Federal guidance issued in May addresses the interaction of COBRA with the ACA. The Department of Labor (DOL) has updated its model COBRA general and election notices for employers to use; Spanish versions of the notices also are available. Accompanying DOL proposed regulations and interagency “frequently asked questions” guidance explain that public exchanges may offer better coverage options than COBRA in some situations, and to optimize their decisions individuals need to understand the somewhat complex interaction of COBRA and exchange enrollment, including eligibility for exchange subsidies. Final rules published May 27 by the Department of Health and Human Services further clarify some of these issues.
Under guidance from the Centers for Medicare and Medicaid Services, dropping COBRA coverage normally isn’t an exchange special-enrollment event, but individuals who currently have or are eligible for COBRA coverage can enroll in federally run exchanges through a one-time special-enrollment period until July 1.
In Congress, Senators are poised to consider President Obama’s pick to lead the Health and Human Services Department, Sylvia Mathews Burwell. Currently the director of the Office of Management and Budget, Burwell would succeed Secretary Kathleen Sebelius, who announced her resignation last month. Republican senators will continue to press for a vote on repealing the law’s medical device tax, although leaders of the Democratic-controlled chamber aren’t likely to oblige.
The House last week passed legislation (HR 30) that would relax the ACA’s employer play-or-pay rules by requiring that employers provide health insurance to employees who work 40 or more hours per week, up from the current standard of 30 hours, or face potential IRS assessments. The measure was approved by a vote of 252-172, with 12 Democrats crossing party lines.
A similar bipartisan Senate bill (S 30) is expected to be the subject of a committee hearing and a vote by the chamber within weeks. The legislation is strongly backed by a wide array of business groups and health plans. However, with a big projected revenue cost from the Congressional Budget Office and a veto threat from the president, the measure’s fate is uncertain as supporters try to muster the 60 votes necessary to overcome a Senate filibuster. For the 40-hour standard to become law over a presidential veto, the legislation would need to pass each chamber by a two-thirds majority.
A group of employers urged White House officials at a recent meeting to alter HHS's proposed insurance nondiscrimination rules under ACA Section 1557 as it undergoes final review. Section 1557 prohibits age, race, sex, disability, and national origin discrimination in any health program or activity that receives federal financial assistance. However, the proposed rules suggest that all operations -- not just ones receiving federal funds -- of any covered organization must comply with these nondiscrimination standards. This could subject some employer health plans and their third-party administrators to the rules.
The current employee tax exclusion for employer-provided health benefits came under scrutiny by lawmakers at an April 14 hearing held by the House Ways and Means Committee. Hearing witnesses included experts who argued that capping the employee income tax exclusion and providing universal tax credits would help to raise workforce wages, among other advantages. But a third witness warned that capping or ending the tax exclusion would undermine employer-sponsored coverage by removing a key incentive for employers to offer health plans, and break up employer risk pools that now include participation by younger, healthier workers.
The hearing comes as a House Republican task force continues work on developing an alternative to the Affordable Care Act (including repeal of the law’s “Cadillac” excise tax on high-cost plans). The task force is considering proposals that would cap or end the employee tax exclusion, using the resulting revenue to establish income tax credits or a standard deduction for the purchase of health insurance.
Recent Labor Department guidance clarifies how the ACA interacts with the Service Contract and Davis-Bacon Acts, which require government contract workers to receive prevailing local wages and fringe benefits. The new memorandum to federal contracting agencies addresses several questions, including that employers paying an employer shared responsibility assessment can’t credit that amount against their Service Contract Act or similar obligations.
IRS has posted final 2015 forms and instructions for the Affordable Care Act's employer shared-responsibility (ESR) and minimum essential coverage (MEC) reporting. Employers, insurers, and others will use these forms to issue individual statements to employees and others with health coverage and file related IRS reports. Large employers will also use these forms to report employees' full-time status and plan eligibility. The first mandatory statements and reports on 2015 coverage are due in early 2016.
A new Senate bill (S 2045) would repeal the Affordable Care Act's 40% excise tax on high-cost plans, set to take effect in 2018. Introduced by Sens. Dean Heller, R-NV, and Martin Heinrich, D-NM, the bill comes as support grows for similar legislation in the House, where a majority of members are now cosponsoring one of two separate repeal measures (HR 2050 and HR 879).
Repeal will be difficult, however, given the projected revenue loss and likely opposition from many Senate Democrats and President Obama. House lawmakers are drafting legislation to modify the tax by creating an actuarial value-based safe harbor for health plans, increasing the inflation index for the tax's cost thresholds, and excluding employees' pretax HSA contributions from calculation of the tax.
Tuesday, the Senate Committee on the Judiciary held a hearing of the Subcommittee on Antitrust, Competition Policy and Consumer Rights on “Examining Consolidation in the Health Insurance Industry and its Impact on Consumers.” Topics included possible effects of the proposed Aetna-Humana and Anthem-CIGNA mergers.
Also on Tuesday, Hillary Clinton released a plan for lowering prescription drug prices. The plan calls for ending direct-to-consumer advertising subsidies for drug companies, imposing dollar caps on monthly and annual out-of-pocket prescription drug costs for those with serious or chronic health conditions, clearing out the generic drug approval backlog in the FDA’s Office of Generic Drugs, and requiring rebates for low-income Medicare enrollees that are equivalent to rebates in the Medicaid program, among other proposals.
The IRS recently released draft instructions for 2015 employer shared-responsibility (ESR) forms. These instructions provide several, mostly helpful, clarifications for completing the individual statements and IRS transmittal (due in early 2016), including a relaxed standard for use of the “98% offer” method and some relief for employers with reporting duties for multiemployer plan populations. Draft 2015 instructions were also released for the form which insurers and certain others will use to report on enrollees’ minimum essential coverage (MEC).
Following up from a July House Committee hearing, key GOP House lawmakers are taking aim at controversial Affordable Care Act (ACA) guidance requiring self-insured and large-group insured nongrandfathered health plans to "embed" individual in-network out-of-pocket (OOP) limits in family coverage limits by the 2016 plan year. In a recent letter to Health and Human Services (HHS) Secretary Sylvia Burwell, the Republican chairmen of the three committees with jurisdiction over the ACA objected to the new requirement. House Education and the Workforce Chairman John Kline, R-MN, has asked for a one-year enforcement delay, but it’s unclear at this time whether changes will be made to the May guidance from HHS, IRS, and the Labor Department.
Regulators assured employers and insurers in the private marketplace they will not face transparency reporting under the ACA until they have an opportunity to comment on proposed rules. Qualified health plans on public exchanges using the HealthCare.gov IT platform will begin transparency reporting first, followed by other state-based exchanges, according to a CMS proposal. A triagency FAQ confirms that transparency reporting requirements for employers and insurers for other plans may differ from the requirements in the CMS proposal.
A new tool from the Robert Wood Johnson Foundation compares what essential health benefits (EHBs) state benchmark plans offer beyond the 10 required by ACA, current as of March. ACA requires nongrandfathered health plans in the individual and small-group markets to cover health services and items in10 general EHB categories but states have some discretion in choosing an EHB benchmark plan, so benefits beyond the ACA-required ones may vary from state to state. Additional information on EHBs and benchmark plans can be found in a Cigna analysis, updated in May, and an overview by the National Health Law Program released in August. States had until June 1 to select a new benchmark plan for the 2017 plan year. HHS is expected to publish a list of state benchmark plans for public comment before final federal approval is granted.
Congress continues its August recess. Both chambers are scheduled to return to legislative session on September 8.
With the ACA's 40% excise tax on high-cost employer-sponsored health coverage slated to take effect in 2018, IRS last week asked for a second round of comments on how to implement the tax. Notice 2015-52 supplements February’s Notice 2015-16 and seeks input on new issues including identification of which entities may be liable for the tax, employer aggregation, age- and gender-based increases to the dollar limit, allocation of the tax among applicable taxpayers, and payment. IRS also wants feedback on cost of coverage issues not covered in the earlier notice. Comments are due October 1.
In Congress last week, recent guidance requiring self-insured and large-group insured nongrandfathered health plans to "embed" individual in-network out-of-pocket (OOP) limits in family coverage by the 2016 plan year drew criticism at a House Education and the Workforce Committee hearing. Seeking a one-year delay in enforcement, committee Chairman John Kline, R-MN, said he's heard concerns from a number of employers about this "unilateral change" in how to apply the ACA's separate OOP limits for individual and family coverage.
US Department of Health and Human Services (HHS) Secretary Sylvia Burwell told Kline that HHS is "hearing comments” on the issue and wants to “incorporate those comments and understand if it is implementable.” To date, no changes have been made to the May 2015 ACA guidance from HHS, IRS, and the Labor Department that requires plans to embed individual OOP limits in family coverage by the 2016 plan year.
Final rules released last week on the mandate for nongrandfathered health plans to cover preventive services without cost sharing largely consolidate and clarify existing guidance. For closely held for-profit entities with religious objections to covering all or certain contraceptive services, the regulations give new details on how to obtain the same accommodation available to nonprofit religious organizations and their affiliates. The regulations will apply for plan years starting on or after 60 days from the date of publication in the Federal Register (Jan. 1, 2016, for calendar-year plans).
President Obama has officially nominated Andrew Slavitt to become CMS Administrator. Slavitt has been serving as Acting Administrator since Marilyn Tavenner stepped down earlier this year. He previously was an executive with Optum, a division of United Health, and was involved in ACA implementation in that capacity. Slavitt needs Senate confirmation and will face tough questioning from Republicans who want to grill the administration over the ACA in addition to drilling down on Medicare and Medicaid issues.
A new law could subject employers to increased penalties for failures (whether failing to furnish or file or providing incorrect or incomplete information) relating to ACA employer shared-responsibility and minimum essential coverage (MEC) reports first due to individuals and IRS in 2016 for the 2015 calendar year.
The Trade Preferences Extension Act of 2015, enacted June 29, increases the penalties for failures to file correct information returns and individual statements, including ACA Forms 1094 and 1095 as well as W-2 and W-3 reporting. The new penalties are potentially steep: $250 for each return that’s inaccurate or not filed (capped at $3 million), plus another $250 for each individual statement that’s missing or incorrect (also capped at $3 million). Uncapped penalties of $500 per return or statement can apply in cases of intentional disregard.
However, IRS can waive penalties for reasonable cause and reduce penalties if failures and errors are corrected within certain time frames. Further, IRS said in the preamble to the ESR and MEC reporting regulations that it won’t impose penalties in 2016 for incomplete or incorrect 2015 reports, as long as the employer has made a good-faith effort to comply with the ACA reporting requirements. This relief generally won’t apply to an employer that fails to furnish individual statements or file information returns on time.
As expected, late last week the Obama administration asked the D.C. Court of Appeals to convene a fuller panel of its judges to reconsider that court’s recent Halbig decision; a three-judge panel of that court ruled in July that ACA unambiguously authorizes IRS subsidies only for people with health coverage obtained on state health insurance exchanges, not federal exchanges. Also late last week, losing parties in the Fourth Circuit King lawsuit, addressing the same question and published the same day as Halbig but reaching the opposite conclusion, asked the US Supreme Court to hear the dispute quickly, saying a ruling by the high court would end the uncertainty about the subsidy matter. Similar cases on the public health insurance exchange subsides are pending in Oklahoma and Indiana. Subsidies are still available on federal exchanges, and likely will continue to be until the litigation is resolved.
This begins the first week of the August recess for both chambers of Congress. The continued implementation of health care reform, as well as the upcoming enrollment period for 2015 on public exchanges, are likely to be topics of discussion in members’ home districts.
The IRS last week issued drafts of the Affordable Care Act (ACA) forms required for employer shared-responsibility (ESR) and minimum essential coverage (MEC) reporting. It's expected that issuers of health insurance and certain employers will use Form 1094-B and Form 1095-B for MEC reporting, while large employers will use Form 1095-C and Form 1094-C for ESR reporting and, in some cases, MEC reporting. The IRS also has posted a draft of Form 8941 for claiming the small employer tax credit for offering health insurance through a SHOP exchange. Draft instructions for the forms are not available yet.
As Congress enters the final week before its August break, implementation of the law is the subject of two House hearings. The first hearing, held on Monday, addressed the ACA’s risk-corridor program for insurers and the ability of individuals to keep their health insurance currently available on the group market if they like that coverage. The second will focus on difficulties experienced by HealthCare.gov during its launch last fall and the costs related to repairing the site and building the “back end” of the system needed for exchange plan administration.
The House is expected to vote this week on a resolution authorizing House Speaker John Boehner’s lawsuit against President Obama over last year’s delay of the law’s employer play-or-play mandate.
Closely held, for-profit corporations whose owners have religious objections to certain forms of birth control do not have to comply with Health and Human Services regulations that all FDA-approved contraceptive methods are preventive services that must be covered by nongrandfathered plans, the US Supreme Court has ruled in Burwell v. Hobby Lobby Stores Inc. (June 30, 2014). The majority cautions its ruling is limited to the facts before it, and doesn’t validate religious objections to other ACA mandates, such as coverage of vaccines, or apply to all public corporations. With respect to contraceptive services, the decision finds that other means — such as expanding the current accommodation granted nonprofit religious organizations — could achieve the mandate’s goal without curtailing religious liberty.
Congressional Democrats and the White House are pushing for legislative action in the wake of the ruling, but any changes to the law are unlikely given Republican control of the House. The administration is exploring whether and how to extend the current accommodation for nonprofit religious groups to affected businesses. Whether businesses would accept that approach, which is the subject of other pending lawsuits, is an open question.