Recent triagency guidance finalized the template and related materials for the ACA’s summary of benefits and coverage (SBC). The new SBC materials will apply for the first annual open-enrollment period starting on or after April 1, 2017, for a plan year beginning on or after that date. This means calendar-year group health plans will use the new SBC materials during fall 2017 open enrollment for the 2018 plan year. Plans that don't hold annual open enrollment will have to use the revised SBC materials starting with the first plan year that begins on or after April 1, 2017. The new template is available on CMS website.
While the IRS has not yet published official 2017 dollar amounts for ACA “play or pay” assessments, Mercer has projected them, using the medical premium inflation factor in the HHS regulations. The following table shows the annual amounts, though employers incur assessments on a monthly basis.
|ACA pay-or-play assessments (Section 4980H)||Projected 2017||2016||2015|
|Not offering coverage (4980H(a))||$2,260||$2,160||$2,080|
|Offering coverage lacking minimum value or affordability (4980H(b))||3,390||3,240||3,120|
Public opinion on the ACA has been deeply divided since day one, and it remains so today. Kaiser has been tracking the public’s views on the law since 2011 and recently created a cool interactive graphic that cuts polling results by various demographics and shows how opinions have changed (or not) over time. Of all the demographic slices here, it appears that political party identification is most indicative of one’s views on the ACA. Take some time to play around with the tracking poll here.
This week, all eyes are on the presidential hopefuls as the primary election season kicks into high gear. With health care on the docket as one of the key domestic policy issues of this election, it’s important for voters to know where each candidate stands, relative to the ACA and Medicare.
Our blog team put together the following summary that we share with a caveat -- these are our impressions of the candidate’s views based on what we have read in the news and seen on TV.
On the Democratic Side:
- Hillary Clinton is a proponent of the Affordable Care Act, albeit with a few tweaks that she says would reduce consumers’ out-of-pocket and prescription drug costs. For instance, she proposes having Medicare administrators negotiate with drug companies for lower prices for beneficiaries, requiring health insurers to cap out-of-pocket drug spending at $250 per month, and mandating that all plans (including employer-sponsored) provide individuals with three sick visits per year before needing to meet their deductible. She opposes any plans to privatize Medicare and she supports the state expansion of Medicaid under the ACA.
- A supporter of universal health care, Bernie Sanders thinks the ACA didn’t go far enough, creating an interesting rift in the Democratic Party. Sanders wants to expand Medicare to create a “Medicare-for-all” single-payer national health insurance. This tax-supported single-payer system would entail no premiums, deductibles or cost-sharing, and private health insurance would only exist to provide supplemental coverage. Until then, he supports the expansion and improvement of Medicaid for low-income families.
On the Republican Side:
- Ted Cruz wants to repeal the ACA (as do most of the Republican candidates) and cut the link between health insurance and employment. He also wants to expand health savings accounts and allow insurers to sell plans across state lines. But he has kept mum on what he would do to maintain the ACA’s coverage expansion, if he were to abolish the law. As for Medicare, he would raise the eligibility age and move to a premium-support system in which beneficiaries are given a fixed government contribution to buy a Medicare insurance plan; if the plan exceeds this amount, individuals would be accountable for the difference. Cruz also opposes Medicaid expansion under Obamacare.
- Donald Trump opposes both the ACA and the idea of a single-payer system. He says he would repeal the ACA and allow consumers to buy plans from insurers in any state, no matter where they live, and he supports the use of HSAs to pay for medical expenses not covered by insurance. He has said that he would preserve Medicare by strengthening the economy enough to support the program.
- Marco Rubio would like to repeal the ACA and replace it with a refundable tax credit to help people purchase health insurance, which would increase each year with a gradual reduction in the tax exclusion for employer health plans. He would also establish high-risk pools funded by the federal government to cover those with pre-existing conditions, allow insurers to sell plans across state lines, and expand HSAs to pay for medical expenses not covered by insurance. He says he would preserve traditional Medicare for current beneficiaries, but future generations would be transitioned into a defined-contribution, premium-support system. He also says he’d convert Medicaid into a capped state block grant program.
- The M.D. of the presidential hopefuls, Ben Carson advocates repealing the ACA and replacing it with health empowerment accounts (HEAs) to be given to all US citizens along with their social security numbers. Citizens would contribute to their HEAs tax-free and would be able to use the accounts to pay for medical expenses for themselves and their family members. The money is theirs, whether they change jobs or move across state lines, and would be paired with high-deductible health plans for catastrophic medical costs. In terms of Medicare, he’d give beneficiaries a fixed contribution with which to buy private health insurance, and if their plan of choice costs less than the government contribution, the remaining dollars would go straight into their HEAs (and if it costs more, the difference could come out of their HEAs). He’d also increase the Medicare eligibility age from 65 to 70, with beneficiaries able to use their HEAs for out-of-pocket expenses, deductibles, and co-pays.
- Like his Republican counterparts, Jeb Bush wants to repeal the ACA, but his plan seems to rely on the employer-based system more than the others. He says he’d offer a tax break for workers on health benefits they receive through their employers and let small businesses make tax-free contributions toward their employees’ plans. In addition, he’d provide a tax credit for catastrophic insurance plans and increase contribution limits for HSAs from $3,350 to $6,550. He’d also cap the employer tax exclusion so that employer-sponsored plans costing more than $12,000 for individuals or $30,000 for families would be taxed. He wants to privatize Medicare and provide lower government subsidies to wealthier people.
- John Kasich wants to repeal the ACA, though he expanded Medicaid in Ohio under the law as governor, and he has said that he supports coverage for pre-existing conditions. He thinks there needs to be more of an emphasis on patient-centered primary care, and he criticizes the fee-for-service system, wanting to reward value instead of volume.
We offer a few general observations about any possible changes being discussed:
- First thing to keep in mind is that more people have health insurance today than before the law was passed -- 12.7 million are enrolled in the public exchange with most getting a subsidy and an additional 7 million are covered by expanded Medicaid or CHIP. Those who favor ACA repeal need to keep in mind the challenge to make sudden any changes that would adversely impact 18 million new beneficiaries.
- From an employer perspective, over the past five years we have made benefit changes, taken on more administrative responsibilities and communication requirements, and paid significant fees to support the ACA. Several of the ACA requirements were very popular with employees -- expanded dependent eligibility to age 26 and the elimination of lifetime maximum benefits to name just two. While we might be happy to see all the ACA requirements go away, we realize some features may be hard to roll back. On the other hand, some of the candidates favor approaches that would rely even more on employer support.
- Finally, the excise tax on high-cost plans has long been the number one ACA concern for employers. The two-year delay is a step in the right direction and we are hopeful that step is actually a step closer to repeal of the excise tax provision. Stay tuned for a separate post on the lack of meaningful impact of the proposed changes in the 2017 budget.
Fasten your seat belts, it will be an interesting ride!
The average age of first-time mothers in the U.S. is now at an all-time high of 26 years old, according to a recent release by the CDC. Still, many first-time mothers are under 26 – which means, thanks to the Affordable Care Act, they are eligible as dependents on their parents’ health insurance plans. But getting coverage for labor and delivery as an adult child on a parent’s plan can be tricky. As Mercer employee benefits attorney Wade Symons explains, “the ACA requires well-woman services to be provided, including prenatal care, but not labor and delivery or other maternity costs.” In addition, having the newborn baby covered under the mother’s parents’ plan “would be covering the dependent of a dependent…Employers won’t offer health insurance for their employees’ grandkids." This creates a situation where the mother-to-be will need to seek other options for coverage to make sure she and her baby are covered appropriately. One option is the public health insurance exchange, though Symons clarifies that “there are only limited periods of open enrollment” and that some women “may not qualify for a special enrollment if [they’re] pregnant and voluntarily opt out” of their parent’s coverage. If you don’t cover maternity services for adult children, you might want to review health plan materials to make sure this is clear and help avoid unpleasant surprises.
Earlier this month, employers let out a sigh of relief when the delay of the Cadillac tax was announced. And they’ve just been given some more breathing room with the extension of deadlines to provide and file required IRS information returns and employee statements. Employers now have until March 31, 2016 to distribute 1095 forms and provide minimum essential coverage (MEC) and employer shared-responsibility (ESR) statements to individuals (the previous deadline was February 1). In addition, the deadline for transmittal of the 1094 forms to the IRS has been extended from March 31 to June 30, 2016 for electronic filings, and from February 29 to May 31, 2016 for non-electronic (paper) filings.
What this means for employers is more time to provide and file these forms. However, you’ll need to be diligent about meeting those deadlines as the IRS has stated that, in light of these extensions, “provisions regarding automatic and permissive extensions of time for filing information returns and permissive extensions of time for furnishing statements will not apply to extended due dates.” In other words, timeliness is important! Penalties will apply for employers who miss the new deadlines (although the IRS will take into account efforts made to meet the deadline when determining penalties in the event that the deadline is not met).
What this means for employees is not quite as straightforward. While most employees with employer-sponsored coverage will not be affected, it’s possible that individuals who enroll in coverage through the public exchange will be impacted if they do not receive their 1095-C forms before they file their income tax returns. Form 1095-C provides information regarding affordability of the employer-sponsored plans which affects the employee’s eligibility to receive premium tax credits for coverage through the public exchange. If an individual does not have the 1095-C form when filing their income tax return, they will need to rely upon other information regarding their coverage. For 2015 only, the IRS will allow premium tax credits to be determined based on the information provided by the individual in their income tax return, even if they did not have their 1095-C at the time, and individuals will not be required to amend their return if the 1095-C form they ultimately receive provides different information than what they provided in their income tax return. This one-time provision also applies to form 1095-B. Employees’ tax preparers are likely to request the 1095 forms as part of the information needed to complete the Form 1040. Thus, it’s important to communicate to employees about the revised timing for distributing these statements.
So take a little time to be thankful for the excise tax delay and the reporting deadline extensions. If you’re ready already, congratulations! If not, get out your calendar and make a new plan that will keep you on top of the upcoming deadlines and safe from any penalties.
It’s a done deal! Federal spending legislation cleared by Congress today for the President’s expected signature contains a two-year delay of the excise tax on high-cost plans. Assuming the tax does go into effect in 2020, the cost threshold will be the same indexed amounts they would have been without the delay. However, the U.S. Comptroller General will conduct a study on appropriate age and gender adjustments in consultation with NAIC.
So what does the delay mean for employers? The 2020 effective date provides “breathing room” for employers to thoughtfully plan for avoiding excise tax exposure. It’s true that there is broad support for repeal of the excise tax in Congress and many think this delay gets us one step closer to repeal. But it’s also true that if the provision is not repealed, employers that don’t prepare for it will face with tough decisions about cutting benefits to bring cost below the tax threshold.
Our research shows that more than a third of all employers currently offer a plan that is on track to trigger the tax in 2020. That’s an indication that -- with or without the excise tax -- employers still need to manage health care costs, improve quality, and engage employees to be better consumers and more accountable for their own health.
So take this extra time to consider leveraging a wide range of proven strategies, including consumer-directed health plans, total health management, and health innovations. Mercer’s latest survey found that about a fourth of employers are considering moving to a private exchange within five years. Our own exchange, Mercer Marketplace, has helped clients to not only reduce their costs but also to engage their employees in making better health care decisions with insightful education, broader health improvement solutions, and better decision-support tools.
And, just as a quick reminder, the ACA reporting deadline is fast approaching. But don’t let that stop you from celebrating this piece of good news. I know I am!
As you finalize medical plan designs for 2016, make sure you consider these five compliance elements of the Affordable Care Act (ACA).
1. Embed individual out-of-pocket (OOP) limits. The ACA’s annual in-network OOP statutory limit for self-only coverage ($6,850) applies to all individuals, whether enrolled in self-only coverage or another tier (e.g., family). Be sure to confirm your medical carrier’s capabilities to adjudicate this benefit design feature. The penalty for non-compliance is $100 per day per individual.
2. Offer MEC to 95% of full-time employees. Under the ACA employer mandate, large employers must offer minimum essential coverage (MEC) to “substantially all” full-time employees and their dependent children (not spouses/domestic partners). In 2016, the “substantially all” percentage increases from 70% to 95%. Employers could be subject to assessments if at least one full-time employee receives tax-subsidized public exchange coverage. The assessment is an annual payment of $2,160 for each full-time employee minus the first 30 full-time employees.
3. Update FPL affordability safe harbor (generally $93 per month). The IRS established three affordability safe harbors employers may use to show coverage is affordable — Federal Poverty Level (FPL), W-2 wages, and rate-of-pay. For plan years beginning on or after July 22, 2015, the FPL safe harbor is $93 per month based on the 2015 FPL of $11,770 (higher in Alaska and Hawaii). The potential assessment for non-compliance is the lesser annual payment of:
- $3,240 for each full-time employee receiving tax-subsidized public exchange coverage
- $2,160 for each full-time employee minus the first 30 full-time employees
4. Consider treatment of opt-out credits in affordability calculations. A recent IRS FAQ regarding HIPAA’s health status nondiscrimination rules states that the required contribution of any employee eligible for a cashable opt-out (in this case, targeted “unhealthy” employees) would be the premium contribution plus the opt-out amount — raising the required employee contribution by the amount of the cashable opt-out. It’s unclear if this same analysis applies when calculating the affordability of coverage under the ACA’s play-or-pay requirements, individual mandate, and eligibility standards for public exchange subsidies. Employers with opt-out designs should review their plan’s affordability with their legal advisors. The potential assessment is same as for #3 above.
5. Prepare for play-or-pay and MEC reporting. The IRS will use the information from Forms 1094 and 1095 filings to confirm subsidy entitlement and assess payments under the individual coverage mandate and the employer shared-responsibility provisions. The first year for which the reporting is required is 2015, due in early 2016. Rules allow for a 30-day deadline extension for both furnishing the individual statements and filing the IRS transmittal, but each requires timely employer action. Employers filing late or inaccurate Forms 1094 and 1095 are subject to penalties of $250 per return, up to a $3 million maximum.
Traditionally, employers have not thought of opt-out credits as increasing the cost of employee coverage. But in a recent HIPAA FAQ unrelated to affordability, regulators said that cash payments — or opt-outs — offered only to employees likely to generate high claims costs violate HIPAA’s prohibition against discrimination on the basis of health status.
The regulators reasoned that when an employer offers these cash opt-out incentives, the targeted “unhealthy” employees who enroll in the employer’s group health plan are effectively paying more than other “healthy” employees who enroll without losing any cash payment. While all employees ostensibly pay the same cost for coverage under the plan’s terms, the targeted employees’ true cost is the stated premium contribution plus the cash opt-out payment they forgo by enrolling in the employer’s health plan. Clear as mud, right?
Some employers offer a cash payment more broadly to all employees who waive the employer’s group health plan. If the reasoning of the high-cost claims opt-out provision applies generally to opt-outs, the required contribution of any employee eligible for an opt-out would be the premium contribution plus the opt-out amount — raising the required employee contribution by the amount of the opt-out.
Admittedly, this could be a stretch. For now, it is unclear whether the same analysis applies when calculating the affordability of coverage under ACA’s play-or-pay requirements, individual mandate, and eligibility standards for public exchange subsidies. To date, IRS has not indicated that it will apply this HIPAA opt-out analysis to affordability calculations. Because of the lack of direct IRS guidance on this opt-out issue as it applies to affordability — and because employers have not traditionally thought of opt-outs as increasing the cost of employee coverage — it’s not clear that IRS would require employers to include opt-outs in the cost of employee coverage without addressing this issue explicitly.
But to be on the safe side, employers should consider whether their opt-out credits may adversely affect the affordability of their coverage. If you have an opt-out design, you will want to monitor future guidance and review your plan’s affordability with legal counsel.
The ACA requires most people to have insurance or pay a penalty. That means employees with adult children need to think twice about discontinuing health coverage for their dependent children as they get older. As long as an employee is claiming a child as a dependent for income tax purposes, they need to be sure the child has health insurance. At tax time, filers are required to show everyone in the household had health insurance (See lines 46 and 61 of Form 1040). In 2015, the penalty is the greater of 2% of household income or $325 per person. You might want to remind your employees of this in time for open enrollment.
The ACA reporting deadlines for minimum essential coverage and employer shared responsibility occur in the first quarter of 2016. Individual statements (Form 1095-Cs) have a Monday, February 1, 2016, deadline and the IRS electronic transmittal due date (Form 1094-C) is Thursday, March 31, 2016.
Several months ago, about half of the employers we surveyed did not yet have a plan for how they would comply with the reporting requirements. Some may initially have thought they would handle the work in-house but now have decided to seek outside assistance from one of the many third-party vendors that offer reporting solutions. However, we have been hearing that because of demand and the lengthy implementation that the work requires, some vendors can no longer commit to meeting the reporting deadlines. They are offering to send the 1095-Cs at a later date in February or in March.
Is this feasible? And if so, what are the risks? In fact, the rules clearly allow for an extension for both deadlines (as described in the 2015 reporting instructions):
- 1095-Cs. Per 26 CFR §301.6056-1(g)(1)(ii), you may apply to the IRS in writing for a 30-day extension. A simple letter to the IRS requesting the extension and providing the reasons it is needed can serve as an application. While the IRS has authority to provide procedures for automatic extensions, we are not aware of any plans to do so. The 2015 reporting instructions contain more information on the content of this letter.
- 1094-Cs. Per 26 CFR §301.6056-1(e), referencing 26 CFR §1.6081-8, the IRS will grant an automatic 30-day extension upon an employer’s filing of Form 8809. You can submit a request for a second 30-day extension if submitted before the initial extension period ends but the second extension is not automatic.
For the 1095-C, the obvious risk is that the IRS will not grant the extension. Also, employers should consider employee reaction to a delay. Recall that the 1095-C may be required in order to complete personal income tax filing. (See lines 46 and 61 of Form 1040).
Seeking an extension, though, may become the best choice for employers who do not choose a reporting solution soon. If you haven’t finalized plans for reporting, act now!
- Review the alternative reporting options — i.e., qualifying offer, qualifying offer transition relief, and 98% offer. These options can make reporting somewhat simpler, particularly for fully insured plans.
- Evaluate resources available to see if handling the reporting in-house is feasible. Even though the requirements are pretty complex, a third of employers we surveyed thought it was.
- Consider the pros and cons of filing for an extension.