Category Archives: Healthcare

Association Health Plans Expanded Under DOL Final Rule

Contributed by Kelly Haab-Tallitsch, July 10, 2018

12837750 - stethoscope wrapped around health insurance policies, soft focusOn June 21, 2018, the US Department of Labor (DOL) published a final rule making it easier for a group or association of small employers to band together to buy health insurance.  The rule allows employers that previously could only purchase small group health coverage to join together to purchase insurance in the less-regulated large group market.

The rule broadens the definition of an “association” that can act as a single “employer” to sponsor an Association Health Plan (AHP) under the Employee Retirement Income Security Act of 1974 (ERISA). Employers that pass a “commonality of interest” test based on geography or industry can form an association for the sole purpose of offering an AHP to their employees.

Under the new rule employers can show a commonality of interest if they are:

  • In the same trade, industry or profession throughout the United States; or
  • In the same principal place of business within the same state or a common metropolitan area, even if the metro area extends across state lines.

Potential Benefits

In most states employers with less than 50 employees must purchase health coverage in the small group market, which is subject to greater regulation (a few states set the cut off at 100 employees). Under the new rule, an association of employers with a total of 50 (or 100) or more employees among them will have access to the large group market. Why does this matter? Large group plans are exempt from some of the regulatory requirements imposed on small group health plans by states and the Affordable Care Act (ACA), including the requirement to provide coverage for 10 essential health benefits.  This will allow an AHP to offer a “skinnier” (and cheaper) plan than those available in the small group market.

AHPs may also help employers leverage the bargaining power of a larger group and reduce administrative costs through economies of scale. The regulations also enable AHPs to self-insure, subject to state oversight, an option not previously available to most small employers. Sole proprietors may also participate in an AHP.

Considerations

AHPs are still subject to nondiscrimination regulations. Coverage of an individual cannot be restricted based on any health factor or denied based on a preexisting condition.

Because AHPs are not subject to the same rules as small group health plans, employers must read the fine print and understand the details of the coverage they are purchasing.  AHPs are closely regulated by state and federal regulations and compliance will continue to be complex. AHPs are a type of a multiple employer welfare arrangement (MEWA), which are generally required to file a Form M-1 and a Form 5500 annually unless otherwise exempt.

Implementation Timeline

The new rule will be phased in beginning in September 2018, at which time fully-insured AHPs may begin to operate under the rule. Existing self-insured AHPs may begin to operate under the new rule on January 1, 2019 and new self-insured AHPs can begin on April 1, 2019.

 

Amazon, Berkshire Hathaway and JP Morgan Name CEO in New Venture that Could Change Healthcare for Employers

Contributed by Suzannah Wilson Overholt, June 20, 2018

As promised earlier this year, we have an update regarding the new health care company being formed by Amazon, Berkshire Hathaway and JPMorgan Chase, which still lacks an official name.  In February, Warren Buffett announced that a CEO would be named within a year.  The group later announced that a search was underway, and then, in early June, announced that a new CEO had been identified and would be named in two weeks.

12837750 - stethoscope wrapped around health insurance policies, soft focusTrue to their promise, on June 20, 2018, the triumvirate of Warren Buffett (Berkshire Hathaway), Jeff Bezos (Amazon) and Jamie Dimon (JPMorgan Chase) announced that Dr. Atul Gawande will serve as CEO of the new company starting July 9.  Dr. Gawande currently practices general and endocrine surgery at Brigham and Women’s Hospital and is a professor at Harvard’s School of Public Health and Medical School. He is also the founding executive director of Ariadne Labs, which, according to the Ariadne Labs website, is a joint center between Brigham and Women’s Hospital and Harvard’s School of Public Health.  Its mission is to “create scalable health care solutions that deliver better care at the most critical moments in people’s lives, everywhere.” The web site indicates that Dr. Gawande is also chairman of Lifebox, “a nonprofit reducing surgical deaths globally.” CNBC reported that Dr. Gawande will not be giving up his positions at Harvard or Brigham and Women’s Hospital and is transitioning to the position of chairman of Ariadne Labs.

When initially announced in January, the primary purpose of the new company was portrayed as an effort to reduce health care costs for employers. The appointment of Dr. Gawande adds a bit more insight into how that goal may be achieved. According to Bloomberg, the selection of Dr. Gawande has led analysts to conclude that the new company will take an expansive look at how to approach fixing health care.  In a letter to his shareholders, Dimon indicated that the new company’s agenda will include aligning incentives among doctors, insurers and patients; reducing fraud and waste; giving employees more access to telemedicine and better wellness programs; and figuring out why so much money is spent on end-of-life care. Some have been critical of his statements, indicating that they are focused on the wrong issues.

The new company will be headquartered in Boston, most likely because that is where Dr. Gawande is located. Bloomberg reported that additional details such as the size, budget and authority of the new company are still not available. However, it will be “an independent entity that is free from profit-making incentives and constraints.”  We will continue to monitor this and provide updates.

“Cadillac Tax” on Health Plans Delayed Until 2020

Contributed by Kelly Haab-Tallitsch

Employers are receiving a temporary reprieve from the controversial “Cadillac Tax” on health plans as part of a large spending and tax bill signed into law by President Obama on Friday, December 18, 2015. The Consolidated Appropriations Act (the “Act”) delays the effective date of the Affordable Care Act’s (ACA’s) excise tax on so-called high cost health plans, known as the “Cadillac Tax,” until January 1, 2020.

The Cadillac Tax, previously scheduled to take effect on January 1, 2018, is a 40% excise tax on employers and insurers who offer health insurance plans that exceed specified high-cost limits ($10,200 for individuals and $27,000 for families for 2018). The 40% tax applies to the cost of the plan above these thresholds.

In addition to the delay, the Act makes the Cadillac Tax a tax-deductible expense for employers, somewhat cushioning its impact. The Act also calls for an examination of suitable benchmarks to be used for the adjustment of the excise tax thresholds in future years.

The delay comes after mounting criticism of the Cadillac Tax from employers, insurers, labor unions and lawmakers. Critics argue that the tax, which was expected to affect an estimated 25% to 30% of employers in 2018, and as many as 50% within the next 10 years, unfairly penalizes employers and unionized workers and will ultimately lead to employees paying more out of pocket for medical expenses.

What Does this Mean for Employers?

While opponents of the Cadillac Tax are citing the delay as the first step towards a repeal of the tax, employers must remain cautious and plan for the tax to be implemented in 2020. Employers should continue evaluating the costs of the health coverage offered to their employees and begin to consider alternatives to reduce exposure to the tax in 2020. Additionally, employers should review the accounting consequences of the now deductible Cadillac Tax.

Penalties Doubled for Affordable Care Act Reporting Noncompliance

Contributed by Kelly Haab-Tallitsch

The Trade Preferences Extension Act of 2015 (“Trade Bill”), signed into law by President Obama on June 29, significantly increases potential penalties for employers and insurers that fail to comply with the Affordable Care Act (ACA) reporting requirements, beginning in early 2016.

As a reminder:

  • IRS Code 6056 requires employers with 50 or more full-time equivalent employees to file reports with the IRS annually stating whether the employer offered health coverage to full-time employees and their dependents during the preceding calendar year.
  • IRS Code 6055 requires all employers with self-insured plans, and insurers, to file reports with the IRS indicating whether an individual had health coverage during the preceding year. These reports must also be furnished to employees.
  • The reporting requirements help the IRS enforce the ACA individual and employer mandates, and are effective for the 2015 calendar year, with reports first due in early 2016.

The penalty for failure to file a required information return with the IRS was increased by the Trade Bill from $100 per return to $250 per return. The annual cap on penalties doubled from $1,500,000 to $3,000,000. In the event a failure to file is due to intentional disregard, the new $250 penalty is doubled and no annual cap applies. Records Room

In addition to filing reports with the IRS, the ACA requires employers to provide certain forms to employees, similar to the existing WS-2 reporting requirements. It is important for employers to be aware that the penalties apply separately to both requirements. For example, a failure to file a Form 1095-C with the IRS and a failure to furnish the same Form 1095-C to the employee will result in two penalties of $250 each, or $500 per affected employee.

These increased penalties also apply to other IRS information returns and filings, such as W-2s, and are effective in 2016. Reduced penalties apply when the failure to file is corrected within a certain period of time and the cap is reduced to $500,000 for employers (or insurers) with $5,000,000 or less in gross annual receipts.

Despite the hike in penalties, the IRS’s enforcement policy for the first year of ACA reporting remains unchanged. The IRS has stated it will not penalize employers that can show they made good faith efforts to comply with the ACA reporting requirements for 2015.

Employers can reduce the risk of noncompliance by taking the following steps:

  • Ensure you are capturing and tracking the data needed to complete the required forms now, to allow for reporting in early 2016
  • Understand what forms are required and their applicable due dates (statements to employees are due as early as January 31)
  • Review the 2014 IRS forms and instructions available at www.irs.gov

Employer Mandates Now Delayed Until 2016!

Contributed by Rebecca Dobbs Bush

The Affordable Care Act (“ACA”) originally scheduled the employer mandates to take effect in 2014.  Then, on July 2, 2013, the White House announced that it would delay enforcement of the employer mandate provisions from 2014 to 2015.  Now – in line with the over-arching theme of the ACA which seems to be last minute postponement of regulations frustrating those proactively trying to ensure compliance — the IRS has now released new guidance further delaying the employer mandate until 2016 for those employers with less than 100 full-time employees.

Employers with more than 100 full-time employees were provided with some relief as well.  Instead of following the 95% test for determining whether they “offer” coverage to all full-time employees, these employers will now only need to offer coverage to 70% of their full-time employees during 2015.

The 227-page guidance from the IRS issues some clarification in regards to several other areas associated with the employer mandate provisions:

  • Clarification on several categories of employees such as volunteers, educational employees, seasonal employees, student workers, adjunct faculty, airline industry employees, on-call employees, home care workers, agricultural employees holding H-2A and/or H-2B visas, and cruise ship workers
  • Transitional relief – clarification and guidance on a phase in of the employer mandate provisions
  • Clarification on the identification of “full-time” employees
  • Further interpretation on the look-back, measurement and administrative period applied to “variable” hour employees, including those employed by temporary staffing firms
  • Clarification on the “affordability” safe harbors for employers

Additional delays and transition rules for non-calendar year plans and dependent coverage

Ironically, Health Care Reform continues to increase in complexity with each effort at clarification.

To read the full 227-page rule, please click here.  As this is a hot topic, we would like to alert you to an upcoming presentation to discuss Healthcare Reform Updates on February 19th in Bolingbrook, IL.  More information can be found here.

Marketplace Notices – to Comply or Not to Comply?

Contributed by Rebecca Dobbs Bush

The deadline for employers to provide current employees with notice of health care coverage options available through the ACA Marketplace is October 1, 2013, right around the corner.    

The DOL has published model notices that employers can use to comply with the notice requirements:

§  Model Notice for employers who offer a health plan to some or all employees <http://www.dol.gov/ebsa/pdf/FLSAwithplans.pdf>

§  Model Notice for employers who do not offer a health plan <http://www.dol.gov/ebsa/pdf/FLSAwithoutplans.pdf>

On September 11, 2013, the DOL published FAQ’s confirming that there is no penalty tied to the Marketplace Notice requirement.  As this particular notice requirement was done as an amendment to the FLSA (instead of as an amendment to HIPAA or ERISA), the FAQ’s should not have been a surprise or considered as a drastic change in position by the department.

In light of the recently published FAQ’s, some are now advising employers not to publish the notices at all.  While there is not a penalty tied to the notice, employers should not forget that they are still legally required.  With the DOL increasing its scrutiny of welfare plans (and where such audits often consist of reviews to ensure proper plan documentation and these very type of notices are in place), it is not recommended to blatantly disregard the Marketplace Notice requirement. 

Instead, the confirmation of lack of penalty should simply be referred to as a reminder to not spend too much time or analysis on this Notice requirement.  In other words, just do your best to comply.  In addition, many employers that are getting caught up with the particulars of how to complete part B of the model notice and having difficulty completing it, are simply distributing part A of the Notice.  There are various considerations to take into account if you are considering this strategy and whether it is best for your company.  In that event, you may want to contact counsel for advice on the best options for your situation.  Keep in mind that when employers are eventually subjected to penalty exposure in 2015, that penalty exposure will be tied to whether or not a person accesses a subsidy at the Marketplace.  Whether a person can access a subsidy is dependent on the price and availability of the employer offering.   All of that information is to be included on Part B of the model notice.  Thus, without providing that information to an employee, the employee may very likely give inaccurate information at the Marketplace resulting in an inappropriate subsidy award.  In turn, increasing potential penalty exposure for the employer.

Also, remember that the Notice requirement is not over after you meet your October 1, 2013 distribution date.  Employers must also provide new employees with notice of health care coverage options available through the ACA Exchange “at the time of hiring.”  For 2014 the DOL will consider an employer to have given notice “at the time of hiring,” if the notice is provided within 14 days of the new employee’s start date.