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Earlier this week, the IRS issued Notice 2019-63, which extends both: (1) the filing deadline for Forms 1095-C and 1095-B; and (2) the good-faith reporting relief.  But this year, there’s more.  In limited circumstances, the IRS will not penalize entities for the failure to furnish information to individuals using Form 1095-B, and in some cases, Form 1095-C (see discussion of Section 6055 Relief below).

 Deadline Extension

Notice 2019-63 extends the due date for reporting entities to furnish 2019 Forms 1095-C and 1095-B to individuals from January 31, 2020 to March 2, 2020.  These forms must also be filed with the IRS (along with the applicable transmittal statement) by February 28, 2020 (if filed on paper) or March 31, 2020 (if filed electronically).  Reporting entities may, however, request individual extensions to file these forms with the IRS.

Good-Faith Reporting Relief

The IRS may impose penalties of up to $270 per form for failing to furnish an accurate Form 1095-C or 1095-B to an individual and $270 per form for failing to file an accurate Form 1095-C or 1095-B with the IRS.  As in prior years, the IRS indicated in Notice 2019-63 that it would not impose these penalties for incomplete or inaccurate forms for the 2019 calendar year (due in 2020), if the reporting entity can show that it “made good-faith efforts to comply with the information-reporting requirements.”  This good-faith reporting relief does not apply to forms that were untimely furnished to individuals or filed with the IRS.

Section 6055 Relief

Under Section 6055 of the Internal Revenue Code (the “Code”), providers of minimum essential coverage must furnish certain information to “responsible individuals” about enrollment in the minimum essential coverage during the previous calendar year.  The purpose of this reporting requirement is to assist the IRS enforce compliance with the “individual mandate” penalty under the ACA.

Under the Tax Cuts and Jobs Act of 2017, the individual mandate penalty was not repealed, but the penalty amount was reduced to zero.  This makes reporting under Section 6055 of the Code irrelevant.  As a result, Notice 2019-63 provides limited relief from the reporting requirements under Section 6055 of the Code.

Here is a brief summary of the Section 6055 reporting requirements:

  • Insurers. For employers that sponsor fully insured group health plans, the plan’s insurer must comply with the Section 6055 reporting requirements using Forms 1094-B and 1095-B.
  • Self-Funded Plan Sponsors. For employers that sponsor self-funded plans, the employer must comply with the Section 6055 reporting requirements. But, the applicable forms depend on whether or not the employer is an “applicable large employer” that is subject to the Employer Shared Responsibility Payment (i.e., the “pay or play” penalty):
    • Small Employers. Employers that are not subject to the pay or play penalty use Forms 1094-B and 1095-B.  (Employers that are not subject to the pay or play penalty generally don’t have enough employees to sponsor a self-funded plan.  So, it is rare for employers to file Forms 1094-B and 1095-B.)
    • Large Employers. Employers that are subject to the pay or play penalty generally use Forms 1094-C and 1095-C.  (Forms 1094-C and 1095-C allow the employer to comply with its reporting obligations under both Sections 6055 and 6056 of the Code.  Under Section 6056 of the Code, employers must report compliance with the pay or play penalty.)

Notice 2019-63 provides relief with respect to Forms 1095-B and limited relief with respect to Forms 1095-C.  For insurers and small self-funded employers, the entity must still prepare and file the Forms 1095-B with the IRS.  However, these entities are not required to furnish individuals with a copy of the Form 1095-B as long as the entity satisfies both of the following requirements:

  • The entity prominently posts a notice on its website stating that responsible individuals may receive a copy of their Form 1095-B upon request. The notice must contain both an email and a physical address that responsible individuals can use to request their Form 1095-B, and a telephone number that the responsible individual can use to contact the entity with questions.
  • The entity furnishes the responsible individual with their Form 1095-B within 30 days of the date that the entity receives the request.

Notice 2019-63 generally does not extend this relief to large self-funded employers, except for Forms 1095-C that are prepared on behalf of individuals who are not full-time employees for the entire 2019 calendar year.  A large employer sponsor of a self-funded plan may file a Form 1095-C on behalf of an individual who was enrolled in the self-funded plan during the 2019 calendar year, but was not a full-time employee during any month of the calendar year.  (For these individuals, the “all 12 months” column of line 14 is completed using the code “1G.”)  Examples of where this relief may extend to Forms 1095-C are: (1) former employees who terminated employment before 2019 but were enrolled in the self-funded plan under COBRA or retiree coverage; and (2) employees who were part-time during all of 2019, but were enrolled in the self-funded plan because the plan sponsor extended eligibility for the self-funded plan to part-time employees.

Conclusion

While the filing deadline extension and the extension of the good-faith reporting relief is likely welcome news to insurers and employers alike, it’s probably not surprising.   And, while the Section 6055 reporting relief is likely surprising, it’s probably only meaningful to insurers.

On July 22, 2019, the IRS announced that the ACA affordability percentage for the 2020 calendar year will decrease to 9.78%. The current rate for the 2019 calendar year is 9.86%.

As a reminder, under the Affordable Care Act’s employer mandate, an applicable large employer is generally required to offer at least one health plan that provides affordable, minimum value coverage to its full-time employees (and minimum essential coverage to their dependents) or pay a penalty. For this purpose, “affordable” means the premium for self-only coverage cannot be greater than a specified percentage of the employee’s household income. Based on this recent guidance, that percentage will be 9.78% for the 2020 calendar year.

Employers now have the tools to evaluate the affordability of their plans for 2020. Unfortunately, for some employers, a reduction in the affordability percentage will mean that they will have to reduce what employees pay for employee only coverage, if they want their plans to be affordable in 2020.

For example, in 2019 an employer using the hourly rate of pay safe harbor to determine affordability can charge an employee earning $12 per hour up to $153.81 ($12 X 130= 1560 X 9.86%) per month for employee-only coverage. However in 2020, that same employer can only charge an employee earning $12 per hour $152.56 ($12 X 130= 1560 X 9.78%) per month for employee-only coverage, and still use that safe harbor. A reduction in the affordability percentage presents challenges especially for plans with non-calendar year renewals, as those employers that are subject to the ACA employer mandate may need to change their contribution percentage in the middle of their benefit plan year to meet the new affordability percentage. For this reason, we recommend that employers re-evaluate what changes, if any, they should make to their employee contributions to ensure their plans remain affordable under the ACA.

As we have written about previously, employers will sometimes use the Federal Poverty Level (FPL) safe harbor to determine affordability. While we won’t know the 2020 FPL until sometime in early 2020, employers are allowed to use the FPL in effect at least six months before the beginning of their plan year. This means employers can use the 2019 FPL number as a benchmark for determining affordability for 2020 now that they know what the affordability percentage is for 2020.

On Dec. 22, 2017, President Trump signed into law Congress’s tax reform legislation. The summary below addresses some of the changes that relate to compensation and employee benefits.

Individual shared responsibility – With respect to health care and employee benefits, the most important feature of the tax act is the elimination of the penalty on individual taxpayers who do not maintain minimum essential coverage. However, please note that this elimination of the penalty is prospective and only applies for months beginning after Dec. 31, 2018. Thus, the penalty remains fully in effect for 2018.

With the reduction in the penalty, some employers may see fewer employees enroll in health care coverage during their 2019 healthcare benefit open enrollment period. However, most employees will continue to view employers that offer health insurance coverage more favorably than those who do not. Therefore, offering health insurance will remain a valuable and tax-efficient recruiting and retention tool.

This may also reduce the number of individuals who enroll in healthcare through either the federal or various state specific healthcare marketplaces. However, premium tax credits will still be available for those individuals that purchase health insurance through these marketplaces. If enough healthy individuals drop their coverage, both the individual and employer group health market will likely see some cost increases to pay for the adverse selection impact of this change.

It is also important to remember that this change applies to the individual penalties only. The potential employer penalties for failing to offer coverage or offering inadequate coverage will remain, as well as the current law’s information reporting requirement.
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IRS Announces Filing Extension for Furnishing 2017 Forms 1095-B and 1095-C and Continued Good Faith Transition Relief

December 26 - Posted at 9:00 AM Tagged: , , , , , , , , ,

In IRS Notice 2018-06, the IRS announced a 30-day automatic extension for the furnishing of 2017 IRS Forms 1095-B (Health Coverage) and 1095-C (Employer-Provided Health Insurance Offer and Coverage), from January 31, 2018 to March 2, 2018.  This extension was made in response to requests by employers, insurers, and other providers of health insurance coverage that additional time be provided to gather and analyze the information required to complete the Forms and is virtually identical to the extension the IRS provided for furnishing the 2016 Forms 1094-C and 1095-C.  Notwithstanding the extension, the IRS encourages employers and other coverage providers to furnish the Forms as soon as possible.

Notice 2018-06 does not extend the due date for employers, insurers, and other providers of minimum essential coverage to file 2017 Forms 1094-B, 1095-B, 1094-C and 1095-C with the IRS.  The filing due date for these forms as it stands today remains February 28, 2018 (April 2, 2018, if filing electronically).

The IRS also indicates that, while failure to furnish and file the Forms on a timely basis may subject employers and other coverage providers to penalties, such entities should still attempt to furnish and file even after the applicable due date as the IRS will take such action into consideration when determining whether to abate penalties.

Additionally, the Notice provides that good faith reporting standards will apply once again for 2017 reporting. This means that reporting entities will not be subject to reporting penalties for incorrect or incomplete information if they can show that they have made good faith efforts to comply with the 2017 Form 1094 and 1095 information-reporting requirements. This relief applies to missing and incorrect taxpayer identification numbers and dates of birth, and other required return information. However, no relief is provided where there has not been a good faith effort to comply with the reporting requirements or where there has been a failure to file an information return or furnish a statement by the applicable due date (as extended).

Finally, an individual taxpayer who files his or her tax return before receiving a 2017 Form 1095-B or 1095-C, as applicable, may rely on other information received from his or her employer or coverage provider for purposes of filing his or her return. 

A New Employer Healthcare Plan: Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)

March 02 - Posted at 3:00 PM Tagged: , , , , , , , , , , , , , , , , , , ,

Until very recently, employers were at risk of receiving steep fines if they reimbursed employees for non-employer sponsored medical care – the Affordable Care Act (ACA) included fines of up to $36,500 a year per employee for such an action. Late in 2016, however, President Obama signed the 21st Century Cures Act and established Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs). As of January 1, 2017, small employers can offer these tax-free medical care reimbursements to eligible employees.


How Do QSEHRAs Work?


If an employee incurs a medical care expense, such as health insurance premiums or eligible medical expenses under IRC Section 213(d), the employer can reimburse the employee up to $4,950 for single coverage or $10,000 for family coverage. Employees may not make any contributions or salary deferrals to QSEHRAs.


The maximum amount must be prorated for those not eligible for an entire year. For example, an employer offering the maximum reimbursement amount should only reimburse up to $2,475 to an employee who has been working for the company for six months. For a complete list of medical expenses covered under IRC 213(d), see https://www.irs.gov/pub/irs-pdf/p502.pdf. Employers may tailor which expenses they will reimburse to a certain extent, and do not have to reimburse employees for all eligible medical expenses.


Much like other healthcare reimbursement arrangements, employees may have to provide substantiation before reimbursement. The IRS has discretion to establish requirements regarding this process, but has not yet done so. Although reimbursements may be provided tax-free, they must be reported on the employee’s W-2 in Box 12 using the code “FF.”


Which Employers Can Offer QSEHRAs?


To offer QSEHRAs, an employer cannot be an applicable large employer (ALE) under the ACA. Only employers with fewer than 50 full-time equivalent employees can offer this benefit. Further, a group cannot offer group health plans to any employees to qualify.

Which Employees Are Eligible For QSEHRAs?


Typically, an employer that chooses to offer a QSEHRA must offer it to all employees who have completed at least 90 days of work. The few exceptions to this rule include part-time or seasonal employees, non-resident aliens, employees under the age of 25, and employees covered by a collective bargaining agreement.


Employers may offer differing reimbursement amounts based on employee age or family size. However, such variances must be based on the cost of premiums of a reference policy on the individual market. It is currently unclear which reference policy will be selected or how permitted discrepancies will be calculated.


To be eligible for a tax-free reimbursement, employees must have proof of minimum essential coverage. It is uncertain how closely employers will have to scrutinize such proof, although guidance will hopefully be available soon.


Interaction Between QSEHRAs And Health Exchanges


Eligible employees must disclose to health exchanges the amount of QSEHRA benefits available to them. The exchanges will account for the reported amount, even if the employee does not utilize it, and will likely reduce the amount of the subsidies available. Employers should take this into account before adopting a QSEHRA.


Other Administrative Issues


In order to establish a QSEHRA, employers will have to set up and administer a plan. Group health plan requirements, such as ACA reporting and COBRA requirements, do not apply to QSEHRAs. But in order to properly provide reimbursements to employees, employers will likely have to establish reimbursement procedures.


Additionally, any eligible employees must be notified of the arrangements in writing at least 90 days before the first day they will be eligible to participate. For the current year, the IRS is giving employers who implement QSEHRAs an extension until March 13, 2017 to provide a notice. The notice must provide the amount of the maximum benefit, and that eligible employees inform health insurance exchanges this benefit is available to them. It also must inform eligible employees they may be subject to the individual ACA penalties if they do not have minimum essential coverage.

The next ACA compliance hurdle employers are set to face is managing subsidy notifications and appeals. Many exchanges recently began mailing out notifications this summer and it’s important for employers to make sure they’re prepared to manage the process. Why? Well, subsidies—also referred to as Advanced Premium Tax Credits, are a trigger for employer penalties. If you fail to offer coverage to an eligible employee and the employee receives a subsidy, you may be liable for a fine. 


Step 1


If an employee receives a subsidy, you’ll receive a notice. This is where things can get complicated. You need to ensure that the notifications go directly to the correct person or department as soon as possible, because you (the employer) only have 90 days from the date on the notification to respond. And rounding up these notices may not be so easy. For example, your employee may not have put the right employer address on their exchange /  marketplace application. Most often, employees will list the address of the location where they work, not necessarily the address where the notification should go, like your headquarters or HR department. If the employee is receiving a subsidy but put a wrong address or did not put any address for their employer, you will not even receive a notice about that employee.  

Step 2


Once you receive the notification, you must decide whether or not you want to appeal the subsidy. If you offered minimum essential coverage (MEC) to the employee who received a subsidy and it met both the affordability and minimum value requirements, you should consider appealing.


You may think that appealing a subsidy and potentially getting in the way of your employee receiving a tax credit could create complications. Believe it or not, you may actually be doing your employee a favor. If an employee receives a subsidy when they weren’t supposed to, they’ll likely have to repay some (or all) of the subsidy amount back when they file their taxes. Your appeal can help minimize the chance of this happening since they will learn sooner rather than later that they didn’t qualify for the subsidy. Plus, the appeal can help prevent unnecessary fines impacting your organization by showing that qualifying coverage was in fact offered. 


Step 3


If you have grounds to appeal, you can complete an Employer Appeal Request Form and submit it to the appropriate exchange / marketplace (Note: this particular form is intended to appeal subsidies through the Federal exchange). The form will ask for information about your organization, the employee whose subsidy you’re appealing, and why you’re appealing it. Once sent, the exchange will notify both you and the employee when the appeal was received.


Step 4


Next, the exchange will review the case and make a decision. In some cases, the exchange may choose to hold a hearing. Once a decision is made, you and your employee will be notified. But it doesn’t necessarily end there. Your employee will have an opportunity to appeal the exchange’s decision with the Department of Health and Human Services (HHS). If HHS decides to hold a hearing, you may be called to testify. In this situation, HHS will review the case and make a final decision. If HHS decides that the employee isn’t eligible for the subsidy, then the employee may have to repay the subsidy amount for the last few months. On the other hand, if the HHS decides the employee is eligible for the subsidy, it will be important for you to keep your appeal on file since this can potentially result in a fine from the IRS later in the year.


Sound complicated? It certainly can be. Managing subsidies and appeals could quickly add up to a substantial time investment, and if handled improperly you could see additional impacts to your bottom line in the form of fines. Handling subsidy notifications and appeals properly up front can lead to fewer fines down the road, benefiting both you and your employees.

Beginning in Spring 2016, the Affordable Care Act (ACA) Exchanges/Marketplaces will begin to send notices to employers whose employees have received government-subsidized health insurance through the Exchanges. The ACA created the “Employer Notice Program” to give employers the opportunity to contest a potential penalty for employees receiving subsidized health insurance via an Exchange.


What are the Potential Penalties?

The notices will identify any employees who received an advance premium tax credit (APTC). If a full-time employee of an applicable large employer (ALE) receives a premium tax credit for coverage through the Exchanges in 2016, the ALE will be liable for the employer shared responsibility payment. The penalty if an employer doesn’t offer full-time equivalent employees (FTEs) affordable minimum value essential coverage is $2,160 per FTE (minus the first 30) in 2016. If an employer offers coverage, but it is not considered affordable, the penalty is the lesser of $3,240 per subsidized FTE in 2016 or the above penalty. Penalties for future years will be indexed for inflation and posted on the IRS website. The Employer Notice Program does provide an opportunity for an ALE to file an appeal if employees claimed subsidies they were not entitled to.

Who Will Receive Notices?

The first batch of notices will be sent in Spring 2016 and additional notices will be sent throughout the year.  For 2016, the notices are expected to be sent to employers if the employee received an APTC for at least one month in 2016 and the employee provided the Exchange with the complete employer address.


Last September, the Centers for Medicare and Medicaid Services (CMS) issued FAQs regarding the Employer Notice Program. The FAQs respond to several questions regarding how employers should respond if they receive a notice that an employee received premium tax credits and cost sharing reductions through the ACA’s Exchanges.


Appeal Process

Employers will have an opportunity to appeal the employer notice by proving they offered the employee access to affordable minimum value employer-sponsored coverage, therefore making the employee ineligible for APTC. An employer has 90 days from the date of the notice to appeal.  If the employer’s appeal is successful, the Exchange will send a notice to the employee suggesting the employee update their Exchange application to reflect that he or she has access or is enrolled in other coverage.  The notice to the employee will further explain that failure to provide an update to their application may result in a tax liability.


An employer appeal request form is available on the Healthcare.gov website. For more details about the Employer Notice Program or the employer appeal request form visit www.healthcare.gov.


Advice

Although CMS has provided these guidelines to apply only to the Federal Exchange, it is likely that the state-based Exchanges will have similar notification programs.


Employers should prepare in advance by developing a process for handling the Exchange notices, including appealing any incorrect information that an employee may have provided to the Exchange.  Advance preparation will enable you to respond to the notice promptly and help to avoid potential employer penalties.

Congress and the IRS were busy changing laws governing employee benefit plans and issuing new guidance under the ACA in late 2015. Some of the results of that year-end governmental activity include the following:


Protecting Americans from Tax Hikes Act of 2015 (“PATH Act”)

The PATH Act, enacted by Congress and signed into law on December 18, 2015, made some the following changes to federal statutory laws governing employee benefit plans:

  • The ACA’s 40% excise tax (aka “Cadillac Tax”) on excess benefits under applicable employer sponsored coverage — so called “Cadillac Plans,” due to the perceived richness of such coverage — is  delayed from 2018 to 2020.


  • Formerly a nondeductible excise tax, any Cadillac Tax  paid by employers will now be deductible as a business expense.


  • Beginning with plan years after November 2, 2015,  employers with 200+ employees will not be required to automatically enroll new or current     employees in group health plan coverage, as originally required under the ACA.


  • After December 31, 2015, individual taxpayers who purchase private health insurance via the Healthcare Exchange will not be eligible to claim a Health Care Tax Credit on their tax returns.

IRS Notice 2015-87

On December 16, 2015, the IRS issued Notice 2015-87, providing guidance on employee accident and health plans and employer shared-responsibility obligations under the ACA. Guidance provided under Notice 2015-87 applies to plan years that begin after the Notice’s publication date (December 16th), but employers may rely upon the guidance provided by the Notice for periods prior to that date.


Notice 2015-87 covers a wide-range of topics from employer reporting obligations under the ACA to the application of Health Savings Account rules to rules for identifying individuals who are eligible for benefits under plans administered by the Department of Veterans Affairs. Following are some of the highlights from Notice 2015-87, with a focus on provisions that are most likely to impact non-governmental employers.


  • Under the ACA, an HRA may only reimburse medical expenses of those individuals (employee, spouse, and/or dependents) who are also covered by the employer’s group health plan providing minimum      essential coverage (“MEC”) that is integrated with the HRA.
  • Employer opt-out payments (i.e., wages paid to an employee solely for waiving employer-provided coverage) may, in the view of Treasury and the IRS, effectively raise the contribution cost for employees who desire to participate in a MEC plan. Treasury and the IRS intend to issue      regulations on these arrangements and the impact of the opt-out payment on the employee’s cost of coverage. Employers are put on notice that if an opt-out payment plan is adopted after December 16, 2015, the amount of the offered opt-out payment will likely be included in the employee’s cost of coverage for purposes of determining ACA affordability.
  • Treasury and the IRS will begin to adjust the affordability safe harbors to conform with the annual adjustments for inflation applicable to the “9.5% of household income” analysis under the ACA. For plan years beginning in 2015, employers may rely upon 9.56% for one or more of the affordability safe harbors identified in regulations under the ACA, and 9.66% for plan years beginning in 2016. For example, in a plan year beginning in 2016, an employer’s MEC plan will meet affordability standards if the employee’s contribution for lowest cost, self-only coverage does not exceed 9.66% of the employee’s W-2 wages (Box      1).
  • To determine which employees are “full-time” under the ACA, “hours of service” are intended to include those hours an employee works and is entitled to be paid, and those hours for which the employee is entitled to be paid but has not worked, such as sick leave, paid vacation, or periods of legally protected leaves of absence, such as FMLA  or USERRA leave.
  • The Treasury and IRS remind applicable large employers that they will provide relief from penalties for failing to properly complete and submit Forms 1094-C and 1095-C if the employers are able to show that they made good faith efforts to comply with their reporting obligations.

ACA Information Reporting Creates Data Privacy and Security Issues

March 12 - Posted at 2:01 PM Tagged: , , , , , , , , , , , ,

During this year, businesses will be hearing a lot about the Affordable Care Act’s (ACA’s) information reporting requirements under Code Sections 6055 and 6056. Information gathering will be critical to successful reporting, and there is one aspect of that information gathering which employers might want to take action on sooner rather than later – collecting Social Security numbers (SSNs), particularly when required to do so from the spouses and dependents of their employees. There are, of course, ACA implications for not taking this step, as well as data privacy and security risks for employer and their vendors.


Under the ACA, providers of “minimum essential coverage” (MEC) must report certain information about that coverage to the Internal Revenue Service (IRS), as well as to persons receiving that MEC. Employers that sponsor self-insured group health plans are providers of MEC for this purpose, and in the course of meeting the reporting requirements, must collect and report SSNs to the IRS. However, this reporting mandate requires those employers (or vendors acting on their behalf) to transmit to the IRS the SSNs of employee and their spouses and dependents covered under the plan, unless the employers either (i) exhaust reasonable collection efforts described below, (ii) or meet certain requirements for limited reporting overall.


Obviously, employers are familiar with collecting, using and disclosing employee SSNs for legitimate business and benefit plan purposes. Collecting SSNs from spouses and dependents will be an increased burden, creating more risk on employers given the increased amount of sensitive data they will be handling, and possibly from vendors working on their behalf. The reporting rules permit an employer to use a dependent’s date of birth, only if the employer was not able to obtain the SSN after “reasonable efforts.” For this purpose, reasonable efforts means the employer was not able to obtain the SSN after an initial attempt, and two subsequent attempts.

From an ACA standpoint, employers with self-insured plans that have not collected this information should be engaged in these efforts during the year (2015) to ensure they are ready either to report the SSNs, or the DOBs. At the same time, collecting more sensitive information about individuals raises data privacy and security risks for an organization regarding the likelihood and scope of a breach. Some of those risks, and steps employers could take to mitigate those risks, are described below.


  • Determine whether the information is subject to HIPAA. Employers will need to consider whether this information, collected for ACA group health plan reporting requirements, is protected health information under HIPAA (PHI) or within the HIPAA “employment records” exception.


  • Implement appropriate safeguards.  For an employer that determines the information collected for this purpose is PHI, it will need to ensure the appropriate steps are taken under the HIPAA privacy and security rules. Either way, employers need to take steps to safeguard this data. A number of states, such as California, Connecticut, Florida, Maryland, Massachusetts, New York, Oregon require reasonable safeguards be in place to protect such information. Examples of good practices include: (i) design forms to collect only the information needed; (ii) direct responses to the requests for the information to go to a single location; (iii) if collected online, make sure the connection is secure; (iv) limit who has access to the information; and (v) after the information is captured and input, destroy all copies of the information other than as needed for appropriate documentation.


  • Ensure your vendors will protect this information. The IRS reporting regulations permit the use of third party vendors to assist employers in the reporting process. Whether the vendor is a “business associate” under HIPAA or a third-party service provider under state law, employers should be sure the vendor is contractually bound to maintain and implement appropriate privacy and security practices, including data breach preparedness.


Employers navigating through ACA compliance and reporting requirements have many issues to be considered. How personal information or protected health information is safeguarded in the course of those efforts is one more important consideration.

Proposed Changes for the Summary of Benefits and Coverage (SBC)

January 16 - Posted at 6:35 PM Tagged: , , , , , , , , , , , , , , , ,

On December 22, 2014, the Departments of Health and Human Services (HHS) issued proposed regulations for changes to the Summary of Benefits and Coverage (SBC).

 

The proposed regulations clarify when and how a plan administrator or insurer must provide an SBC, shortens the SBC template, adds a third cost example, and revises the uniform glossary. The proposed regulations provide new information and also incorporate several FAQs that have been issued since the final SBC regulations were issued in 2012.

 

These proposed changes are effective for plan years and open enrollment period beginning on or after September 1, 2015. Comments on the proposed regulations will be accepted until March 2,2015 and are encourages on many of the provisions.

 

New Template

 

The new SBC template eliminates a significant amount of information that the Departments characterized as not being required by law and/or as having been identified by consumer testing as less useful for choosing coverage.

 

The sample completed SBC template for a standard group health plan has been reduced from four double-sided pages to two-and-a-half double-sided pages. Some of the other changes include:

 

  • An additional cost example for a simple foot fracture treated in an emergency room, which will be added to the two current examples. This new example is proposed as a health problem that any individual could experience, while the two current examples- having a baby and managing type 2 diabetes- affect only certain individuals.
  • The coverage example calculator will be authorized for continued use and updated claims and pricing data for the two existing exampled and the third example will be provided.
  • References to annual limits for essential health benefits (EHBs) and preexisting condition exclusions  will be removed.
  • Information regarding minimum essential coverage (MEC) and minimum value (MV) has been revised and must be included in the SBC. This effectively ends a temporary enforcement safe harbor that previously permitted statements about MEC and MV to be included in a cover letter rather than in the SBC.
  • Premium information may be included in an SBC, but it is not required.
  • All SBCs must include an issuer website where the individual policy or group certificate of coverage can be reviewed and obtained. Plan administrators are not required to include a website separate from the issuer website.
  • SBCs for individual policies will be required to disclose whether abortion services are covered or excluded and whether coverage is limited to services for which federal funding is allowed.

 

Glossary Revisions

Revisions to the uniform glossary have also been proposed. The glossary must be available to plan participants upon request. Some definitions have been changed and new medical terms such as claim, screening, referral and specialty drug have been added. Additional terms related to health care reform such as individual responsibility requirement, minimum value and cost-sharing reductions have also been added.

 

Paper vs Electronic Distribution

SBCs may continue to be provided electronically to group plan participants in connection with their online enrollment or online renewal of coverage. SBCs may also be provided electronically to participants who request an SBC online. These individuals must also have the option to receive a paper copy upon request.

 

SBCs for self-insured non-federal government plans may continue to be provided electronically if the plan conforms to either the electronic distribution requirements that apply ERISA plan or the rules that apply to individual health insurance coverage.

 

Types of Plans to Which SBCs Apply

The regulations confirm that SBCs are not required for expatriate health plans, Medicare Advantage plans or plans that qualify as excepted benefits. Excepted benefits include:

 

  • Employee Assistance Plans (EAPs) that meet the requirements to be excepted benefits
  • Health Savings Account (HSAs) because they are not group health plans
  • Dental and vision coverage that meet the requirements to be excepted benefits

 

SBCs are required for:

  • Health Reimbursement Arrangements (HRAs) because they are considered group health plans
  • Health Flexible Spending Accounts (FSAs) if they do not qualify as excepted benefits
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