Compliance Corner Archives
Healthcare Reform 2018 Archive
On Nov. 28, 2018, the IRS published Notice 2018-94, which delays the date by which informational statements must be provided to individuals. The notice also provides transitional good faith relief for reasonable mistakes made in reporting Sections 6055 and 6056 information about 2018.
Specifically, the due date for providing individuals with Form 1095-B (by a carrier or self-insured employer) and Form 1095-C (by an applicable large employer) has been extended from Jan. 31, 2019, to March 4, 2019. The deadline for filing these forms with the IRS hasn’t changed. That date remains April 1, 2019, if filing electronically, or Feb. 28, 2019, if not filing electronically. If an employer doesn’t comply with the deadlines, the employer could be subject to penalties. The notice also states that because the automatic extension of the due date to furnish is as generous as the permissive 30-day extension to provide notices to individuals/employees, the IRS will not formally respond to any request for such an extension.
Despite the extended due date, employers and other coverage providers are encouraged to furnish 2018 statements as soon as they’re able. But if individuals haven’t received these forms by the time they file their individual tax returns, they may rely upon other information received from employers or coverage providers to attest that they had minimum essential coverage as required by the individual mandate. Individuals need not amend their returns once they receive the forms, but they should keep them with their tax records.
In addition, Notice 2018-94 extends good faith effort relief to employers for incorrect or incomplete returns filed in 2019 (as to 2018 information). The IRS previously provided relief for penalties stemming from 2018 reporting failures (as to 2017 information). Accordingly, for 2018 and prior filings, relief is available to entities that could show that they made good faith efforts to comply with the information reporting requirements, even if they reported incorrect or incomplete information. In determining what constitutes a good faith effort, the IRS will take into account whether an employer or other coverage provider made reasonable efforts to prepare for reporting, such as gathering and transmitting the necessary data to a reporting service provider or testing its ability to use the Affordable Care Act Information Return Program (AIR) electronic submission process. This relief doesn’t apply to a failure to timely furnish or file a statement or return, and it doesn’t extend to employer mandate penalties (for large employers that didn’t offer affordable, minimum value coverage to full-time employees pursuant to the ACA’s employer mandate).
Lastly, the notice states that the IRS is reviewing whether the repeal of the individual mandate tax penalty (which takes effect in 2019) will change the reporting requirements under IRC Section 6055 for self-insured employers and other coverage providers (such as an insurer of a fully insured plan) to report on all covered individuals under the plan on either Form 1095-B or 1095-C. NFP’s Benefits Compliance division will continue to monitor any developments that might impact employer reporting obligations in future years.
The IRS recently issued the 2018 version of the Form 8941, Credit for Small Employer Health Insurance Premiums, and the related instructions. Form 8941 is used by small employers to calculate and claim the small business health care tax credit. As background, this tax credit benefits employers that do all of the following:
- Offer coverage through the small business health options program, also known as the SHOP Marketplace
- Have fewer than 25 full-time equivalent employees
- Pay an average wage of less than $50,000 a year (indexed annually)
- Pay at least half of employee health insurance premiums
An employer may only claim the credit for a two-consecutive-year period.
The 2018 instructions include three important information items.
First, the average annual wage for 2018 is increased from $53,000 (in 2017) to $54,000.
Second, the IRS states that employers located in Hawaii cannot claim this credit for insurance premiums paid for health plans beginning after 2016. This is because Hawaii’s Section 1332 Innovation Waiver related to the SHOP was approved by HHS. Thus, effective 2017, the state of Hawaii is no longer required to maintain a SHOP because of the state’s Prepaid Health Care Act, which requires employers of all sizes to offer affordable coverage to employees. The state also provides premium assistance to small employers.
Lastly, for calendar year 2018, some SHOP Marketplaces in certain counties didn’t have qualified health plans available for employers to offer to employees. However, relief is available which allows eligible small employers with a principal business address in those counties to claim the credit for 2018, including coverage through a SHOP or coverage that met the requirements for relief under IRS Notice 2016-75 (if applicable), for all or part of 2017.
If a small employer qualifies for the health care tax credit, they should work with their accountant to properly claim the credit with the IRS.
On Nov. 5, 2018, the IRS released Notice 2018-85, which announces that the adjusted applicable dollar amount for PCOR fees for plan and policy years ending on or after Oct. 1, 2018, and before Oct. 1, 2019, is $2.45. This is a $.06 increase from the $2.39 amount in effect for plan and policy years ending on or after Oct. 1, 2017, but before Oct. 1, 2018.
As a reminder, PCOR fees are payable by insurers and sponsors of self-insured plans (including sponsors of HRAs). The fee doesn’t apply to excepted benefits such as stand-alone dental and vision plans or most health FSAs. The fee, however, is required of retiree-only plans. The fee is calculated by multiplying the applicable dollar amount for the year by the average number of lives and is reported and paid on IRS Form 720 (which hasn’t yet been updated to reflect the increased fee). It’s expected that the form and instructions will be updated prior to July 31, 2019, since that’s the first deadline to pay the increased fee amount for plan years ending between Oct. and Dec. 2018. The PCOR fee is generally due by July 31 of the calendar year following the close of the plan year.
The PCOR fee requirement is in place until the plan years ending after Sept. 30, 2019.
On Nov. 7, 2018, the HHS, the Treasury Department and the DOL (the Departments) jointly released advanced copies of two final regulations that broaden the exemption from the ACA’s contraceptive mandate. The final rules are effective 60 days following publication in the Federal Register (expected Nov. 15, 2018).
As background, the ACA requires plans to cover certain preventive services with no cost-sharing. However, a number of religious institutions objected to being required to cover certain contraceptives, prompting the Obama administration to provide a waiver and accommodation process for those institutions. The Supreme Court’s decision in Burwell v. Hobby Lobby Stores, Inc. ruled in favor of Hobby Lobby, holding that closely held for-profit employers could also choose not to cover certain contraceptives.
Then, in Oct. 2017, the Trump administration issued two interim final rules which broadened the exemption for sincerely held religious beliefs and sincerely held moral convictions. Further litigation spawned from the interim final rules and two federal courts issued preliminary injunctions blocking the federal government from enforcement of these rules as a result (see Jan. 9, 2018, edition of Compliance Corner). It remains to be seen how the courts’ injunctions will impact the finalized rules.
After considering over 100,000 public comments, the final rules remain largely unchanged from the interim final rules issued back in Oct. 2017 (see article in Oct. 17, 2017, edition of Compliance Corner).
Here is a general overview of both final rules:
First, the final rule on religious exemptions expands the exemption that previously applied only to churches and similar religious organizations. This particular exemption will be available to non-governmental employers and institutions of higher education, nonprofits, for-profits, insurers and individuals with religious objections where the employer plan sponsor and/or issuer (as applicable) are willing to offer a plan omitting certain contraceptive coverage. The religious exemption does not apply to governmental plans, and no publicly-traded employers are expected to invoke the religious exemption.
Second, the final rule on moral exemptions is more restrictive than the religious exemption. Under the moral exemptions rule, only nonprofits, privately held for-profit employers, insurers, institutions of higher education, and individuals can invoke an exemption to the contraceptive mandate based on sincerely held moral objections. This could encompass association health plans where the plan sponsor is a nonprofit or a privately-held for-profit entity. However, the moral final rule does not extend to governmental plans or publically traded for-profit employers.
Both rules maintain the availability of an optional accommodation where the entity’s insurer or third-party administrator is responsible for providing contraceptive services to plan participants and beneficiaries on a voluntary basis. In other words, an otherwise exempt employer could decide to take advantage of the accommodation, which would provide contraceptive coverage to its employees and their dependents on an optional basis. Businesses that object to covering some, but not all, contraceptives would be exempt with respect to only those methods to which they’re opposed.
Under both final rules, if an employer objects to contraceptive coverage on a religious or moral basis, the group health plan, the insurer, and the coverage itself are exempt from the full ACA guidelines on contraceptive methods. Those entities are not subject to a penalty for failure to cover contraceptives for plan enrollees. Employers who claim an exemption do not have to provide any sort of self-certification or notice to the government.
Several states currently require insurers to cover contraceptives and several others have religious exemptions of some kind, but it should not be assumed that these are comparable with the new federal exemption. The departments state that the final rules only apply to the federal contraceptive mandate and do not regulate, preempt or otherwise address various state contraceptive mandates or religious exemptions. Therefore, if a plan is exempt under the final rule on religious or moral exemptions that does not necessarily exempt the plan or insurer from applicable state laws. Of course, state mandates do not apply to self-funded plans, but they apply to fully-insured plans.
Importantly, though, ERISA requires employers to outline the plan’s covered services in the plan document. As such, employers should keep in mind that the rules require employers to notify employees of any change in contraceptive coverage, in accordance with current ERISA rules. So, for example, where the decision not to cover certain contraceptives is a material modification or reduction in covered services, the employer will need to provide employees with Summaries of Material Modification. In addition, if that decision is made outside of open enrollment/renewal, the employer may also be responsible for an advance notice under the summary of benefits and coverage (SBC) rules, which may require 60-days advance notice of the change.
The final rules are effective 60 days following publication on the Federal Register (presumably effective Jan. 15, 2019). However, as these various legal challenges work their way through the courts, employers wishing to avail themselves of these exemptions should work with legal counsel to ensure that they implement the exemptions in a compliant manner, paying special attention to applicable state laws.
Press Release »
Fact Sheet »
Final Regulations for Religious Exemptions »
Final Regulations for Moral Exemptions »
This week, the IRS released the 2018 version of Publication 5223, General Rules and Specifications for Affordable Care Act Substitute Forms 1095-A, 1094-B, 1095-B, 1094-C and 1095-C. As background, applicable large employers (those subject to the employer mandate) and employers that sponsor self-insured plans are subject to certain informational reporting requirements under IRC Sections 6055 and 6056. Under those sections, those employers must file Forms 1095-B and 1095-C (as applicable) with the IRS and distribute either a copy of the forms or a substitute form to employees or otherwise covered individuals.
Publication 5223 outlines standards for acceptable substitute forms that may be sent to the IRS and also outlines acceptable standards for substitute forms furnished to individuals. The standards are quite rigorous, including specific font size, ink type, paper orientation and weight, and print positions. Importantly, should the employer choose to use substitute forms, these standards must be satisfied in order to avoid employer reporting penalties (also outlined in the publication). The 2018 version of Publication 5223 contains no major changes from previous years but has been updated to reference new dates and forms.
Most employers use the standard Forms 1094/95-B/C to fulfill their reporting obligations, in which case the publication is not applicable. That said, employers that want to use substitute forms should review the publication to ensure any substitute forms they use are consistent with the standards.
Non-grandfathered health plans must provide coverage for certain recommended preventive care services with no cost sharing applied to participants. The recommendations are issued by the United States Preventive Services Task Force (USPSTF), the Advisory Committee on Immunization Practices (ACIP) of the CDC, and the Health Resources and Services Administration (HRSA). Group health plans must provide coverage for a new recommendation for plan years starting one year after it’s issued.
Below is a listing of the preventive care services that have been newly recommended since March 2018 along with the effective date (plans must comply for plan years starting on or after the indicated date).
- Skin cancer counseling about minimizing exposure to ultraviolet radiation for persons aged 6 months to 24 years with fair skin and their parents: March 1, 2019.
- Osteoporosis screening using bone measurement testing for women aged 65 and older with screening for postmenopausal women younger than age 65 who are at increased risk for osteoporosis: June 1, 2019.
- Exercise intervention to prevent falls in community dwelling adults aged 65 and older who are at increased risk for falls (includes supervised individual/group exercise classes and physical therapy): April 1, 2019.
- Obesity screening and counseling for adults with a body mass index of 30 or higher: Sept. 1, 2019.
- Syphilis screening for pregnant women: Sept. 1, 2019.
- Intimate partner violence screening for women of reproductive age with a referral to support services: Oct. 1, 2019.
USPSTF Recommendations »
ACIP Recommendations »
HRSA Recommendations for Children and Adolescents »
HRSA Recommendations for Women »
HRSA Recommendations for Newborns »
On Oct. 17, 2018, the IRS issued proposed regulations relating to the de minimis error safe harbor exceptions to penalties for failure to file correct information returns or furnish correct payee statements under IRC sections 6721 and 6722. These proposed regulations are consistent with prior guidance on the safe harbor included on page five of the final instructions to Forms 1094/1095-C, which were reported on in our Oct. 16, 2018 edition of Compliance Corner.
As background, the penalties apply when a person is required to file an information return or furnish a payee statement but the person fails to do so on or before the prescribed date, fails to include all of the information required to be shown or includes incorrect information.
Under the safe harbor, an error on an information return or payee statement is not required to be corrected, and no penalty is imposed, if the error relates to an incorrect dollar amount and the error differs from the correct amount by no more than $100 ($25 in the case of an error with respect to an amount of tax withheld). The information return or payee statement must be otherwise correct and timely filed or furnished on time. The safe harbor does not apply in cases of intentional disregard of the requirements to file or furnish correct information returns or payee statements. Further, the proposed regulations highlight the fact that the safe harbor does not apply if the payee elects in writing to receive a corrected statement.
Finally, the proposed regulations update the penalty amounts to reflect legislative increases and adjustments for inflation. Employers may be interested in the de minimis error safe harbor exceptions to penalties, because it applies to information reported on Forms W-2, 1094/1095-C, and 1099-R.
On Oct. 24, 2018, HHS and the IRS jointly released guidance on the use of innovation waivers under the ACA which replaces previous guidance issued on Dec. 16, 2015 (80 FR 78131).
As background, the ACA allows states to apply for an “innovation waiver” from the employer mandate penalty tax and certain other requirements for plan years beginning on or after Jan. 1, 2017. The waivers give states the flexibility to pursue their own strategies to provide their residents with access to health insurance that’s affordable and provides MEC.
The new guidance revises 2015 guidance with the intent of providing more flexibility to states, as the previous guidance imposed significant restrictions on states beyond what was required by the ACA. For example, the 2015 guidance focused on the number of individuals estimated to receive comprehensive and affordable coverage. In contrast, this guidance concentrates on access to comprehensive and affordable coverage, thereby allowing states to offer access to more options that are less comprehensive but potentially more affordable.
In addition, the guidance expands the definition of coverage that must be provided to a comparable number of residents to include access to all forms of private coverage (including short-term, limited-duration insurance; association health plans; and employer-sponsored coverage) and public coverage (like Medicaid). To allow states greater flexibility in pursuing a waiver despite timing limitations (as when a state legislative calendar results in infrequent legislative sessions), the guidance clarifies that even though states are required to enact a law providing for implementation of the waiver, in certain circumstances, existing state legislation combined with a duly enacted state regulation or executive order may satisfy the requirement.
HHS intends to release additional guidance in the future, including examples of how states can take advantage of the increased flexibility in obtaining a waiver. In the meantime, this guidance makes it clear that waivers could potentially allow states to implement expanded options for association health plans. Thus, employers and citizens in certain states may potentially have greater coverage options in the future.
The IRS recently released final Forms 1094 and 1095 (B and C) and instructions related to IRC Sections 6055 and 6056 reporting. The 2018 forms and instructions appear to have no substantial changes from the 2017 versions.
As a reminder, Forms 1094-B and 1095-B (the forms used for Section 6055 reporting) are required of insurers and small self-insured employers that provide MEC. These reports will help the IRS administer and enforce the ACA’s individual mandate for 2018. Form 1095-B, the form distributed to the covered employee, will identify the employee, any covered family members, the group health plan and the months in 2018 for which the employee and family members had MEC under the employer's plan. If the plan is fully insured, Form 1094-B identifies the insurer (for a fully insured plan) or the employer (for a self-insured plan) and is used by the insurer to transmit corresponding Forms 1095-B to the IRS.
In addition, the ACA requires all employers with 50 or more full-time equivalent employees to file Forms 1094-C and 1095-C with the IRS and to provide statements to employees to comply with IRC Section 6056 (intended to help the IRS enforce the ACA’s employer mandate). Specifically, large fully insured employers will need to complete and submit Forms 1094-C and 1095-C (Parts I and II). Large self-insured employers, which are subject to both Sections 6055 and 6056, may combine reporting obligations by using Form 1094-C and completing all sections of Form 1095-C (Parts I, II and III). Small self-insured employers would need to file Forms 1094-B and 1095-B. In addition, employers with grandfathered plans must comply with the reporting requirements.
The 2018 final forms and instructions appear to have only minor changes compared to the 2017 forms. Highlights of the changes are as follows:
- 1094-B – Appears unchanged.
- 1094-C – Appears unchanged.
- 1095-B – Appears unchanged.
- 1095-C – Line 1 in Part I and Column (a) in Part III provide dividers for the entry of the individual’s first name, middle initial and last name. This new layout will likely ensure all Forms 1095-C are completed with an identical name structure, thus leading to more uniformity and fewer TIN issues.
- Instructions – Penalty amounts for reporting failures reflect indexed increases. The penalties for failure to comply have increased from $260 to $270 per failure. This means that an employer who fails to file a completed form with the IRS and distribute a form to an employee/individual would be at risk for a $540 penalty. Notably, however, the instructions don’t refer to proposed regulations that we reported about in the June 12 edition of Compliance Corner that would require aggregation of most information returns when determining the 250-return threshold for mandatory electronic filing.
Lastly, the due dates for 2018 employer reporting are:
- Jan. 31, 2019 to provide 2018 information returns to employees or responsible individuals.
- Feb. 28, 2019 for paper filings with the IRS of all 2018 Forms 1095-C or 1095-B, along with transmittal Form 1094-C or 1094-B. Employers filing fewer than 250 forms may file either by paper or electronically.
- April 1, 2019 for electronic filings with the IRS of all 2019 Forms 1095-C or 1095-B, along with transmittal Form 1094-C or 1094-B. Employers filing 250 or more forms are required to file electronically with the IRS.
Employers should become familiar with these forms in preparation for filing information returns for the 2018 calendar year. In addition, despite the repeal of the individual mandate penalty in 2019, large employers will still need to continue to offer affordable, minimum value coverage to all full-time employees and prepare to comply with employer reporting requirements as to 2018 coverage.
Form 1094-B »
Form 1095-B »
Form 1094-C »
Form 1095-C »
B Form Instructions »
C Form Instructions »
On Sept. 14, 2018, the IRS released Publication 5164, entitled “Test Package for Electronic Filers of Affordable Care Act (ACA) Information Returns (AIR),” for tax year 2018 (processing year 2019). The publication describes the testing procedures that must be completed by those filing electronic ACA returns with the IRS, specifically Forms 1094-B, 1095-B, 1094-C and 1095-C. As a reminder, those who are filing 250 or more forms are required to file electronically with the IRS.
Importantly, the testing procedure applies to the entity that will be transmitting the electronic files to the IRS. Thus, only employers who are filing electronically with the IRS on their own would need to complete the testing. If an employer has contracted with a software vendor who’s filing on behalf of the employer, then the testing and this publication would not apply to the employer, but would apply to the software vendor instead.
For reporting year 2018, the IRS provides two options (see pages 12-13) for submitting test scenarios: predefined scenarios and criteria-based scenarios. Predefined scenarios provide specific test data within the submission narrative for each form line that needs to be completed. Criteria-based scenarios give more flexibility to test and create data that may be unique to their organization when completing the necessary test scenarios.
Correction scenarios are also provided (see page 17), but they’re not required in order to pass testing.
As a reminder, electronic filing of 2018 returns will be due April 1, 2019 (since March 31, 2019, falls on a weekend). If you’re a large employer who’s required to file electronically and would like information on third-party vendors who can assist, please contact your advisor.
The IRS released a revised version of Publication 5165, entitled “Guide for Electronically Filing Affordable Care (ACA) Information Returns for Software Developers and Transmitters,” for tax year 2018 (processing year 2019). This publication outlines the communication procedures, transmission formats, business rules and validation procedures for returns transmitted electronically through the Affordable Care Act Information Return System (AIR). Employers who plan to electronically file Forms 1094-B, 1095-B, 1094-C or 1095-C should review the latest guidance and make any necessary adjustments to their filing process.
Employers filing electronically must use AIR, and the only acceptable format will be XML. The individual responsible for electronically filing the employer’s forms will be required to register with the IRS e-Services and will receive a PIN, which will be used to sign the Terms of Agreement and electronically filed forms.
The IRS has released the latest version of Publication 5258: “ACA Information Returns (AIR) Submission Composition and Reference Guide.” The guide has been updated for use in 2019.
This publication is meant to assist various entities with electronic information return (AIR) submissions required under the ACA — Forms 1094-B and 1095-B under Section 6055, and Forms 1094-C and 1095-C under Section 6056.
The guide includes information on the process for applying for the program, technical requirements and updates to the 2019 version, what testing is necessary before the actual transmission, parameters for filing, and data file size limits. The technical nature of this reference guide reinforces the need for employers to partner with an IT professional (either in-house or external) or experienced vendor if planning to file ACA information returns electronically.
As a reminder, if you’re a self-insured employer or an applicable large employer, the deadline to provide information returns to employees or responsible individuals is Jan. 31, 2019, for tax year 2018. Also, employers filing 250 or more forms must file electronically with the IRS. Employers filing fewer than 250 forms may file by paper or electronically. Paper filings are due by Feb. 28, 2019. Those filing electronically must report 2018 data by April 1, 2019 (since March 31, 2019 falls on a weekend).
IRS Website on ACA AIR Program »
ACA Information Returns (AIR) Submission Composition and Reference Guide »
On Sept. 10, 2018, the IRS released a draft version of the instructions for Forms 1094-B and 1095-B, which are used by insurers and small self-insured employers to report that they offered MEC . These instructions are largely unchanged from the 2017 version. The one change mentioned is that insurance carriers are now encouraged (but not required) to report catastrophic health plan coverage offered through the Marketplace.
On Sept. 11, 2018, the IRS released a draft version of the instructions for Forms 1094-C and 1095-C, which are used by large employers to comply with Section 6056 reporting under the PPACA. The instructions are largely unchanged from the 2017 versions. The Plan Start Month in Part II of the Form 1095-C continues to be an optional field. Employers relying upon the multiemployer arrangement interim guidance will continue to report 1H (no offer of coverage) on Line 14 of the Form 1095-C, with Line 15 blank and code 2E on Line 16.
The forms must be filed with the IRS by Feb. 28, 2019 if filing by paper and April 1, 2019 if filing electronically. The Forms 1095-B and 1095-C must be distributed to applicable employees by Jan. 31, 2019. The penalties for failure to comply have increased from $260 to $270 per failure. This means that an employer who fails to file a completed form with the IRS and distribute a form to an employee/individual would be at risk for a $540 penalty.
We’ll keep you updated of any developments, including release of the finalized forms and instructions.
2018 Forms 1094-B and 1095-B Draft Instructions »
2018 Forms 1094-C and 1095-C Draft Instructions »
On Sep. 11, 2018, CMS issued Technical Guidance 01-2018, which updated the requirements for group health plans and health insurance issuers that are subject to the HHS-administered federal external review process.
As background, non-grandfathered group health plans and health insurance issuers offering non-grandfathered group or individual coverage must comply with the applicable external review process in their state if that process meets the standard established by the National Association of Insurance Commissioners (NAIC). If the state external review process does not meet this standard, or if the plan or issuer is not subject to state insurance regulation, then those group health plans and health insurance issuers must still implement an effective external review process meeting those same standards. The Code of Federal Regulations establishes the federal external review process for this purpose.
Insured coverage not subject to an applicable state external process and self-insured non-federal governmental plans may elect to use the federal Independent Review Organization (IRO) external review process or the HHS-administered federal external review process as outlined in the guidance.
The guidance updates previous guidance (provided in January 2017) because the federal contractor that administers the process has begun to accept requests for external review through an online portal. As such, the guidance informs plans and issuers that their notices to plan participants must be updated to inform them that there are now three options for requesting an external review (mail, fax or through the online portal).
Plan sponsors who are not subject to state insurance regulation or plan sponsors located in states where the state external review process does not meet the NAIC standard can use this guidance to implement the HHS-administered external process.
On Aug. 1, 2018, the DOL, HHS and Department of the Treasury (the Departments) issued a final rule related to short-term, limited-duration coverage. The rule finalizes the proposed rule, issued in February 2018, with some modification. The issuance of the rules was a direct result of an executive order issued by President Trump in October 2017, which sought an extension of the coverage.
As background, short-term, limited-duration insurance is a type of coverage intended to fill temporary gaps in coverage when an individual is transitioning from one plan or coverage to another form of coverage. This type of coverage is exempt from the definition of "individual health insurance coverage" under the ACA and is, therefore, not subject to ACA provisions that apply to individual health insurance plans — including the requirement to provide coverage for essential health benefits, the prohibition on annual and lifetime dollar limits and prohibition on pre-existing condition exclusions. As a result, short-term, limited-duration insurance plans generally cost less than ACA-compliant plans.
The proposed rule to change the maximum duration of short-term, limited-duration coverage to less than 12 months from the current maximum duration of less than three months was finalized. Additionally, the final rule permits such coverage to be renewed for no more than a total of 36 months.
Under the proposed rules, issuers were required to provide a disclosure to consumers explaining that short-term, limited-duration coverage isn’t required to comply with certain federal requirements and doesn’t constitute minimum essential coverage. The final rule revised the notice to add language specifying the federal requirements with which the policy is not required to comply.
For example, the required notice states that the consumer should be aware of any policy exclusions related to pre-existing conditions, mental health services, preventive care and maternity care. Further, the revised notice explains that an individual who doesn’t have minimum essential coverage in 2018 may owe a payment on their tax return. This is to reflect the individual mandate that’s in place for the remainder of 2018 and the fact that the penalty for such goes away in 2019. The notice must appear in the contract and application materials in at least 14-point font.
Importantly, the final rule makes clear that states may further restrict the availability of short-term, limited-duration policies. A state may prohibit such coverage, enforce a shorter maximum policy period, restrict renewals or require additional disclosure. Such laws will not be preempted by the final rule.
The final rule is applicable to policies sold on or after 60 days following publication in the Federal Register.
On July 3, 2018, the IRS released draft versions of the 2018 informational reporting forms that insurers and self-insured employers will use to satisfy their obligations under IRC Section 6055. In addition, on July 11, 2018 the IRS released 2018 draft versions of the forms that large employer plan sponsors and health plans will use to satisfy their obligations under IRC Section 6056. These forms, once finalized, will be filed in early 2019 relating to 2018 information. The IRS is currently accepting comments on the draft forms. A 2018 draft version of Form 1095‐B and draft instructions for these forms have not yet been released.
As a reminder, Forms 1094-B and 1095-B (6055 reporting) are required of insurers and small self-insured employers that provide minimum essential coverage. These reports will help the IRS to administer and enforce the individual mandate. Form 1095-B, the form distributed to the covered employee, will identify the employee, any covered family members, the group health plan and the months in 2018 for which the employee and family members had minimum essential coverage under the employer's plan. Form 1094-B identifies the insurer or small self-insured employer and is used to transmit the corresponding Form 1095-B to the IRS.
Forms 1094-C and 1095-C (6056 reporting) are to be filed by applicable large employers that are subject to the employer mandate (as they will help the IRS administer and enforce the employer mandate). Employers will use Form 1095-C to identify the employer, the employee, whether the employer offered minimum value coverage meeting the affordability standard to the employee and dependents, the cost of the lowest plan option and the months for which the employee enrolled in coverage under the employer's plan. Further, if the plan is self-insured, the employer will use the form to fulfill its Section 6055 reporting obligations by indicating which months the employee and family members had minimum essential coverage under the employer’s plan.
Whereas Form 1095-C reports coverage information at the participant level, Form 1094-C reports employer-level information to the IRS. The applicable large employer will use this form to identify the employer, number of employees, whether the employer is related to other entities under the employer aggregation rules and whether minimum essential coverage was offered.
The 2018 draft forms appear to have only a few minor changes compared to the 2017 forms. Highlights of the changes are as follows:
- 1094-B – Appears unchanged.
- 1094-C – Appears unchanged. However, this could change upon the release of the draft instructions.
- 1095-B – No draft form released at this time.
- 1095-C – Line 1 in Part I and Column (a) in Part III provide dividers for the entry of the individual’s first name, middle initial and last name. This new layout will likely ensure all Forms 1095-C are completed with an identical name structure, thus leading to more uniformity and fewer TIN issues.
Employers should become familiar with these forms in preparation for filing information returns for the 2018 calendar year. However, these forms are only draft versions, and they shouldn’t be filed with the IRS or relied upon for filing. In addition, despite the repeal of the individual mandate penalty in 2019, large employers will still need to continue to offer affordable, minimum value coverage to all full-time employees and prepare to comply with employer reporting requirements as to 2018 coverage.
2018 Draft Form 1094-C »
2018 Draft Form 1094-B »
2018 Draft Form 1095-C »
CMS has imposed a new reporting requirement on employers who sponsor wraparound coverage. Few employers will be impacted by the new requirement as wraparound coverage is a specific type of coverage that is rarely offered.
As background, wraparound coverage was introduced in 2015 as a new type of excepted benefit. As an excepted benefit, it's exempt from certain ACA insurance mandates (such as the essential health benefits requirement and the prohibition on lifetime and annual dollar limits) and HIPAA portability (including special enrollment rights).
Wraparound coverage must supplement either non-grandfathered/non-grandmothered individual or multi-state plan coverage. The plan must provide meaningful coverage beyond general cost sharing. The cost of the wraparound coverage must be no more than the greater of the annually indexed health FSA employee contribution limit ($2,650 in 2018) or 15 percent of the cost of the employer's primary medical plan. Importantly, the employees who are eligible for the wraparound coverage must either be retired employees or employees who are not reasonably expected to be full-time (i.e. part-time employees). They must be offered non-excepted coverage by the employer. Further, the employer must still offer full-time employees the opportunity to enroll in minimum value, affordable employer-sponsored medical coverage. Lastly, the coverage must first be implemented between Jan. 1, 2016 and Dec. 31, 2018 and be in effect for no more than three years.
The one-time reporting requirement is due within 60 days after the publication of the form (on June 25) or 60 days after the first of the plan year that the coverage is offered, whichever is earlier. The Wraparound Coverage Reporting Form will collect the following information: the type of coverage that is supplemented (individual or multi-state plan); who is eligible to enroll; number of enrolled; and additional benefits provided by the coverage (for example, services such as home health care or access to an onsite health clinic at no cost).
While wraparound coverage has been available since 2016, very few employers have implemented such coverage because of the limited application. It's really only beneficial for employers wanting to help supplement individual coverage purchased by non-full-time employees who are already eligible for one of the employer's medical plans. Employers are generally not required to offer any type of coverage to such employees. Thus, most employers do not sponsor such a plan and will not be impacted by this new requirement.
On May 31, 2018, the IRS released proposed regulations to significantly expand mandatory electronic filing of most ACA information returns. As background, employers filing 250 or more information returns during a single calendar year are required to file electronically, but currently, the 250 return threshold applies separately to each type of information return. For example, if an employer files 200 Forms W-2 and 100 Forms 1095-C for 2018, the employer isn’t required to file either form electronically because each filing is separately considered and neither reaches the 250 filing threshold.
The proposed regulations would require aggregation of most information returns when determining the 250 return threshold instead calculation of each information return separately by form type. Forms that would have to be aggregated include Forms 1095-B and 1095-C, Forms 1099, Forms 1099-R issued by qualified retirement plans and Forms W-2. In addition, any corrected returns would need to be filed electronically under the proposed rules, even if fewer than 250 corrected forms are filed during the year.
If these proposed rules are finalized, the new aggregation rules are likely to affect most employers, and only the smallest applicable large employers would be permitted to file paper Forms 1095-C. However, the IRS noted that its waiver process would continue to be available for certain filers that lack access to electronic filing at a reasonable cost.
The proposed regulations would become effective for information returns due after Dec. 31, 2018. The IRS is accepting comments on the proposed rule until July 30, 2018. Thus, applicable large employers that could be affected may want to make arrangements to file information returns electronically if they aren’t already doing so.
Filing Requirements for Information Returns Required Electronically, Proposed Rules »
On May 25, 2018, the IRS released helpful guidance on the various types of 227 letters, which are acknowledgement letters sent to close an employer shared responsibility payment (ESRP) inquiry (see the Nov. 14, 2017, and March 6, 2018, editions of Compliance Corner for more information on that process) or provide the next steps to the applicable large employer (ALE) regarding the proposed ESRP. To clarify, at this stage the IRS uses the information the ALE provided in response to the initial Letter 226-J to review their ESRP. The Letter 227 version that the ALE receives will explain the outcome of that review and the next steps to take to fully resolve the ESRP.
There are five different 227 letters:
- Letter 227-J acknowledges receipt of the signed agreement Form 14764 (ALE's response to a proposed ESRP) and that the ESRP will be assessed. After issuance of this letter, the case will be closed. The IRS says no response is required.
- Letter 227-K acknowledges receipt of the information provided and shows the ESRP has been reduced to zero. After issuance of this letter, the case will be closed. The IRS says no response is required.
- Letter 227-L acknowledges receipt of the information provided and shows the ESRP has been revised. The letter includes an updated Form 14765 (list of employees receiving premium tax credit (PTC)) and revised calculation table. The ALE can agree or request a meeting with the manager and/or request an appeal.
- Letter 227-M acknowledges receipt of information provided and shows that the ESRP didn't change. The letter provides an updated Form 14765 (PTC listing) and revised calculation table. The ALE can agree or request a meeting with the manager and/or request an appeal.
- Letter 227-N acknowledges the decision reached in appeals and shows the ESRP based on the appeals review. After issuance of this letter, the case will be closed. The IRS says no response is required.
The ALE should carefully read the letter for the next steps available and information on how the case will be resolved. If appropriate, the ALE should complete the response Form 14764, indicating their agreement or disagreement. If the ALE disagrees with the proposed ESRP, they must provide an explanation of why they disagree and/or indicate changes needed on Form 14765. The ALE should return all documents as instructed in the letter by the response date. If they agree with the proposed ESRP, they should follow the instructions to sign the response form and return it with full payment in the envelope provided by the IRS. In a situation similar to other assessed taxes, the ESRP will be subject to an IRS lien and the IRS may levy enforcement actions.
Considering what we've seen in regards to these ESRP assessments, there are some compliance responsibilities ALEs should keep in mind for future filings. ALEs should make sure that offers of coverage are documented every year during open enrollment and that signed waiver forms are collected from any FTEs who decline the group health coverage. Additionally, employers should keep important records, such as payroll records, variable-hour tracking calculations, signed enrollment forms and copies of enrollment materials showing employee costs and coverage options.
Finally, ALEs should carefully consider and select a vendor, if appropriate, to populate and file Forms 1094-C and 1095-C. They also shouldn't assume the vendor will correctly populate the forms without any employer oversight. Generally, this means the ALE should ensure all IRS instructions for completing the forms are properly followed, that the indicator codes used in Lines 14 and 16 are correct before filing any 1095-C forms with the IRS and that filing and employee distribution are completed by the IRS deadlines each year. While a vendor may assist an employer with its reporting requirements, the responsibility and liability for such compliance remain with the employer.
Please ask your NFP client service team for a copy of our ESRP Process white paper for more information.
On May 22, 2018, the IRS published Rev. Proc. 2018-34, which provides the 2019 premium tax credit (PTC) table and the employer contribution percentage requirements applicable for plan years beginning after Dec. 31, 2018.
As background, the ACA's employer-shared responsibility rules (also known as the "employer mandate") require an employer to provide affordable, minimum value coverage to its full-time employees. The IRS's required contribution percentage is used to determine whether an employer-sponsored health coverage offers an individual "affordable" coverage, and the affordability percentage is adjusted for inflation each year. In addition, the ACA also provides a refundable PTC, based on household income, to help individuals and families afford health insurance through affordable insurance exchanges. The IRS provides the PTC percentage table for individuals to calculate their PTC.
For 2019, the ACA's affordability percentage will increase to 9.86 percent (up from 9.56 percent in 2018). For the employer mandate and affordability, this means that an employee's required premium contribution toward single-only coverage under an employer-sponsored group health plan can be no more than 9.86 percent of the federal poverty line or of an employee's W2 income or rate of pay (depending on which of the three affordability safe harbors the employer is relying upon).
The 2019 PTC table used to determine an individual's eligibility for PTCs is provided below:
| Household Income Percentage of Federal Poverty Line | Initial Percentage | Final Percentage |
| Less than 133% | 2.08% | 2.08% |
| At least 133%, but less than 150% | 3.11% | 4.15% |
| At least 150%, but less than 200% | 4.15% | 6.54% |
| At least 200%, but less than 250% | 6.54% | 8.36% |
| At least 250%, but less than 300% | 8.36% | 9.86% |
| At least 300%, but not more than 400% | 9.86% | 9.86% |
The revenue procedure is effective for plan years beginning on and after Dec. 31, 2018.
Employers should be mindful of the upcoming 2019 affordability percentages and make sure that the premium offerings for 2019 continue to be affordable for full-time employees, so as to avoid any employer-shared responsibility penalties. The penalties related with employer shared responsibility remain the law (despite the fact that the ACA's individual mandate will be repealed beginning in 2019).
The IRS recently released Publication 5208, which is directed at applicable large employers (those subject to the ACA's employer mandate, also known as the "employer shared responsibility payment").
Specifically, the one-page document provides:
- Step-by-step instructions employers may use to determine whether they’re applicable large employers (ALEs) and are therefore subject to the employer shared responsibility payment (ESRP) and information reporting requirements. It also includes a reminder that the law treats aggregated groups as one single employer when determining whether or not the employer is an ALE.
- An overview of information-reporting requirements for Forms 1094-C and 1095-C, which are the forms filed with the IRS that help the IRS determine if an employer potentially owes a shared responsibility payment. Form 1095-C is also provided to employees.
- A reminder that an ESRP is triggered if at least one full-time employee of an ALE received a premium tax credit through the exchange, and that ALE failed to offer coverage to at least 95 percent of full time employees, or the coverage offered was unaffordable or didn’t meet minimum value.
The employer shared responsibility requirements and related reporting obligations are very complex. Publication 5208 touches only on a few high points. The takeaway for employers is that they must determine each year if they are ALEs and are subject to the employer shared responsibility provisions and subsequent information-reporting requirements. Specifically, those considered ALEs must offer coverage that’s affordable and meets minimum value to all full-time employees or face a penalty.
NFP has many resources to assist. Please ask your advisor for more information.
On April 27, 2018, the IRS published Notice 2018-27, which provides relief for certain small employers that wish to claim the Small Business Health Care Tax Credit (the Credit) for 2017 and later years.
As background, the Credit was created by the ACA under IRC Section 45R and provides relief to certain small employers that provide health insurance coverage to their employees. To qualify for the credit, the health insurance coverage must be a qualified health plan (QHP) purchased through the Small Business Health Options Program (SHOP) Marketplace, and employers may only claim the credit for two consecutive taxable years (the credit period).
The HHS advised the IRS that, for calendar years 2017 and 2018, SHOP exchanges in an increasing number of counties across the U.S. don’t have any QHPs available for otherwise eligible small employers to offer employees. However, because the Credit has been available since 2010, the relief provided in this Notice is more limited than in earlier years.
The relief within 2018-27 helps “eligible small employers” who first claimed the credit for all or part of 2016 (or claimed the credit for all or part of a later taxable year) for coverage offered through the SHOP Marketplace, but are unable to offer employees a QHP through a SHOP Marketplace plan for all or part of the remainder of the credit period because there aren’t any plans available in the county where the employer is located. Pursuant to this Notice, employers now have the ability to calculate the credit for the subsequent portion of the credit period by treating health insurance coverage provided for the portion of the remaining credit period as qualifying for the credit, as long as it would have qualified for the credit under the rules applicable before Jan. 1, 2014. The Notice provided five examples to illustrate when the relief will and won’t apply.
Notice 2018-27 also mentions that employers in Hawaii continue to be unable to claim the Credit for plan years beginning in calendar years 2017-2021. This is because Hawaii’s application for a 5-year state innovation waiver under ACA Section 1332 was approved in 2016 and, therefore, Hawaii isn’t required to operate a SHOP Marketplace. As background, ACA Section 1332 waivers allow a state to pursue innovative strategies for providing residents with access to high-quality, affordable health insurance while retaining the basic protections of the ACA. As such, any future Section 1332 waivers that allow a state not to be required to operate a SHOP Marketplace will supersede the relief provided in this Notice.
Please note that this Notice in no way modifies or otherwise affects the transitional relief provided in the earlier issued notices that provide similar transitional relief for 2014, 2015 and 2016.
On May 3, the DOL, IRS and HHS (the Departments) issued final regulations related to ACA-mandated coverage for emergency services. As a reminder, the ACA places certain requirements on non-grandfathered group health plans that cover services received in an emergency department. The plan must pay benefits for those services without regard to prior authorization determination or the provider’s network participation status.
The 2010 interim final regulations further clarified the amount that plans must pay for non-network emergency services. The plan must pay the greater of: the in-network negotiated amount for emergency services; the out-of-network amount based on usual, customary and reasonable (UCR) charges plus the in-network cost-sharing provision; or the Medicare amount.
Many stakeholders submitted comments to the Departments expressing concern over the methodology for determining the out-of-network emergency service rate. Specifically, the concern was that there would be manipulation of rates since there’s little transparency or oversight related to insurers’ UCR calculations. When the Departments issued final regulations in 2015, there was little change from the interim final rules.
In April 2016, the Departments issued additional guidance in the form of an FAQ, which stated that a plan’s calculations of each of the three rate options must be disclosable to the DOL or a plan participate upon request.
In May 2016, the American College of Emergency Physicians filed a lawsuit against the Departments claiming that the Departments didn’t meaningfully respond to the stakeholders’ concerns and the rules didn’t ensure a reasonable payment for out-of-network emergency services. The U.S. District Court for the District of Columbia agreed in part and remanded the case to the Departments for further explanation of the final regulations.
The recently issued final regulations are the Departments’ response to that court order. The regulations retain the same methodology based on the three rate options with no change. The regulations provide detailed justification as well as a discussion of stakeholders’ comments and suggestions. For example, some had suggested that the Departments create a national database to help set UCR rates. The Departments dismissed this solution as costly, time-consuming and an overstep of their authority.
The final regulations won’t change how non-network emergency services will be paid under group health plans. However, it serves as a reminder for employers who sponsor an ERISA-covered group health plan. If a participant requests additional information related to the calculation or payment of their non-network emergency claim, this could be considered an ERISA disclosure request that must be responded to within 30 days. The employer would want to work with the insurer on any requests.
On May 1, 2018, the Congressional Research Service (CSR) published a report entitled “Federal Requirements on Private Health Insurance Plans.” The report details the federal requirements that apply to private individual, small group and large group health insurance plans and also self-insured plans.
Of particular interest to employers may be the chart starting on page three of the report that lists more than 30 separate requirements (such as mental health parity, guaranteed issue, guaranteed renewability, COBRA and essential health benefits) and identifies which plans are subject to each requirement. For example, both small and large insured plans are subject to guaranteed issue and renewability; but large insured plans and self-insured plans aren’t required to provide coverage for essential health benefits.
If you have any questions as to which requirements apply to your plan, please contact your advisor for guidance.
On April 17, 2018, the 2019 Notice of Benefit and Payment Parameters was published in the Federal Register. These final regulations adopt most of the proposed regulations, which were issued on Oct. 27, 2017, although there are some deviations in the final regulations.
The rules – which are generally effective for plan years beginning on or after Jan. 1, 2019 – are intended to enhance the role of states in the individual and small group markets, provide states with additional flexibilities, reduce regulatory burdens associated with the ACA and improve affordability.
Many of the rules are aimed primarily at insurers as they are technical in nature and related to the parameters and provisions for the risk adjustment program. The rules which may be of interest to employers are summarized below.
Small Business Health Options Program (SHOP) Premium Rating
Issuers offering coverage through a SHOP are not required, under federal law, to offer average enrollee premiums (commonly referred to as composite rates). They may be required or permitted to do so under applicable state law.
SHOP Guaranteed Availability of Coverage
Effective for plan years beginning on or after Jan. 1, 2018, an insurer may limit enrollment of an employer to the annual enrollment period of November 15 through December 15 of each year if the employer fails to comply with the group participation rules.
Off-Exchange Special Enrollment Periods
Individuals are permitted to enroll mid-year in off-exchange coverage following the gaining of a dependent through marriage, birth, adoption, placement for adoption, placement in foster care or through a child support order (or other court order). The individual may enroll in or change coverage along with their dependents, including the newly gained dependent and any existing dependents. The new dependent also has an independent right to enroll in coverage without the parent or spouse.
Broker-assisted SHOP Enrollment
SHOP rules relax the requirements for interested small employers to enroll in the SHOP online. Small employers who desire to participate in the SHOP will have the option to utilize a broker rather than use the online enrollment platform.
As a result, a state exchange on the federal platform will no longer be able to utilize the federal platform for the functions of employee eligibility, enrollment and premium aggregation functions.
Verification of Employee’s Eligibility for Premium Tax Credit
The proposed rules requested information on ways to improve verification of whether an exchange applicant reasonably expects to be enrolled in employer-sponsored coverage or is eligible for minimum value, affordable coverage from an employer — as such coverage renders the individual eligible for an advanced premium tax credit.
The final rules discuss the need for a comprehensive database of information on employer-sponsored coverage, but acknowledges that one does not currently exist and the building of such a database would be costly. The federally facilitated exchange (FFE) conducted a pilot study that involved the exchange contacting the employers of individuals receiving a premium tax credit. The employers were contacted by telephone based on contact information provided by the individual on the application.
Though only a small sampling of employers were contacted, the FFE found that this approach was not cost-effective. At this time, exchanges will continue to perform verifications using the federal employment database, SHOP database and any alternative method approved by HHS. This means that employers may not have an advanced opportunity to verify an employee’s eligibility for a premium tax credit.
If an employee is ineligible for a premium tax credit due to an employer’s offer of coverage, a large employer would have an opportunity to appeal any associated employer mandate penalty assessed after the fact through the Letter 226J process.
Essential Health Benefits (EHB) Benchmark Plans
States will have greater flexibility in how they select their EHB benchmark plans for plan year 2020 and beyond.
A state’s benchmark plan directly impacts a group health plan’s design in that it serves as a reference plan that defines the scope and limits applied to EHBs. Beginning in 2020, states will be able to select a new benchmark plan annually, select another state’s benchmark plan or substitute categories of benefits from another state’s benchmark plan. Under the proposed rules, CMS requested comments regarding a federal default definition of EHB with states having the ability to expand benefits beyond the default definition.
This specific provision is not being implemented at this time.
Stand-Alone Dental Plans (SADP)
Effective in 2019, SADPs will not be required to meet any specific actuarial valuation. This rule is intended to increase the number of options and plan designs available to consumers.
Medical Loss Ratio (MLR)
Rather than an insurer tracking and reporting their actual Quality Improvement Activity expenses, they will be able to use a standardized amount based on 0.8 percent of the insurer’s earned premium for the year.
This could affect the frequency and amount of MLR rebate checks distributed by insurers to fully insured group health plans.
Maximum Out-of-Pocket Annual Limits
The maximum out-of-pocket limits for 2019 will be $7,900 for single coverage – up from $7,350 in 2018 – and $15,800 for family coverage (up from $14,700 in 2018).
Similar to the preamble of the proposed rules, CMS continued to encourage insurers to offer more qualified high deductible health plans to HSA-eligible individuals. This is consistent with several proposed congressional bills that would expand HSA funding.
Lastly, CMS stated an intention to consider proposals in future rulemaking that would help reduce drug costs and promote drug price transparency.
The rules are generally effective for plan year 2019, unless otherwise indicated. Employers should work with their insurers and administrators to implement the new out-of-pocket limits. Small employers should work with their advisors concerning any questions related to the SHOP and participation requirements.
On April 9, 2018, the IRS released FAQ guidance on the newly-created tax credit available to employers who offer paid FMLA leave. As background, the 2017 Tax Cuts and Jobs Act (2017 Tax Reform) added Section 45S to the Internal Revenue Code to establish a new temporary tax credit for employers that voluntarily offer paid family and medical leave to employees.
Section 45S is intended to incentivize employers to offer FMLA leave on a paid basis. To be eligible for the new federal tax credit, an employer must have a written policy that offers at least two weeks (annually) of paid family and medical leave to full-time employees and a proportionate amount to part-time employees that is based on the employee’s expected work hours. The paid leave must be available to all employees who have been employed by the employer for at least one year and who, for the preceding year, had compensation of not more than 60 percent of the highly compensated employee threshold for the preceding year — for 2018, that means employees making more than $72,000, as 2017 is the preceding year. Extending the offer of paid family leave to employees above the threshold is permissable, but the credit would not be available.
The FAQs add further detail as to what qualifies as "family and medical leave" for purposes of the credit. Section 45S mirrors the federal Family and Medical Leave Act (FMLA), to include one or more of the following:
- Because of the birth of a son or daughter of the employee and in order to care for such son or daughter;
- Because of the placement of a son or daughter with the employee for adoption or foster care;
- In order to care for the spouse, or a son, daughter, or parent, of the employee, if such spouse, son, daughter, or parent has a serious health condition;
- Because of a serious health condition that makes the employee unable to perform the functions of the position of such employee;
- Because of any qualifying exigency (as determined by the Secretary of Labor) arising out of the fact that the spouse, or a son, daughter, or parent of the employee is on covered active duty (or has been notified of an impending call or order to covered active duty) in the Armed Forces; or
- In order for the employee to care for a covered service member (if the employee is the spouse, child, parent, or next of kin of the service member).
If the employer provides paid leave as vacation leave, personal leave, or medical or sick leave – other than leave for one or more reasons above – that paid leave is not considered family and medical leave.
The FAQ also explains how to calculate the general business credit, which is equal to 12.5 percent of the amount of wages paid to a qualifying employee while on family and medical leave when the employer provides at least 50 percent of normal wages for up to 12 weeks per taxable year. The credit increases incrementally up to a maximum of 25 percent for employers that offer 100 percent of normal wages during a qualifying leave, is currently available for wages paid in taxable years beginning after Dec. 31, 2017 and is scheduled to expire after Dec. 31, 2019. Essentially, it’s available for employers that offer paid FMLA leave in 2018 and 2019.
The Section 45S tax credit is available to all employers, even those that are not subject to FMLA, so long as they offer certain FMLA-like protections to employees. Section 45S does not mandate that employers provide FMLA leave on a paid basis and does not change any aspect of FMLA. It also does not take into account any paid leave required by state or local law in determining the amount of paid leave the employer provides. Further, it is unclear how employers that pay in excess of State or local requirements may qualify for the credit under Section 45S.
The IRS intends to publish additional guidance on the credit. An example of the items to be addressed include, but are not limited to: when the written policy must be in place, how paid family and medical leave relates to an employer’s other paid leave, how to determine whether an employee has been employed for one year or more, the impact of state and local leave requirements, and whether members of a controlled group of corporations and businesses under common control are treated as a single taxpayer in determining the credit.
Employers that currently offer a paid leave opportunity to full-time employees (and part-time employees) should review the FAQs to determine if the current program qualifies for the available tax credit. If an employer currently does not offer an FMLA program or the program offered does not meet the standard established under Section 45S, they should consider the tax benefits of a paid family and medical leave policy, keeping in mind that this program is temporary (at least currently). Employers may also want to work with outside counsel, since a review of current leave policies and procedures would be necessary.
On March 20, 2018, the Congressional Research Service (CRS) released its 2018 U.S. paid family leave report, giving an overview of paid family leave in the United States — including employer-sponsored paid family leave and state-run paid family leave insurance programs. It also compares paid family leave policies in other advanced-economy countries and addresses recent legislative activity as it relates to federal paid family leave.
As a reminder, FMLA provides workers with an entitlement of up to 12 weeks of unpaid leave for their own serious health condition, to care for an immediate family member (spouse, child, or parent — but not a parent "in-law") with a serious health condition, or following birth/adoption/placement for foster care, but no federal law currently provides workers entitlement to paid leave of any kind.
The report discusses state mandated paid family leave for eligible employees engaged in certain caregiving activities, including California, New Jersey, New York, Rhode Island, Washington State and the District of Columbia, and highlights recent federal legislation which allows employers to receive tax credits for a portion of wages paid to employees out on FMLA.
The report also illustrates trends in voluntary employer-provided paid family leave within the U.S. private sector. Not surprisingly, the statistics show that employer-provided paid leave is more prevalent among professional and technical occupations and industries, high-paying positions, full-time employees, and employees working for large companies. It also indicates, however, that there may be a shift in company-provided family leave due to recent company announcements emphasizing paid parental leave and more expansive uses of family leave.
While no mandated federal paid leave legislation has been enacted as of yet, employers should be aware of state law and city ordinances mandating paid leave for certain caregiving situations. Therefore, employers wishing to keep abreast of paid leave mandates and trends may find this report useful.
On March 12, 2018, the U.S. District Court for the District of Massachusetts, in Massachusetts v. U.S. Dept. of Health and Human Services (HHS), 2018 WL 1257762 (D. Mass. 2018), held that Massachusetts lacks standing to challenge two interim final HHS rules relating to the contraceptive coverage exemption for employers with religious and moral objections. As background, the ACA requires most employers to provide certain preventive services, including contraceptive services and items, without cost-sharing. Certain qualifying religious employers were already exempt from the contraceptive coverage requirement, and other employers that held religious objections could also request an exemption via an accommodation process. Then, in October 2017, HHS published two interim final rules that significantly expanded the religious exemption (as outlined in our Oct. 17, 2017, article here) by allowing any employer (including non-closely held companies and publicly traded companies) to claim a religious or moral objection to offering certain contraceptive items and services. The interim final rules also provided an exemption for insurers with sincerely held moral objections to contraceptive coverage.
In Massachusetts v. HHS, the state of Massachusetts argued that HHS hadn’t complied with the Administrative Procedure Act (APA) when it failed to provide an applicable notice and comment period before issuing the two interim final rules, and that the rules will cause significant harm to Massachusetts women who lose contraceptive coverage as a result of the rules’ enforcement. Massachusetts estimated that between 666 and 2,520 Massachusetts women who are currently using contraception would lose their employer-sponsored coverage and would, therefore, experience increased out-of-pocket costs, as a result of the two rules. Based on those arguments, the state requested a nationwide permanent injunction (prohibition) on enforcement of the two rules.
The court denied the injunction, concluding that Massachusetts hadn’t established that anyone had actually been harmed by the new rules or that employers would actually use the expanded exemptions. The court reasoned that because Massachusetts already has a law on its books that prohibits certain employer-sponsored group health plans from imposing cost-sharing for contraceptives, the estimates were inaccurate and inappropriately based on unsupported assumptions.
Interestingly, courts in California (CA) and Pennsylvania (PA) have previously imposed nationwide preliminary injunctions that block enforcement of the two interim final rules. The Massachusetts court, however, distinguished itself by concluding that employers in CA and PA are likely to use the expanded exemptions (since those states don’t have similar laws prohibiting it). According to the MA court, to be able to show harm (fiscal injury or suffering some type of adverse effect on the health of state residents), the state must show that employers intend to actually use the expanded exemptions. The MA court’s ruling means the case may continue; we’ll have to wait and see how the court rules on the merits of the case itself.
For employers, the court decision doesn’t bring new compliance obligations, but the issue is still quite unsettled. Thus, employers wishing to rely upon any expanded religious exemptions should work with outside counsel to better understand whether they qualify for such exemptions.
In March, 2018, the Government Accountability Office (GAO) released a publication which reviews the awarded commitments provided by the Patient-Centered Outcomes Research Institute (PCORI) and the corresponding expenditure data from the Patient-Centered Outcomes Research Trust Fund (Trust Fund) as well as the HHS data on obligated funds to publish the PCORI findings and build data capacity for the research.
As background, PCORI is a federally funded, nonprofit corporation authorized by the ACA to improve the quality and relevance of evidence through research to help patients, clinicians, purchasers and policymakers to make informed health care decisions. In short, PCORI exists to improve comparative clinical effectiveness research (CER). The ACA also requires HHS to publish the findings from the CER, including those provided by PCORI, and to coordinate with relevant federal health programs to handle the research. Funding for this research is collected from the general fund of the Department of Treasury (Treasury), transfers from the Medicare trust funds, and fees collected by the Treasury from private insurance and self-insured health plans.
The ACA charged the GAO to review PCORI’s use of federal funding by 2018. For this report, the GAO analyzed: (i) the PCORI’s use of the commitments made for the Trust Fund for comparative CER activities, including the distribution of the research findings and (ii) HHS’s use of the Trust Fund for these activities.
The GAO findings in this review were limited, because most research is still underway. Only 53 of the 543 research projects were completed as of the end of fiscal year 2017, because the CER process from initial proposal stage to publishing the research may take up to six years to complete. To date, PCORI has committed about $2 billion for awards in 2010-2017. About 79 percent of the $2 billion is for research awards ($1.6 billion) and 16 percent is to build the capacity to use existing health data to conduct the research. PCORI projects to commit an additional $721 million in fiscal years 2018-2021. Of the current committed funds, health conditions that received the highest PCORI research award commitments include mental and behavioral health, cancer, cardiovascular disease, neurological disorders and patients suffering from multiple chronic conditions.
HHS has committed $448 million from the Trust Fund, a majority of which was to distribute and implement CER findings. Similar to the situation at PCORI, a majority of the research is still being completed, and the CER has yet to be done. HHS plans to spend $120 million in fiscal years 2018-2020 to satisfy the obligation to train researchers on conducting CER, build data capacity and perform administrative activities.
The report contains no new employer obligations, but employers may be interested in reviewing it to gain a better understanding of the PCORI.
The GAO Report of PCORI’s use of federal funds »
The GAO Report of PCORI’s research activities published in 2015 »
Compliance Corner wouldn’t normally include coverage of a district court case that hasn’t yet been decided. However, the details of this specific case serve as a cautionary tale for employer plan sponsors to remain diligent in their overall compliance efforts.
In 2014, employee Magdy Abdelmassih worked for a number of Kentucky Fried Chicken restaurants located in Pennsylvania. Mitra, a corporation in Texas, owned the restaurants, with Manish Patel and Pushpak Patel serving as co-owners and co-CEOs. From March 10 to April 28, 2014, Abdelmassih was on FMLA related to a chronic medical condition. Later that year, he was terminated from employment.
In Abdelmassih v. Mitra QSR KNE LLC, 2018 WL 1083857 (E.D. Pa. 2018), Abdelmassih brought a total of eight claims against the corporation, HR manager, regional manager and owners under the ADA, ADEA, COBRA, FLSA, FMLA and related state law. The Feb. 28, 2018 ruling by the U.S. District Court for the Eastern District of Pennsylvania was simply to determine whether summary judgment would be granted to the defendants on those claims. In other words, the court ruled whether the legal claims would continue under review or if they would be dismissed.
The court dismissed the ADEA, ADA, FMLA and FLSA claims against co-owners Manish and Pushpak Patel. While individuals can be held liable in some capacity under these laws, the court determined that the owners didn’t play an active, supervisory role in Abdelmassih’s employment.
The ADEA claim against the corporation and other defendants wasn’t dismissed in summary judgment, as evidence was presented that the regional manager had made disparaging comments regarding the employee’s age (he was in his 60s). The court dismissed the ADA claim for failure to provide reasonable accommodation, reasoning that there was no evidence that the employee had requested or stated a need for accommodation. The ADA claim for discrimination related to disability and the FMLA claim related to retaliation wasn’t dismissed in summary judgment, as there was evidence that the employer had possibly treated the employee in a discriminatory or retaliatory manner upon return from FMLA, ultimately resulting in termination of employment. Also, the employer failed to distribute the required FMLA notices to the employee (Notice of Eligibility and Rights & Responsibilities; Designation Notice). Additionally, the court denied summary judgment on the FLSA claim against the corporation, as there was evidence that the employee regularly worked 50 or more hours per week without overtime payment.
Lastly, upon the employee’s termination of employment, the employer failed to provide the employee with a COBRA election notice. The employee brought a claim under COBRA against the corporation and the owners. The claim against the owners was dismissed as they weren’t the plan administrators. As a reminder, under ERISA, the plan administrator is liable for statutory penalties based on failure to provide required notification. The plan administrator must be identified in the SPD. If the SPD fails to identify a plan administrator (or if the plan fails to have an SPD), the employer plan sponsor is the default plan administrator. If a specific individual is named as the plan administrator, that individual could be held personally responsible for any failures. This is why it’s best practice to identify the employer as the plan administrator in the SPD and other plan documents. In this case, the benefits brochure listed the HR manager as the COBRA contact and United Healthcare as the insurance provider. The owners weren’t mentioned in any documentation, so summary judgment was granted for that claim.
It will be interesting to see how these claims are ultimately decided by the court. While the defendants presented evidence of the employee’s past poor performance, there was enough evidence of notification failures, retaliation and discrimination on the employer’s behalf that the defendants were denied summary judgment for several of the claims. This case serves as a reminder of an employer’s obligation to distribute FMLA and COBRA notices in a timely manner, the importance of identifying the employer as the plan administrator in plan documents and the potential consequences for failure to train managers on the ADA, ADEA and FLSA requirements.
On March 8, 2018, CMS issued a letter to Idaho Gov. Otter and Insurance Director Cameron that states that health insurance products sold under the state insurance department's Bulletin No. 18-01 don't comply with several provisions required under the ACA. As such, CMS acknowledged its duty, somewhat reluctantly, to take over enforcement responsibility if it determines that a state fails to substantially enforce the requirements.
As background, Idaho Bulletin No. 18-01 was released in January 2018 in response to Gov. Otter's executive order directing the Idaho Department of Insurance to pursue creative options that encourage carriers to offer lower-cost health plans, including options that don't meet ACA requirements. Generally, the bulletin requires that insurers follow some ACA mandates, but it substantially relaxes others. For example, the bulletin allows carriers to impose preexisting condition exclusions when an individual experiences a break in coverage, omits certain essential health benefits, permits premium increases for individuals who report having particular health conditions and authorizes annual benefit dollar limits.
CMS's letter identifies eight categories in which the bulletin authorizes provisions that fail to meet ACA requirements. It also gives the state 30 days to respond, spells out the process of determining whether the state is properly enforcing the ACA, and mentions the consequences if CMS has to assume enforcement authority, including potential civil penalties levied against noncompliant insurers. However, the letter suggests that the Idaho plans could possibly be offered under the proposed exception for short-term, limited-duration plans.
While these plans don't directly affect the employer-sponsored insurance market, it may be helpful for employers to understand these developments in order to assist with employee inquiries.
On Feb. 20, 2018, the DOL, HHS and Department of the Treasury (the Departments) issued a proposed rule to change the maximum duration of short-term, limited-duration coverage to less than 12 months (the current maximum duration is less than three months). The issuance of this proposed rule was a direct result of an executive order issued by President Trump in October 2017, which sought an extension of the short-term, limited-duration coverage allowed.
As background, short-term, limited-duration insurance is a type of coverage intended to fill temporary gaps in coverage when an individual is transitioning from one plan or coverage to another form of coverage. This type of coverage is exempt from the definition of "individual health insurance coverage" under the ACA and is, therefore, not subject to ACA provisions that apply to individual health insurance plans — including the requirement to provide coverage for essential health benefits, the prohibition on annual and lifetime dollar limits and prohibition on pre-existing condition exclusions. As a result, short-term, limited-duration insurance plans generally cost less than ACA-compliant plans.
In, 2016, the Departments published a final rule that restricted short-term, limited-duration insurance to less than three months (including any renewal periods), but key stakeholders, including state regulators, expressed concerns that the three-month limit could cause harm to some consumers, limit consumer options and have little positive impact on the risk pools in the long run. The new proposed rules address these concerns by reverting to an earlier definition of such insurance that permits this coverage up to 12 months.
In addition to extending the duration of coverage, the proposed rule also requires specific language to appear in the contract (and in any application materials) to help consumers understand the short-term, limited-duration coverage they're purchasing. There are two permissible versions of the notice, but both are intended to clearly communicate that the short-term, limited-duration coverage isn't required to comply with the federal requirements for health insurance, that the expiration of the coverage or loss of eligibility may require waiting until an open enrollment period and the coverage is not "minimum essential coverage" (which means the individual could later be exposed to a tax liability for failure to obtain MEC).
CMS is accepting comments on the proposed rule for 60 days until April 23, 2018.
On March 1, 2018, the IRS released sample Notice CP 220J, which will notify applicable large employers (ALEs) that the IRS has charged them an employer shared responsibility payment (ESRP).
As background, this notice was preceded by the release of Letter 226J, which is the initial letter sent by the IRS notifying ALEs of a proposed ESRP (see the Nov. 14, 2017, edition of Compliance Corner for more information), and Forms 14764 (ALE's response to a proposed ESRP) and 14765 (list of employees receiving premium tax credit). (Ask your advisor for a copy of our ESRP Process white paper for more information.)
So, if the IRS concludes that an ALE in fact owes an ESRP, the IRS will send Notice CP 220J, soliciting the payment. Specifically, Notice CP 220J will show the assessed tax amount and provide the ALE with payment instructions. The ALE should carefully read the notice for the due date, amount due and payment options. The ALE won't have to submit payment before the notice is sent. In a situation similar to other assessed taxes, the ESRP will be subject to an IRS lien and the IRS may levy enforcement actions. Additionally, interest will accrue from the date of the notice and demand and will continue until the total amount due is paid in full.
Finally, if an ALE disagrees with the ESRP assessment being made by the IRS, various options are discussed on page two of the notice, including filing suit in a U.S. District Court and the opportunity to ask questions about the ESRP calculations.
Considering what we've seen in regards to these ESRP assessments, there are some compliance responsibilities ALEs should keep in mind for future filings. ALEs should make sure that offers of coverage are documented every year during open enrollment and that signed waiver forms are collected from any FTEs who decline the group health coverage. Additionally, employers should keep important records, such as payroll records, variable-hour tracking calculations, signed enrollment forms and copies of enrollment materials showing employee costs and coverage options.
Finally, ALEs should carefully consider and select a vendor, if appropriate, to populate and file Forms 1094-C and 1095-C. They also shouldn't assume the vendor will correctly populate the forms without any employer oversight. Generally, this means the ALE should ensure all IRS instructions for completing the forms are properly followed, that the indicator codes used in Lines 14 and 16 are correct before filing any 1095-C forms with the IRS and that filing and employee distribution is completed by the IRS deadlines each year. While a vendor may assist an employer with its reporting requirements, the responsibility and liability for such compliance remains with the employer.
On Jan. 18, 2018, HHS announced the 2018 federal poverty levels (FPL). The threshold for the 48 contiguous states is $12,140 for a single household and $25,100 for a household of four individuals. The thresholds are different for Alaska ($15,180 and $31,380, respectively) and Hawaii ($13,960 and $28,870, respectively).
The FPL plays an important role under the ACA. Individuals who purchase coverage through the exchange may qualify for a premium tax credit if their household earnings are within 100 percent to 400 percent of the FPL. Employers wishing to avoid a penalty under the employer mandate may use the FPL affordability safe harbor, which means the cost of an employee's required contribution for employer sponsored coverage does not exceed 9.56 percent (for 2018) of the single FPL. This means that the FPL affordability safe harbor threshold in the 48 contiguous states for 2018 would be $96.71 per month. As a reminder, the FPL safe harbor is only one of the affordability safe harbors; the other two are the rate of pay and Form W-2 safe harbors.
Employers should consider this adjustment to the FPL when determining whether their coverage is affordable, especially if they're using the FPL affordability safe harbor. The 2018 FPL is applicable beginning Jan. 13, 2018.
In the last 12 months, there have been several changes to the preventive services that must be offered with no cost sharing. As background, the ACA requires non-grandfathered health plans to provide coverage for a range of preventive care services without cost-sharing requirements (such as copayments, deductibles or coinsurance requirements) for patients. The mandatory preventive care benefits required under the ACA include evidence-based screenings and counseling, routine immunizations, preventive services for children and youth, and preventive services for women.
The ACA's list of "Mandated Preventive Health Care Services" is subject to annual updates, and insurers and self-funded health plan administrators must ensure that their coverage requirements encompass each of the newly added items (as applicable) as of the first day of the plan year or policy year one year after the recommended update is issued. Additionally, plan documents, benefit schedules, summary plan descriptions (SPDs) and similar communications, and any related materials should be carefully reviewed and updated (where appropriate). Those updated documents should also be provided to plan participants.
The list for significant updates to the Mandated Preventive Health Care Services provided by the U.S. Preventive Services Task Force (USPSTF) are listed as follows (by order of effective date):
- Hearing Loss. Screening for hearing loss in newborn infants (no longer required)
- Depression (Adults). Screening for depression in the general adult population, including pregnant and postpartum women (mandated for plan years beginning on and after Jan. 31, 2017)
- Depression (Children and Adolescents). Screening for major depressive disorder (MDD) in adolescents aged 12 to 18 years (mandated for plan years beginning on and after Feb. 28, 2017)
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Aspirin. A low-dose aspirin for prevention of cardiovascular disease and colorectal cancer in adults aged 50-59 years who meet all of the following criteria:
- Have a 10-year cardiovascular risk of 10% or greater
- Aren't at increased risk for bleeding
- Have a life expectancy of at least 10 years
- Are willing to take low-dose aspirin daily for at least 10 years (mandated for plan years beginning on and after April 30, 2017)
- Colorectal Cancer. Screening for colorectal cancer starting at age 50 and continuing until age 75 (mandated for plan years beginning on and after June 30, 2017)
- Syphilis (Non-Pregnant Adults and Adolescents). Screening for syphilis infection in persons who are at increased risk for infection (mandated for plan years beginning on and after June 30, 2017)
- Latent Tuberculosis Infection. Screening for latent tuberculosis infection (LTBI) in populations at increased risk (mandated for plan years beginning on and after Sept. 30, 2017)
- Breastfeeding. Providing interventions during pregnancy and after birth to support breastfeeding (mandated for plan years beginning on and after Oct. 31, 2017)
- Statin. Adults aged 40-75 years with no history of cardiovascular disease (CVD) use a low- to moderate-dose statin for the prevention of CVD events and mortality when they have one or more cardiovascular disease risk factors, and a calculated 10-year CVD event risk of 10% or greater; screening for cardiac risk may include assessment of blood pressure, smoking status, screening for lipid disorders and use of ACC/AHA CVD to estimate 10-yr risk (mandated for plan years beginning on and after Nov. 30, 2017)
- Folic Acid. All women who are planning or capable of pregnancy take a daily supplement containing 0.4-0.8 mg (400-800 µg) of folic acid (mandated for plan years beginning on and after Jan. 31, 2018)
- Preeclampsia. Screening for preeclampsia in pregnant women with blood pressure measurements throughout pregnancy (mandated for plan years beginning on and after April 30, 2018)
- Obesity (Children and Adolescents). Screening for obesity in children and adolescents six years and older and offer to refer them to comprehensive, intensive behavioral interventions to promote improvements in weight status (mandated for plan years beginning on and after June 30, 2018)
- Vision (Children Aged 6 Months to 5 Years). Vision screening at least once in all children ages three to five years to detect amblyopia or its risk factors (mandated for plan years beginning on and after Sept. 30, 2018)
The Health Resources and Services Administration (HRSA) provided updates to the preventive services for women (incorporated into the Mandated Preventive Health Care Services), mandated for plan years beginning on and after Dec. 20, 2017:
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Breast cancer screening for average-risk women. Mammography exams are to be performed at least biennially beginning at age 40 through age 74 (but age is not a basis to discontinue screening)
- Women at increased risk for breast cancer should undergo mammography "periodically"
- Imaging tests, biopsies or other interventions are required to be considered an integral part of "Screening"
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Cervical cancer screening for average-risk women. Screening for cervical cancer:
- For ages 21-29, PAP smear every 3 years
- For ages 30-65, with cytology and human papillomavirus testing (HPV) testing with Pap smear every 5 years or a regular cytology alone (without HPV testing) every 3 years
- Women with an average risk shouldn't be screened more than once every 3 years
- Contraception. Adolescent and adult women must have access to the full range of female-controlled contraceptives to prevent unintended pregnancies and improve birth outcomes; counseling and follow-up care are included in this requirement
- Screening for gestational diabetes mellitus. Pregnant women should be screened after 24 weeks of gestation, and women with risk factors for diabetes should be screened prior to 24 weeks of gestation
- Screening for human immunodeficiency virus (HIV) infection. Coverage for preventive education and risk assessment in adolescents and all women, based on risk, is mandated; education and assessment occur annually based on risk, but may be more frequent for increased-risk cases
- Screening for interpersonal and domestic violence. Annual screening for adolescents and women is required as is, when needed, the provision of or referral to initial intervention services, which include counseling, education, harm reduction strategies and referral to appropriate supportive services
- Counseling for sexually transmitted diseases. Annual, directed behavioral counseling by a health care provider or other trained provider for sexually active adolescent and adult women at increased risk
- Well-woman preventive visits. Preventive care visits to ensure that recommended preventive services (including preconception) are made on an annual basis, although several visits may be required, depending on health status and needs
The following are updates to the 2018 Immunization Practices provided by the Advisory Committee on Immunization Practices (ACIP) (incorporated into the Mandated Preventive Health Care Services). They are effective February 2018:
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Revised the immunization schedule for children and adolescents age 18 or younger, including:
- Hepatitis B vaccine
- Poliomyelitis vaccine
- Human papillomavirus (HPV) vaccine
- Influenza vaccine
- Meningococcal vaccine
- Haemophilus vaccine
- Meningococcal B vaccine
-
Updates to immunizations schedule for vaccines provided based on medical condition"
- HIV
- Pneumococcal
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Revised requirements for:
- Diphtheria and tetanus toxoids
- Acellular pertussis
- Hemophilia
- Influenza type B and pneumococcal vaccines
The revised nominated conditions to the Recommended Uniform Screening Panel (RUSP) mandated for plan years beginning on and after February 2017 include:
- Adrenoleukodystrophy (ALD)
- MPS I (alpha-L-iduronidase deficiency)
There are significant changes made to the Bright Futures/American Academy of Pediatrics – Bright Futures Project Recommendations, which are mandated for plan years beginning on and after May 1, 2018), and include:
- Updates to the timing and follow-up for a number of existing recommendations
- New bilirubin screening requirements for newborns
- New screening requirements for maternal depression
- Other changes as set forth in official detailed schedules
Though the NFP Benefits Compliance team has provided these updates ad hoc in the past, going forward, we intend to summarize all changes to the Mandated Preventive Health Care Services list in October of each year so that plan sponsors have time to incorporate the new changes (if any) into the plan documents prior to the beginning of the then upcoming plan year.
Note: Plan sponsors (of non-grandfathered plans) should work with their medical and pharmacy benefit administrators to ensure that the new recommendations are implemented and determine if there's a cost impact to the plan. Further, the impact of some of these expansions is unknown, but it may be best to reach out to your stop-loss carrier to see if there are additional concerns.
USPSTF, Preventive Care Mandates »
HRSA, Women's Preventive Service Guidelines »
ACIP, 2018 Immunization Schedule for Children and Adolescents Aged 18 or Younger »
Recommended Uniform Screening Panel (RUSP) »
Bright Futures provided by the American Academy of Pediatrics »
The IRS recently updated the website section, “Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act,” primarily to adjust for 2018 penalty amounts that relate to ALEs that fail to offer affordable coverage to all their full-time employees (under IRC Section 4980H). The updates include (Q&A-54):
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The 2018 adjusted penalty amounts for each full-time employee for IRC Section 4980H failures are:
- $2,320 under Code Section 4980H(a) (Penalty A) (as compared to $2,260 in 2017)
- $3,480 under Code Section 4980H(b) (Penalty B) (as compared to $3,390 in 2017)
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The 2018 indexing adjustment for the required contribution percentage used to determine whether employer-sponsored health coverage is “affordable” for purposes of employer shared responsibility.
- Affordability threshold for 2018 is 9.56 percent (Q&A-39)
- Clarification that the transition relief has now expired and is not available for 2017 and future years. The transition relief that delayed the effective date of the employer shared responsibility provisions to certain employers that was available for the 2015 plan year (including months falling in 2016 for non-calendar plans) has now expired (Q&A-2).
As a reminder, the IRS has started to send Letter 226-J to inform ALEs of their potential liability under IRC Section 4980H (Employer Shared Responsibility Payment – ESRP) for the 2015 calendar year. This notes the first-ever assessment of employer shared responsibility penalties.
IRS Letters 226J are based on information from Forms 1094-C and 1095-C filed by the ALE, the individual income tax returns filed by the ALE’s employees and information from the state health insurance exchanges relating to premium tax credit qualification. Some of the notices already distributed have contained assessed penalties in the millions of dollars. More Letters 226-J are expected to be issued in 2018 and future years. If you receive one, be sure to reach out to counsel so that you can promptly prepare a response within 30 days.
On Jan. 22, 2018, Pres. Trump signed H.R. 195 into law. The main purpose of this legislation was to continue funding government operations and reauthorize the Children’s Health Insurance Program (CHIP) for six more years. However, it also impacts several provisions of the ACA, including the Cadillac tax and the health insurance tax (HIT).
First, the effective date of the excise tax on employer-sponsored coverage that exceeds a certain threshold, known as the Cadillac tax, has been pushed back until 2022 (tax years beginning after Dec. 31, 2021).
Second, the health insurance provider fee, also called the HIT, will be in moratorium for calendar year 2019. In other words, the HIT is effective for 2018, suspended for 2019, and effective again for calendar year 2020 and beyond. In response to the changes, the IRS released an FAQ that provides greater detail on how the provider fee is paid, when it applies and how the moratorium in 2019 affects 2018, 2020 and beyond.
Additionally, the bill delays the medical device tax, which will now be effective for sales made after Dec. 31, 2019.
The delay of the Cadillac tax and the HIT is welcome relief for employers, considering the effect these taxes may ultimately have on their plans. Bipartisan efforts for a full repeal of the Cadillac tax and HIT are likely to continue. Regardless, employers should evaluate whether plan amendments are necessary considering these recent changes.
The IRS recently issued the 2017 version of the Form 8941, Credit for Small Employer Health Insurance Premiums, and the related Instructions. Form 8941 is used by small employers to calculate and claim the small business health care tax credit. As background, this tax credit benefits employers that do all of the following:
- Offer coverage through the small business health options program, also known as the SHOP Marketplace
- Have fewer than 25 full-time equivalent employees
- Pay an average wage of less than $50,000 a year (indexed annually)
- Pay at least half of employee health insurance premiums
The 2017 instructions include three important changes. First, the average annual wage for 2017 is increased from $52,000 (in 2016) to $53,000. Second, the IRS states that employers located in Hawaii cannot claim this credit for insurance premiums paid for health plans beginning after 2016. This is because Hawaii’s Section 1332 Innovation Waiver related to the SHOP was approved by HHS. Thus, effective 2017, the state of Hawaii is no longer required to maintain a SHOP because of the state’s Prepaid Health Care Act, which requires employers of all sizes to offer affordable coverage to employees. The state also provides premium assistance to small employers. There is transition relief for Hawaii employers that claim the credit for plan years beginning in 2016 and continuing into 2017. The credit will continue to be available for those months falling in 2017.
Lastly, small employers located in Pierce, Polk and St. Croix counties in Wisconsin are eligible to claim the credit if they offered health insurance coverage outside of the exchange to employees and otherwise qualify for the credit. The credit is available to employers who did not offer coverage through the SHOP because in 2016, the SHOP in these counties failed to offer qualified health plans to small employers. The employer must have a principal business address in one of the identified counties.
If a small employer qualifies for the health care tax credit, they should work with their accountant to properly claim the credit with the IRS.
On Dec. 22, 2017, the IRS released Notice 2018-06, which delays the date by which informational statements must be provided to individuals and provides transitional good faith relief for reasonable mistakes made in reporting Sections 6055 and 6056 information about 2017.
Specifically, the due date for providing individuals with Form 1095-B (by a carrier or self-insured employer) and Form 1095-C (by an applicable large employer) has been extended by 30 days, to March 2, 2018 (changed from Jan. 31, 2018). The deadline for filing these forms with the IRS hasn’t changed. That date remains April 2, 2018, if filing electronically, or Feb. 28, 2018, if not filing electronically. If an employer doesn’t comply with the deadlines, the employer could be subject to penalties.
Despite the extended due date, employers and other coverage providers are encouraged to furnish 2017 statements as soon as they’re able. But if individuals haven’t received these forms by the time they file their individual tax returns, they may rely upon other information received from employers or coverage providers to attest that they had minimum essential coverage as required by the individual mandate. Individuals need not amend their returns once they receive the forms, but they should keep them with their tax records.
In addition, Notice 2018-06 extends good faith effort relief to employers for incorrect or incomplete returns filed in 2018 (as to 2017 information). The IRS previously provided relief for penalties stemming from 2017 reporting failures (as to 2016 data), and the relief appears to be outlined in the 2017 Instructions for Forms 1094-C and 1095-C. Accordingly, for 2017 and prior filings, relief is available to entities that could show that they made good faith efforts to comply with the information reporting requirements, even if they reported incorrect or incomplete information. In determining what constitutes a good faith effort, the IRS will take into account whether an employer or other coverage provider made reasonable efforts to prepare for reporting, such as gathering and transmitting the necessary data to a reporting service provider or testing its ability to use the AIR electronic submission process. This relief doesn’t apply to a failure to timely furnish or file a statement or return, and doesn’t extend to employer mandate penalties (for large employers that didn’t offer affordable coverage to full-time employees pursuant to the ACA’s employer mandate).
On Dec. 28, 2017, CMS finalized the 2019 actuarial value (AV) calculator methodology, which only contained small changes from the draft calculator reported on in the Nov. 14, 2017, Compliance Corner. The AV calculator is designed by HHS and CMS to help estimate the AV for a given plan design in the individual and small group markets, which is used to categorize such plans into the metal levels of coverage (bronze, silver, gold and platinum). The proposed rules describe the calculator’s methodology and operation, and can be quite technical and complex. The rules primarily provide technical guidance to insurers, but contain general information regarding medical trends.
The calculator is largely unchanged from previous years, which means that individual and small group insurance plan options may stay largely the same in plan design and metal level status. However, one interesting change was that the annual projection factor for medical costs used in 2018 was 3.25 percent, but HHS increased that factor to 5.4 percent for 2019. The projection factor for prescription drugs remains at the higher level of 11.5 percent to account for the expectation that the cost of prescription drugs is to increase at a substantially higher rate than medical costs. For the 2019 AV calculator, the maximum out-of-pocket limit and related functions have been set at $8,000 to account for an estimated 2019 annual limitation on cost sharing. The 2019 annual limitation on cost sharing will be specified in the final 2019 payment notice.
Employers don’t need to take any action in relation to the AV calculator. Large groups aren’t categorized into one of the metal tier categories. The AV of fully insured and small group policies will be determined by the insurer. However, the cost of medical and prescription services is expected to increase significantly over the next two years for all sized plans.