.  As in the case of a standard measurement period, if an employee is determined to be a full-time employee during the initial measurement period, the stability period must be a period of at least six consecutive calendar months that is no shorter in duration than the initial measurement period and that begins after the initial measurement period (and any associated administrative period).

If a new variable hour or seasonal employee is determined not to be a full-time employee during the initial measurement period, the employer is permitted to treat the employee as not a full-time employee during the stability period that follows the initial measurement period.  This stability period for such employees must not be more than one month longer than the initial measurement period and, as explained below, must not exceed the remainder of the standard measurement period (plus any associated administrative period) in which the initial measurement period ends.  In these circumstances, allowing a stability period to exceed the initial measurement period by one month is intended to give additional flexibility to employers that wish to use a 12-month stability period for new variable hour and seasonal employees and an administrative period that exceeds one month.  To that end, such an employer could use an 11-month initial measurement period (in lieu of the 12-month.

An employee or related individual is not considered eligible for minimum essential coverage under the plan (and therefore may be eligible for a premium tax credit or cost-sharing reduction through an Exchange) during any period when coverage is not offered, including any measurement period or administrative period prior to when coverage takes effect.

In addition, here is an excerpt from http://www.irs.gov/irb/2014-9_IRB/ar05.html with regards to educational organizations.

Commenters also requested that employers that are educational organizations be prohibited from taking potential employment break periods into account in determining their expectations of future hours of service. For a description of the employment break period rule, see section VII.E.2 of this preamble. The final regulations clarify that educational organization employers cannot take into account the potential for, or likelihood of, an employment break period in determining their expectations of future hours of service.

 

The answer to your question is no.  Currently, the W-2 reporting requirement is for employers who file 250 or more W-2s.  The employer will be required to report the aggregate cost of their sponsored health coverage on the employees’ W-2.  The amount to be reported on the W-2 is NOT included in the employee’s gross income. 

Originally, the effective date of this change was taxable year 2011.  However, the IRS issued guidance on October 12, 2010 delaying the effective date of the reporting requirement to taxable year 2012 (i.e. W-2s issued in 2013 covering the 2012 taxable year).  The guidance made the reporting requirement optional for benefits provided in tax year 2011. 

On March 29, 2011 and January 2, 2012, the IRS issued further guidance that includes a delay in the W-2 reporting requirement until further guidance is issued for the following employers: 

1. Employers filing fewer than 250 W-2s for the previous calendar year (for example, employers filing fewer than 250 W-2s for taxable year 2011 will not be required to report the cost of coverage on the 2012 W-2); 

2. Employers sponsoring self-funded plans that are not subject to federal COBRA continuation coverage such as self-funded church plans; and 

3. Federally recognized Indian tribal governments and tribally chartered corporations that are wholly owned by a federally recognized Indian tribal government. 

The Form W-2 includes code DD that should be used to report the aggregate cost of employer sponsored health coverage in Box 12 on your employees’ Form W-2. 

 

If the employer doesn’t offer coverage to their full-time employees (and their dependents), the employer is subject to an employer shared responsibility penalty if at least one of their full-time employees purchases coverage at a Marketplace exchange with premium tax credits.  Employees eligible for a premium tax credit are those whose household income is between 100% (133% in states that expanded Medicaid) and 400% of the federal poverty level and who are not eligible for employer-sponsored coverage that is affordable and meets minimum value. The monthly penalty the employer would have to pay would be 1/12 of $2,000 (this amount will be adjusted annually for inflation) multiplied by the number of full-time employees you have for that month (minus the first 30). 

Under a transition rule for 2015, the monthly penalty calculation would be 1/12 of $2,000 multiplied by the number of full-time employees you have for that month minus the first 80 (instead of the first 30). 

If coverage is not offered to at least 95% (70% for the 2015 plan year if certain criteria are met) of your full-time employees (and their dependents), then you will be subject to the monthly “no coverage” penalty which is 1/12 of $2,000 multiplied by the number of full-time employees you have for that month (minus the first 30) if at least one employee receives a premium tax credit or cost-sharing reduction through an exchange. For 2015 plan years only, the penalty calculation for large employers would be 1/12 of $2,000 multiplied by the number of full-time employees you have for that month (minus the first 80). 

 If the employer offers coverage to at least 95% (70% for the 2015 plan year if certain criteria are met) of your full-time employees (and their dependent children), you will be subject to a monthly penalty of 1/12 of $3,000 for each full-time employee that receives a premium tax credit or cost-sharing reduction for coverage purchased through a Marketplace exchange in that month because your coverage is unaffordable or does not meet a minimum value. 

If the plans being offered by the employer do not have providers who participate within the 300 mile radius, then yes, we suggest the employer offer plans that will include providers in their area.