Compliance Update November 2017

The Holiday Season Has Arrived – Good News!

Each year around this time I am pleased to announce the perfect Holiday gift has arrived. Yes; my book, the 2017/2018 Welfare Benefits Guide is now available.

2017-2018 Welfare Benefits Guide

This two-volume treatise makes the perfect stocking stuffer for that Human Resource professional on your gift-giving list.

The Holiday Season Has Arrived – Bad News!

One of the main components of the Affordable Care Act or Obamacare is the employer mandate. This requires Applicable Large Employers or ALEs to offer quality/affordable health coverage to full-time employees or pay a penalty starting January 1, 2015. The Internal Revenue Service is starting to send out notices telling employers they owe the penalty!

Be ready to respond to IRS notice

IRS Penalty Notices are Imminent

Pay-or-play penalties coming

Payment procedures for penalties

This is a big deal. The IRS is sending out the notice (i.e. IRS Letter 226J) this month, which relates to the 2015 calendar year. The employer will have 30 days after being notified by the IRS to contest the penalty or pay the penalty. It is no secret that the Trump administration wants to repeal and replace Obamacare. Therefore, it is not surprising that the administration is starting to enforce the more unpopular provisions of the law in an attempt to gather support for repealing the statute.

ACA Individual Mandate!!  

Another main component of the ACA is the individual mandate that requires individuals to have health coverage or pay a penalty. The IRS has indicated that it will not process any 2017 individual tax returns unless the taxpayers indicate that they and everyone on their return had health care coverage, qualified for an exemption from coverage, or will make a shared-responsibility payment.

IRS will enforce individual mandate

IRS won’t accept incomplete returns

As I indicated in the article above, the Trump administration wants to repeal and replace Obamacare and is starting to enforce the more unpopular provisions to gain the public’s support to repeal the law. Enforcing the individual mandate is one way to accomplish this goal.

Trump’s Continued Attack on Obamacare

One of candidate Trump’s promises was the immediate repeal and replacement of Obamacare. However, Congress (mostly the Senate) was unable to deliver on that promise. Therefore, President Trump has taken it on himself to dismantle the law piece by piece. To that end he has issued an executive order telling the departments of Treasury, Labor, and Health and Human Services to consider making changes in current regulations and guidance to expand health coverage options.

Likely impact of Executive Order

Order modifies ACA rules

There are three parts to the executive order. First, the agencies are to issue rules expanding the availability of association health plans. Second, it allows for short-term health plans that need not comply with all the Obamacare rules. Finally, it reduces the restrictions applicable to health reimbursement arrangements by increasing the funding opportunities and allowing the money be used to buy individual policies. All three parts will weaken the Obamacare protections. The executive order will not have an immediate impact and parts of the executive order may be challenged in court.

President Trumps Ends Cost-Sharing Reduction Payments

President Trump continues to attack Obamacare by ending the cost-sharing reduction payments to carriers participating in the health care exchanges or marketplaces. The health plans offered under the health care exchanges or marketplaces are based on the high deductible health plan platform. This means the plans have high out-of-pocket amounts that the individuals have to pay before the plans start providing benefits. The cost-sharing reduction payments, or CSR subsidies, are government payments to the carriers reimbursing the carriers for some of the out-of-pocket amounts.

Impact on Individual Market

How CSR subsidies work

That is, the government reduces the amount lower-income individuals have to pay out of pocket. So, for example, say the annual out-of-pocket under the plan for single coverage is $6,600. However, if the individual’s income is between 100% and 200% of the Federal Poverty Level the maximum out-of-pocket he or she would have to pay is $2,250. The government makes up the difference in CSR payments.

Loss of subsidies means premiums will increase

Since the government has stopped making the CSR subsidies, the carriers will have to make up the differences in increased premiums. Estimates have shown that the silver marketplace premiums would increase by an average of 19 percent to compensate for the loss of cost-sharing subsidies.

PCORI Fee Increase

The PCORI fee is part of the Affordable Care Act and is used to fund the Patient-Centered Outcomes Research Institute. Employers sponsoring self-funded health plans have to report and pay the fee.

2017 PCORI fee announced

The fee is reported on IRS Form 720 and is paid with IRS Form 720V. The fee is relatively small. The amount is $2.39 (a 13 cent increase over last year) per person covered under the plan for plan years ending October 2017 through September 2018.

Comprehensive Year-End Checklist

There are a number of things to do for year-end and there are a lot of checklists out there. However, this is one of the most comprehensive ones I found for health and welfare benefit plans.

End of Year To-Do List

As a practical matter, the insurance company, in the case of a fully insured plan, and the TPA, in the case of a self-funded plan, will do the heavy lifting when it comes to compliance. Nevertheless, you should take a few minutes to review the checklist to ensure nothing falls between the cracks.

Checklist for 2018

The previous article had a checklist for the end of this year so it seemed appropriate to have a checklist for next year.

Beginning of Year To-Do List

It is important to note that the rules may change during the year to new legislation or, more likely, new guidance issued by the Trump administration.

Exemption to ACA Contraceptive Benefits

Obamacare requires group health plans to provide first dollar coverage for preventive services, and contraceptive benefits fall under this category. This has been extremely controversial and many employers objected on religious grounds. In fact, one employer fought the requirement all the way to the U.S. Supreme Court. The Obama administration issued rules that permitted certain employers to apply for an exemption from this requirement.

Contraceptive Mandate Exemption Extended

The Trump administration has expanded those that can claim an exemption from the requirement to provide first dollar coverage for contraceptive benefits.

Anthem and Express Scripts Part Ways

Health care expenditures account for a large part of a gross national product or GNP and where there is money, there is a lot of activity. There has been a substantial amount of consolidation in the health care sector.

Anthem Brings Prescriptions In-House

Anthem has just announced that it is taking the prescription drug business in house and will be using CVS Health Corp to process prescription drugs. Anthem estimates this will result in $4 billion in annual savings.

Qualified Small Business Health Reimbursement Arrangement Guidance

One of the last things President Obama did was to enact the 21st Century Cures Act which allowed the formation of Qualified Small Business Health Reimbursement Arrangement or QSEHRA for short. This allows small employers (i.e. those with fewer than 50 full-time and full-time equivalent employees) to establish HRAs that can be used to reimburse an employee’s individual health policy.

HRAs for Small Employers

QSEHRAs Aren’t Traditional HRAs

QSEHRAs are subject to a number of restrictions and the IRS just released comprehensive rules governing QSEHRAs. Therefore, if you want to sponsor one of these programs you need to follow the rules.

On-Site Clinics and HSAs

More large employers are looking to on-site clinics as a way to reduce health care costs. One consideration is how those clinics can impact employers sponsoring high deductible health plans and HSAs.

How on-site clinics can affect HSAs

How the program is set up and what services are available at the clinic may impact the employees’ ability to make and receive HSA contributions. This concern is not new and this article does a nice job of explaining the issues.

Tax Reform and Employee Benefits

The Republicans failed to pass health care reform but they are making a serious run at tax reform. Here is a list of the proposed changes to employee benefits under the House and Senate proposals.

House, Senate See Tax Reform Differently

It is early in the process so I would not put too much stock in the proposal at this point. Having said that, Congress is trying to fast-track the legislation so that they can show the public they can legislate.

How Long to Keep Records

There are a substantial amount of records involved with any employee benefit plan. So the question becomes how long should you keep them.

Keep benefit plan records at least 8 years

As a general rule of thumb, eight years is the minimum, and that is at a minimum. Fortunately technology makes it easier to store the records electronically but if you do store them electronically they have to be in a format that allows you to search the records.

Power to the States

One of the main themes of the Trump administration when it comes to repealing and replacing Obamacare is to give the states more control over health care. For example, the Graham-Cassidy bill provided block grants to the states. Under this arrangement the Federal government would give the states a bucket of money to spend however the state chooses to spend it. However, Congress was unable to agree on any legislation.

CMS Proposes State Control of Essential Benefits

CMS issued over 350 pages of rules that, in part, allow each state to define “essential health benefits.” As you may recall, small employer group health plans have to cover essential health benefits, and giving the states the ability to set their own definition can have a major impact on what the plans cover and, correlatively, the premiums associated with those plans. In other words, if the plan is not required to cover a comprehensive list of services, the premiums will be lower.

COBRA 60-Day Election Period – Maybe Longer?

There is a saying that bad facts make bad law. The COBRA rules are pretty clear. The person has 60 days to elect COBRA coverage. However, this Court extended the election period based on the circumstances.

An Exception to COBRA Election Period

What happened is the person was hurt in an accident and admitted to the hospital during the 60-day election period. The Court extended the election period because the employee was in the hospital when the 60-day period expired.

IRS Releases 2018 Contribution Limits

A number of contribution limits under the Internal Revenue Code are indexed each year to account for inflation.

IRS Publishes 2018 FSA Limits

The IRS just released the new number for next year. The maximum amount that can be deposited into an employee’s Health FSA increased from $2,600 to $2,650.