In the past few weeks, the regulatory agencies have issued details on a number of items of interest to sponsors of group health plans.
In order for the Internal Revenue Service (IRS) to verify that individuals have the required minimum essential coverage, that individuals who request premium tax credits are entitled to them, and that large employers are meeting their shared responsibility (play or pay) obligations, employers and insurers will be required to provide reporting on the health coverage they offer.
Although reporting will not begin until 2016, the reporting will reflect coverage offered and elected during the 2015 calendar year (regardless of whether the plan is a calendar year or non-calendar year plan). All sponsors of self-funded plans and all employers with 50 or more employees (whether coverage is self-funded or fully insured) should begin assessing their data gathering and systems soon to be sure they will be able to access and report the needed information when reporting begins. Although the play or pay requirements do not apply to many employers with 50 to 99 employees for 2015, reporting is still required for 2015 from these employers. This employer reporting will help the IRS administer the individual shared responsibility requirements and eligibility for premium tax credits.
Read a summary of the reporting requirements.
Additional Change in Status Events Allowed for Section 125 Plans
The IRS has issued a Notice which adds new change in status events that may be allowed under a Section 125 plan. The first two events allow an employee to drop medical coverage during the year to enroll in a Marketplace plan, through either open enrollment or special enrollment. This liberalization will make it much easier for individuals in non-calendar year plans to move between employer-provided and Marketplace coverage.
Another change in status event allows an employee who is considered full-time for plan purposes because he is in a stability period related to a measurement period in which he worked 30 or more hours per week, but who is actually now scheduled to work fewer than 30 hours per week, to drop the group medical coverage and move to coverage through his spouse's employer or the Marketplace.
Read a summary about the added change in status events.
Year Three PCORI Fee
The Patient Centered Outcomes Research Institute (PCORI) fee will be collected from group health plans over a seven-year period. The fees will be used to fund research into the most effective methods of treating various medical conditions. The fee was $1 per covered person for the first year it was due and $2 per person for the second year it is due. A cost of living adjustment applies to years three through seven. For the third year the fee is due, the fee will be $2.08 per covered person per year. This cost-of-living-adjusted fee will apply for plan years that end on October 1, 2014, through September 30, 2015.
Handling Changes in Measurement and Stability Periods
Large employers (for 2015, this generally means those with 100 or more full-time or full-time equivalent employees) may use either the monthly or look-back method to determine whether an employee on average works 30 or more hours per week, and for whom a penalty may be owed if adequate health coverage is not offered. Under the look-back measurement method, an employee generally is treated as a full-time employee for each month during the following stability period if the employee averaged 30 or more hours of service per week during the measurement period. Employers have asked questions about how to handle employees who move among positions with differing look-back periods (start dates or lengths or both). The IRS has now issued a notice which provides a proposed method of handling these transfers.
Read a summary of the proposed handling of changes in measurement and stability periods.
Limited Scope Dental and Vision Plans and EAPs
Late this month, the U. S. Department of Health and Human Services (HHS), the Internal Revenue Service (IRS), and the Department of Labor (DOL) released final regulations that explain how "limited scope" (stand-alone) dental and vision plans and employee assistance plans (EAPs) qualify as "excepted benefits." Excepted benefits are health benefits that are limited enough in scope to be exempt from many of the requirements of the Patient Protection and Affordable Care Act (PPACA), such as annual dollar limits, reporting on W-2s and various fees.
Read a summary of the excepted benefit criteria for stand-alone dental and vision plans and EAPs.
Same-Sex Marriage and HIPAA Privacy
Consistent with the federal government's handling of same-sex marriages following the Supreme Court's decision that the Defense of Marriage Act (DOMA) is unconstitutional, HHS has issued guidance that states that same-sex spouses will be recognized for purposes of:
- Sharing protected health information with a family member
- The prohibition on considering genetic information when underwriting
This treatment will apply to all same-sex spouses who are legally married, whether or not they live in or receive care in a state that recognizes same-sex marriage.
Medicare Part D Creditable Coverage Notices Must be Provided by October 14, 2014
Plans that provide prescription drug coverage must give all employees, retirees, and dependents who are or who may become eligible for Medicare Part D during next 12 months a notice explaining whether the prescription drug coverage provided by the group health plan is "creditable" or "non-creditable" coverage for purposes of Medicare. The notice must be given each year before the start of open enrollment for Medicare Part D prescription drug coverage -- the notice is due each year by October 14. Due to difficulty identifying dependents who may be Medicare-eligible, many employers provide the notice to all employees. Model Notice Letters can be found at http://www.cms.gov/Medicare/Prescription-Drug-Coverage/CreditableCoverage/Model-Notice-Letters.html.
The Centers for Medicare & Medicaid Services (CMS) also requires plan sponsors to provide notice of their creditable-coverage status to Part D-eligible members before an individual's initial opportunity to enroll in Part D (this is generally satisfied by the annual notice), before the effective date of coverage for any Medicare-eligible individual who joins the employer's plan, if the plan's prescription drug coverage ends or its creditable coverage status changes, and upon an individual's request.
Whether coverage is creditable matters because a penalty in the form of a higher premium will apply to individuals who do not elect Medicare Part D or other creditable prescription drug coverage when first eligible if they later elect drug coverage. Coverage is considered creditable if it is expected to cover, on average, as much as the standard Medicare Part D prescription drug plan.
Larger Self-Funded Health Plans Must Obtain a Health Plan Identifier by November 5, 2014
To meet federal requirements, large health plans must obtain a national health plan identifier number (HPID) by November 5, 2014. For this requirement, a large health plan is one with more than $5 million in annual receipts. Small health plans have until November 5, 2015, to obtain an HPID.
Although this requirement applies to all health plans, as a practical matter the insurer will obtain the identifier number for fully insured plans. All self-funded plans will need to obtain the number, even if they use a third party administrator (TPA) to pay claims. Read a summary of the requirement to obtain an HPID.
Question of the Month
Q: If a large employer meets the employer-shared responsibility (play or pay) requirements for part, but not all, of the year, how is the penalty calculated?
A: Although the penalties are generally stated as annual amounts ($2,000 per full-time employee for failing to offer minimum essential coverage to enough employees, or $3,000 per employee who receives a premium tax credit), the penalty actually is calculated per calendar month. So if, for example, the employer offered minimum essential coverage to 80% of its full-time employees throughout 2015, it would not owe the $2,000 penalty. If three employees received a premium tax credit, but only from June through September 2015, the employer would owe $3,000 [1/12 of the $3,000 penalty ($250) x 3 employees x 4 months].