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On February 23, 2017, the Centers for Medicare and Medicaid Services released an insurance standards bulletin allowing states once again to extend the life of “grandmothered” (aka transitional health insurance or non-ACA) medical policies to policy years beginning on or before October 1, 2018, as long as the policies do not extend beyond December 31, 2018. These plans will continue to be exempt from most of the ACA’s insurance reform provisions which otherwise became effective on January 1, 2014.
On November 14, 2013, facing political pressure from millions of consumers who were receiving cancellation notices for their 2013 coverage, the Obama administration announced in guidance that states could allow insurers to extend noncompliant coverage for policy years beginning before October 1, 2014, free from certain of the ACA reforms. In March of 2014, the administration extended the life of these “grandmothered” or “transitional” plans to coverage renewed by October 1, 2016 and eventually until the end of 2017.
While the original transitional decision could perhaps have been justified by the inherent authority in the executive to reasonably delay the implementation of new legal requirements, the extension of the original delay looked increasingly political and was harder to justify legally. It also likely did serious damage to the ACA-compliant individual market. Insurers had set their 2014 premiums in the expectation that the entire non-grandfathered market would transfer to ACA-compliant plans. Instead, healthier individuals likely remained with their earlier, health-status-underwritten coverage, making the pool of consumers that actually bought 2014 coverage less healthy than expected. The transitional policy very likely played a significant role in the large insurer losses in the individual market for 2014, and played a role in raising premiums going forward.
As of today, there are probably a little fewer than a million Americans still in individual market transitional plans, although the percentage of the individual market in transitional plans varies greatly from state to state, and many remain covered in small group transitional plans. It has been thought that consumers and employers prefer transitional plans because they cost less or have lower cost-sharing.
The Trump administration’s guidance states that it is based on a commitment to “smoothly bringing all non-grandfathered coverage in the individual and small group market into compliance with all applicable” ACA requirements. One must wonder, however, why four years will be enough for a smooth transition if three years was not.
The guidance gives states the option of extending the transition for a shorter (but not longer) period of time and also of applying it to both the small group and individual markets or to either market separately. States also have the option of authorizing part-year policies if necessary to ensure that coverage ends at the end of 2018.
The Affordable Care Act (“ACA”), introduced in 2014 the Transitional Reinsurance Fee (“Fee”) in an effort to fund reinsurance payments to health insurance issuers that cover high-risk individuals in the individual market and to stabilize insurance premiums in the market for the 2014 through 2016 years. The Fee has also been instituted to pay administrative costs related to the Early Retiree Reinsurance Program.
BACKGROUND ON TRANSITIONAL REINSURANCE PROGRAM
The ACA established a transitional reinsurance program to provide payments to health insurance issuers that cover high risk individuals in an attempt to evenly spread the financial risk of issuers. The program is designed to provide issuers with greater payment stability as insurance market reforms are implemented and the state-based health insurance exchanges/marketplaces facilitate increased enrollment. It is expected that the program will reduce the uncertainty of insurance risk in the individual market by partially offsetting issuers’ risk associated with high-cost enrollees. In an effort to fund the program, the ACA created the Fee which is a temporary fee that is assessed on health insurance issuers and plan sponsors of self-funded health plans. The Fee is applicable for the 2014, 2015 and 2016 years and is deductible as an ordinary and necessary business expense.
The Fee is generally applicable to all health insurance plans providing major medical coverage including sponsors of self-insured group health plans. Major medical coverage is defined as health coverage for a broad range of services and treatments, including diagnostic and preventive services, as well as medical and surgical conditions in inpatient, outpatient and emergency room settings. Since COBRA continuation coverage generally qualifies as major medical coverage, the Fee will also apply in this instance. It does not, however, apply to employer provided major medical coverage that is secondary to Medicare.
The Fee, as currently structured, does not apply to various other types of plans including (but not limited to) health savings accounts (H.S.A.s), employee assistance plans (EAP) or wellness programs that do not provide major medical coverage, health reimbursement arrangements integrated with a group health plan (HRA), health flexible spending accounts (FSA) and coverage that consists of only excepted benefits (e.g. stand-alone dental and vision).
AMOUNT OF THE FEE
The Fee for the 2015 benefit year is equal to $44 per covered life. It is expected that the Fee for the 2015 benefit year will generate approximately $8 billion in revenue. The Fee for the 2016 year is expected to be $27 per covered life and will raise approximately $5 billion in revenue. Thereafter, the Fee is set to expire and no longer be applicable. The fee for 2014 was $63 per covered life.
REPORTING THE NUMBER OF COVERED LIVES AND PAYING THE FEE
The 2015 ACA Transitional Reinsurance Program Annual Enrollment and Contributions Submission Form will be available on www.pay.gov on October 1, 2015. The form for 2014 is also available on this website. Please note there is a separate form for each benefit year. For the 2015 year, the number of covered lives must be reported to the Department no later than November 16, 2015. The Department will then notify reporting organizations no later than December 15, 2015 the amount of the fee that will be due and payable.
As with the 2014 benefit year, the Department of Health and Human Services has given contributing entities two different options to make the payment. Under the first option, the first portion of the Fee ($33 per covered life) is due and payable no later than January 15, 2016 (30 days after issuance of the notice from the Department). This portion of the Fee will cover reinsurance payments and administrative expenses. The second portion of the Fee ($11 per covered life) will cover Treasury’s administrative costs associated with the Early Retiree Reinsurance Program and will be due no later than November 15, 2016.
Under the second payment option, contributing entities can opt to pay the full amount ($44 per covered life) by January 15, 2016.
As the number of covered lives is due to be reported no later than November 16th of this year, employers should review their types of health coverage and determine which plans are subject to the Fee. Employers that have fully insured plans should be on the lookout for potential increased premiums as the insurance carrier is responsible to report and pay the Fee on behalf of the plan in these instances. Those with self funded medical coverage need to be sure to report and pay the fe
The IRS and the Treasury Department issued a notice on the so-called “Cadillac Tax”—a 40 percent excise tax to be imposed on high-cost employer-sponsored health plans beginning in 2018 under the Affordable Care Act (ACA).
Notice 2015-16, released on Feb. 23, 2015, discusses a number of issues concerning the tax and requests comments on the possible approaches that ultimately could be incorporated in proposed regulations. Specifically, the guidance states that the agencies anticipate that pretax salary reduction contributions made by employees to health savings accounts (HSAs) will be subject to the Cadillac tax.
In 2018, the ACA provides that a nondeductible 40 percent excise tax be imposed on “applicable employer-sponsored coverage” in excess of statutory thresholds (in 2018, $10,200 for self-only, $27,500 for family). As 2018 approaches, the benefit community has long awaited guidance on this tax. While many employers have actively managed their plan offerings and costs in anticipation of the impact of the tax, those efforts have been hampered by the lack of guidance. Among other things, employers are uncertain what health coverage is subject to the tax and how the tax is calculated.
Particularly, Notice 2015-16 addresses:
The agencies are requesting comments on issues
discussed in this notice by May 15, 2015. They intend to issue another notice
that will address other areas of the excise tax and anticipates issuing
proposed regulations after considering public comments on both notices.
Of most immediate interest to plan sponsors is the specific type of coverage (i.e., “applicable coverage”) that will be subject to the excise tax, particularly where the statute is unclear.
Employee Pretax HSA
The ACA statute provides that employer contributions to an HSA are subject to the excise tax, but did not specifically address the treatment of employee pretax HSA contributions. The notice says that the agencies “anticipate that future proposed regulations will provide that (1) employer contributions to HSAs, including salary reduction contributions to HSAs, are included in applicable coverage, and (2) employee after-tax contributions to HSAs are excluded from applicable coverage.”
Note: This anticipated treatment of employee pretax contributions to HSAs will have a significant impact on HSA programs. If implemented as the agencies anticipate, it could mean many employer plans that provide for HSA contributions will be subject to the excise tax as early as 2018, unless the employer limits the amount an employee can contribute on a pretax basis.
and Vision Plans
The ACA statutory language specifically excludes fully insured dental and vision plans from the excise tax. The treatment of self-insured dental and vision plans was not clear. The notice states that the agencies will consider exercising their “regulatory authority” to exclude self-insured plans that qualify as excepted benefits from the excise tax.
The agencies are also considering whether to exclude excepted-benefit employee assistance programs (EAPs) from the excise tax.
Onsite Medical Clinics
The notice discusses the exclusion of certain onsite medical clinics that offer only de minimis care to employees, citing a provision in the COBRA regulations, and anticipates excluding such clinics from applicable coverage. Under the COBRA regulations an onsite clinic is not considered a group health plan if:
The agencies are also asking for comment on
the treatment of clinics that provide certain services in addition to first
With the release of this initial guidance, plan sponsors can gain some insight into the direction the government is likely to take in proposed regulations and can better address potential plan design strategie
The deadline for submitting the required information and scheduling the requirement payment, which must be done through www.pay.gov is November 15, 2014.
The Affordable Care Act (ACA) provides for a transitional reinsurance program to help stabilize premiums for coverage in the individual health insurance marketplace during the first 3 years of operation (2014-2016). The program is designed to primarily transfer funds from the group market to the individual market, where high risk individuals are more likely to be covered.
Payments under the reinsurance program are funded by “contributions” (aka fees) payable by health insurance carriers for fully funded groups and third party administrators on behalf of self-insured group health plans. However, under ACA regulations, the self insured group is ultimately responsible for the payment.
The transitional reinsurance fee requirement applies on a per capita basis with respect to each individual covered by a plan that is subject to the fee. The total amount of the fee for 2014 is $63 per covered life and will decrease to $44 per covered life in 2015. The amount of the fee in 2016 has not yet been established by CMS, but will be lower than the 2015 amount. The fee applies to major medical coverage, retiree medical coverage, and COBRA coverage. Plans that are not subject to the reinsurance fee include FSAs, HSAs, Dental & Vision coverage, coverage that fails to provide minimum value, and EAP programs to name a few.
The transitional reinsurance fee is imposed on the “contributing entity”, defined as an insurer/carrier for fully-insured coverage or the group for self insured coverage. Third -party administrators (TPAs), administrative service only entities (ASO) and others may submit on behalf of the contributing entity, though CMS has specified that the TPA or ASO is not required by law to do so.
Because the fee is imposed on the self insured plan and not the plan sponsor, plan assets may be used to pay the assessment/fee. The IRS has also noted that plan sponsors can treat the fee as an ordinary and necessary business expense for tax purposes.
The term covered lives includes everyone under the plan, including spouses, dependents, and retirees. CMS has named several options for counting covered lives, depending on if the plan is fully insured or self funded. The methods of counting covered lives for the reinsurance fee are similar to, but not exactly the same, as the Patient Centered Outcomes Research Institute (PCORI) count methods. A full description of each counting method can be found on the CMS website here.
Regardless of the counting method chosen, plans must maintain documentation of the count, including all materials provided by TPAs in arriving at the figure, for at least 10 years. CMS may audit a plan to assess its compliance with the program requirements and it will be crucial to be able to produce this information.
The entire reinsurance fee process takes place on www.pay.gov. This process is separate from the Health Insurance Oversight System (HIOS) which is used, for example, to obtain a Health Plan Identifier (HPID). The applicable form became available on October 24, 2014. While this leaves somewhat limited time for plan sponsors to submit the applicable form and schedule the fee by the November 15, 2014 deadline, CMS has yet to issue guidance that the submission date will be delayed.
In order to successfully complete the reinsurance fee submission, plan sponsors (or their representatives) need to:
After registering on Pay.gov, the submitter will select the Transitional Reinsurance program Annual Enrollment and Contribution Submission Form. The form requires basic company and contact info, payment type, benefit year, and the annual enrollment count. After the information is entered on the form, plan sponsors will need to upload their supporting documentation CSV file. After the enrollment and supporting documentation is submitted, the form will auto-calculate the amount owed. Plans then need to schedule payment(s) for this amount . The form cannot be submitted without payment information. Plans can choose to remit payment for the entire benefit year once (the full $63 per covered life) or plans can submit two separate payments for the year. If the separate payment method is used, the first payment ($52.50 per covered life) is due by January 15, 2015 and the second payment ($10.50 per covered life) is due by November 15, 2015. Regardless of the option chose, all payments MUST be scheduled by November 15, 2014.
The IRS has released the 2014 Form 720 that plan sponsors of self-insured group health plans will use to report and pay the Patient Centered Outcomes Research Institute (PCORI) fee. The fee is due by July 31, 2014 for plan years ending in 2013.
The Affordable Care Act (ACA) imposes a fee on health insurers and plan sponsors of self-insured group health plans to help fund the Patient Centered Outcomes Research Institute. PCORI is responsible for conducting research to evaluate and compare the health outcomes and clinical effectiveness, risks, and benefits of medical treatments, services, procedures, and drugs.
The PCORI fee is assessed for plan years ending after September 30, 2012. The initial fee is $1 times the average number of covered lives for the first plan year ending before October 1, 2013 and $2 per covered life for the plan year ending after October 1, 2013 and before October 1, 2014. Fees for subsequent years are subject to indexing. The PCORI fee will not be assessed for plan years ending after September 30, 2019, which means that for a calendar year plan, the last plan year for assessment is the 2018 calendar year.
Plan sponsors must pay the PCORI fee by July 31 of the calendar year immediately following the last day of that plan year. All plan sponsors of self-insured group health plans will pay the fee in 2014, but the amount of the fee varies depending on the plan year.
The IRS has released the 2014 Form 720 with instructions for plan sponsors to use to report and pay the PCORI fee. Although the Form 720 is a quarterly federal excise tax return, if the Form 720 is filled only to report the PCORI fee, no filing is required in other quarters unless other fees or taxes have to be reported.
Please contact our office for information on the Affordable Care Act (ACA) and how it affects your business.
Imagine you are home cooking dinner on a Saturday night and you suffer a minor burn. You can not decide if the burn is serious enough to go to the Emergency Room or how exactly to care for the burn. Did you know that most major insurance carriers offer their members 24/7/365 access to a free Nurse Hotline for situations just like this?
These Nurse Hotlines help provide a free nurse to members who can help the member evaluate the best type of care for their situation (i.e. if they should go to the ER to have their burn looked at or if a home remedy will suffice). They can also offer members additional information on chronic conditions they suffer from, support when coordinating follow up care, or help direct them to other programs their insurance carrier may offer (i.e. weight loss discounts or free breast pumps to expectant mothers).
For more information on your insurance carrier and if they offer this program, please contact our office.
It was announced on Wednesday, March 5th, by the Obama Administration that it would allow some health plans that do not currently meet all Affordable Care Act (ACA) requirements to continue offering non-compliant insurance for another two years. The Centers for Medicare and Medicaid Services (CMS) released the announcement, clarifying the new policy.
In November 2013, the Obama administration decided that some non-grandfathered health plans in the small group and individual markets would not be considered out of compliance if they failed to meet certain coverage provisions of the ACA. The transition relief was originally scheduled to last for one year, and was viewed as a response to the numerous health insurance policy cancellations that would result from the new requirements.
This recent announcement extends this relief for two additional years. CMS released the following:
“At the option of the States, health insurance issuers that have issued or will issue a policy under the transitional policy anytime in 2014 may renew such policies at any time through October 1, 2016, and affected individuals and small businesses may choose to re-enroll in such coverage through October 1, 2016.”
Who Will This Impact?
This decision, which will likely prevent another wave of cancellations that were scheduled to begin November 1, 2014 and will impact some insurance offerings, but is unlikely to have a significant impact, since only about half of the states have opted to grant extensions to health plans within their jurisdictions. Further, the number of people currently on these non-compliant plans has been dropping, and is expected to continue to decline. Under the new policy, these plans (which typically offer fewer benefits at lower costs since they do not have to abide by the ACA’s minimum essential coverage) will still be available until plans expire in 2017.
Please note that it will be up to each individual state, as well as each individual insurance carrier, as to if they will decide to adopt this additional two year extension. Under the original one year transitional relief, even though it was allowed in the State of Florida, there are currently some health insurance carriers who have decided to not allow groups to renew their existing non-compliant medical plans.
We will continue to keep you up to date of new developments in ACA implementation as they arise. Please contact our office for additional information regarding your group’s medical policy and the impact of this recent change on it.
Did you know that some of the major insurance carriers have revised their requirements on small group medical insurance regarding employee participation and employer contribution?
One major carrier offers 5 group medical plans in Florida for employers (with 2-100 employees) that lowers the required employer contribution to the lesser of 25% of the employee medical premium or $50 per employee. Additionally, they also only require 50% employee participation on any of these 5 plans.
Currently most major medical carriers require the employer to contribute 50% towards the cost of the employee premium and the group must maintain 75% employee participation (this does not include any eligible employees who can provide proof of valid coverage elsewhere).
Another national medical insurance carrier just lowered their employee participation requirements for all small group medical plans in Florida. This is valid only for new business with 2-50 eligible employees, but it does apply to all of their small business medical plans offered. Any existing small group clients with this carrier are still subject to the 75% participation requirement currently.
If you would like more information on any of the plans offered, please contact our office for more information.