Category Archives: Healthcare

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.

HITECH Act – What Should An Employer Worry About?

Contributed by Rebecca Dobbs Bush

On January 25, 2013, the Federal Register published final rules issued by Health and Human Services (HHS) to modify the HIPAA Privacy, Security and Breach Notification and Enforcement Rules.  The compliance deadline for almost every provision of these rules is September 23, 2013. 

The bulk of the provisions of HITECH do not have much implication on the average employer that is only worried about HIPAA Privacy with regard to how it may implicate the administration of their group health plan.  Primarily, employers (in their capacity as group health plan administrators) would need to become familiar with the slight changes HITECH imposes for privacy notices.

Before getting too worried about what’s in your Privacy Notice, remember that a group health plan that provides benefits only through one or more contracts of insurance with health insurance issuers or HMOs, and that does not create or receive protected health information other than summary health information or enrollment or disenrollment information is not required to develop a Privacy Notice.  See 45 CFR 164.520(a).

For those that are required to distribute Privacy Notices in the administration of their group health plans, HITECH regulations impose the following additions to the privacy notice:

  • A description of the types of disclosure that require an individual authorization, such as a release of PHI for sale, and marketing activities, or if the information that is released is psychotherapy notes.
  • A statement that other uses and disclosures of PHI not mentioned in the privacy notice will only be made with the individual’s authorization.
  • A statement of the right to restrict disclosures of protected health information to a health plan where the individual pays out of pocket in full for the healthcare item or service (only applies to notices from health providers, not health plans).
  • A statement of the obligation to notify affected individuals following a breach of unsecured PHI.

To the extent that a plan’s privacy notice already meets the regulations requirements, HHS has clarified that the plan is not required to revise and distribute another privacy notice on account of the final rules.  This is good news for employers who have already updated their privacy notices in response to the proposed version of the regulations which were issued in 2010.

Employer Mandates Delayed Until 2015!

Contributed by Rebecca Dobbs Bush

On July 2, 2013, the White House announced that it would delay enforcement of the Employer Mandate Provisions in Health Care Reform from January 1, 2014 to January 1, 2015.  Par for the course with Health Care Reform, we are again faced with last minute delays rewarding those who were doing nothing to prepare and frustrating those trying to be proactive to stay compliant.

The Executive Branch is charged with enforcement of the laws so the idea is that they have the ability to simply refuse to enforce a piece of legislation or delay enforcement of it.  However, some are arguing that the White House does not have this type of unilateral authority.  The question becomes whether there is anyone out there that would actually bring litigation challenging the current administration and seeking to enforce the confusing, costly and burdensome employer mandate provisions.

The individual mandate and other provisions of Health Care Reform remain in effect and are proceeding as scheduled.  The employer mandate is so far the only part of the legislation impacted by the White House’s recent announcement.

Under the prior deadlines, many employers were learning that it was too late to make decisions about restructuring their workforce to minimize obligations under the employer mandates.  This delay will allow those employers time to reconsider whether doing so is an appropriate strategy.

New October 1, 2013 Deadline for Employers to Notify Employees of Health Care Coverage Options

Contributed by Rebecca Dobbs Bush 

In January, the DOL delayed the March 1, 2013 effective date of the notice requirements in Section 18B of the Fair Labor Standard Act to late summer or fall of 2013.  On May 8th the DOL clarified the delay in a technical release and provided guidance on a new October 1, 2013 deadline.

Employers must now provide current employees with notice of health care coverage options available through the ACA Exchange no later than October 1, 2013.

Additionally, beginning October 1, 2013, employers must 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. 

The DOL’s technical release also includes model notices that employers can use to comply with the notice requirements. 

However, stay tuned as this guidance and the model notices are temporary as to what the DOL will consider compliance with Section 18B of the FLSA and will only remain in effect until formal regulations or additional guidance is issued.  See the full text of the DOL Technical Release No. 2013-02.

In today’s technical release, the DOL also issued guidance on a new model COBRA Election Notice.  The new model COBRA Election Notice includes language informing the qualified beneficiary that there may be other coverage options available through the Health Insurance Marketplace and the possibility of being eligible for a tax credit.  See the Redline Version of the COBRA Model Election Notice.

Will Your Employees be More Interested in Health Insurance Subsidies than Your Group Health Plan?

Contributed by Rebecca Dobbs Bush

While most of us have had just about enough when it comes to discussing Health Care Reform, the discussions aren’t even close to being over.  The most anticipated provisions, the individual and employer mandates, are scheduled to take effect January 1, 2014. 

Many employers are focused on more of an internal analysis – evaluating whether they need to implement a group health plan or change the structure of their current benefit offerings to manage their exposure to penalties under the employer mandate provisions.  At the same time, it is critical to understand the options for individuals to receive subsidies and the availability of individual plans for purchase on state/federal insurance exchanges.  Along with the mandate provisions, insurance exchanges and individual subsidies also become available as of January 1, 2014.  As an employer, have you determined how many in your workforce might be eligible for subsidies in the event you didn’t offer insurance or in the event your group health plan offering is not “affordable” and of “minimum value?”  Not only should you be looking at this to be able to evaluate compensation and benefits offerings to employees, whether an individual is eligible for a subsidy can determine whether you have any penalty exposure for that particular individual.

Citizens and legal residents with household incomes between 100% and 400% of the federal poverty level (who purchase coverage through a health insurance exchange and do not have access to an “affordable” health plan of “minimum value” through their employer) are eligible to receive a monthly advance tax credit to reduce the cost of their coverage.  The amount a person can receive is based on the premium for the second lowest cost plan available on the exchange (i.e., a silver plan) and varies based on their income. 

For example, a household of 4 earning approximately $46,100 is at 200% of the federal poverty level.  This family would not have to pay more than 6.3% of their income ($2,904.30) if they decide to purchase coverage on the exchange at a benchmark level of silver or lower.  For the sake of example, if you assume the annual cost of family coverage in a silver plan is around $10,000, this family would receive monthly tax credits in advance totaling approximately $7,000 annually.  The amount they receive in subsidies is tied to the cost of the silver plan.  However, they are free to access the same amount of subsidy and use it to purchase the cheaper bronze plan. 

For those between 100% to 250% of the federal poverty level, they would also be eligible for subsidies to assist with out-of-pocket costs at the point of service, such as deductibles, copayments and coinsurance.  In the above example, if the family purchased a silver plan (which will have an actuarial value of 70%), they would receive additional subsidies to essentially improve the actuarial value of their coverage to 87%.

But remember, access to all of these subsidies for the family in the example above disappears where an employer offers “affordable coverage” at a “minimum value.”  Based on IRS clarification, an employer’s coverage is “affordable” and of “minimum value” if the cost of covering the employee only is no more than 9.5% of that employee’s income and the actuarial value of the plan is at least 60%.  The test for affordability is not based on the cost of family coverage in an employer’s health plan.

It is estimated that approximately 68% of the population is at or below 400% of the federal poverty level.  Have you evaluated how many employees in your workforce might be eligible to receive a subsidy and how your anticipated benefit offerings compare?  The Kaiser Family Foundation has published a subsidy calculator to use in examining the impact of the subsidy at different income levels, ages, family sizes, and regional costs.  It can be found here:  http://healthreform.kff.org/subsidycalculator.aspx

The New Year is a Reminder of the Imminence of the Mandates of Health Care Reform

Contributed by Rebecca Dobbs Bush

With the ringing in of the New Year, we are now officially on the eve of the employer mandate provisions within Health Care Reform. The employer mandate provisions require those employers with 50 or more “full-time equivalent” employees to offer “minimum value” coverage to employees that work 30 or more hours per week. Where two or more companies have a common owner, or are otherwise related, they are combined for purposes of determining whether they employ enough employees. The coverage offered by the company must be “affordable” for employees. Where an employer does not do this, and at least one full-time employee receives a premium tax credit to help pay for coverage on an Exchange, the employer will be subject to penalties or a “tax” of $2,000 per full-time employee – with the first 30 full-time employees “free.”

The employer mandate provisions are now also being referred to as the “shared responsibility” provisions. The IRS has issued multiple Notices attempting to clarify the confusion over implementation and application. Most recently, the IRS issued proposed regulations and FAQ’s on December 28, 2012. The attempted clarification of the shared responsibility provisions have only served to confirm the confusing and complicated nature of the provisions.

What is imperative for every employer to understand is that the basis for determining how and whether the shared responsibility provisions apply to your business on January 1, 2014 depends upon the make-up and structure of your workforce during 2013. Accordingly, employers need to act now to understand whether and how the shared responsibility provisions of Health Care Reform will affect them come January 1, 2014.

Nursing Mothers Do Not Have The Right to Bring A Private Cause Of Action Against Employers For Substantive Violations Of The Express Breast Milk Provision Of PPACA

Contributed by Allison Chaplick

In early 2010, the Patient Protection and Affordable Care Act (PPACA) amended the Fair Labor Standards Act, 29 U.S.C. 207, to include the “express breast milk provision.” Under 207(r), an employer is required to provide:

(A) a reasonable break time for an employee to express breast milk for her nursing child for 1 year after the child’s birth each time such employee has need to express the milk;

and

(B) a place, other than a bathroom, that is shielded from view and free from intrusion from coworkers and the public, which may be used by an employee to express breast milk.

However, an employer does not have to compensate an employee for time spent expressing breast milk.  The enforcement provisions of PPACA, which are found at 29 U.S.C. §216(b), entitle an employee to unpaid minimum wage, overtime and liquidated damages for violations of §207.

On December 21, 2010, the U.S. Department of Labor’s Wage and Hour Division (WHD) issued a Notice explaining that under PPACA’s enforcement provisions “[i]f an employer refuses to comply with the requirements of section 7(r), [. . .] the Department may seek injunctive relief in federal district court.”  

Relying Sections 207(r)(2) and 216(b) and the WHD’s Notice, a district court sitting in the Northern District of Iowa dismissed a plaintiff’s complaint alleging that her employer—a convenience store—substantively violated PPACA when it failed to provide her with a private place to express breast milk.  In Stepheni Salz v. Casey’s Marketing Co., plaintiff alleged that she took a leave of absence after the birth of her child and that when she returned to work she needed to express breast milk.  While the employer did allow her to use the convenience store’s office to express breast milk, after a few months, plaintiff noticed that the office had a working video camera.  Plaintiff complained about the presence of the video camera in the office and was subsequently reprimanded for poor performance.  Plaintiff ultimately quit.

The Salz court concluded that because §207(r)(2) did not require an employer to compensate an employee for time spend expressing breast milk, and §216(b) provides that enforcement of §207 is limited to unpaid wages, there was no private “manner of enforcing the express breast milk provision,” and dismissed her claim.  Notwithstanding the fact that the plaintiff did not have any recourse for the substantive violation claim, the district court did permit her retaliation and constructive discharge claim to proceed because §215(a)(3) of the FLSA makes it unlawful for a employer to discharge or discriminate against an employee for filing a complaint under §207.

With more and more mothers returning to work after maternity leave, it is important for employers to understand their obligations under PPACA, and Illinois’ equivalent the Nursing Mothers in the Workplace Act.  However, the enforcement provisions for substantive violations seem to be more “bark than bite” as they are limited to injunctive relief (i.e., requiring reasonable break times, private place to express breast milk).