Compliance – ACA & Other

Two Court Cases pose significant threat to PPACA

Employee Benefit Advisors has been following two court cases that have been falling under the radar. These cases could dismantle health care reform as we know it.


Excerpts from Employee Benefit News September 27, 2013 by Serena Yee and Christie Daly

The ACA requires the creation of a health insurance exchange in each state that will serve as a competitive marketplace where individuals and small businesses can purchase private health insurance. If a state refuses to establish an exchange then the federal government is taking over the implementation.

Section 1401 of the ACA provides that premium assistance is available to taxpayers who are enrolled in coverage through an exchange established by the state under Section 1311 of the ACA. Nonetheless, the Internal Revenue Service promulgated a regulation that bases eligibility for premium assistance subsidies on enrollment in coverage through any exchange, including a federally-established exchange. Specifically, the regulation states that subsidies shall be available to anyone “enrolled in one or more qualified health plans through an exchange,” and subsequently defines an exchange to mean “a state exchange, regional exchange, subsidiary exchange and federally-facilitated exchange.”

Potential impact

Since a majority of the states, 34 to be exact, have refused to establish a state exchange, a ruling in favor of the plaintiffs could seriously jeopardize the future of the ACA since the subsidies are key to the operation of other parts of the law, including the calculation and collection of the individual and employer mandate penalties.

read full article»

PPACA: It’s Oct 2 – Now what?

October 1 was a very significant date for the implementation of PPACA as the individual exchanges went live. However, there were reports from many states with problems with the rollout and not all exchanges were activated on schedule. Both the online small business markets known as SHOP exchanges and the Spanish language exchange are delayed. Going forward, there are several key provisions that will impact employers.

Guaranteed availability/renewability – requires carriers to accept all groups applying for coverage
Waiting periods – requires waiting periods to be no more than 90 days
Auto enrollment – employers enroll their full-time employees in a health plan
Health care excise taxes – New taxes for health insurance and pharmaceutical companies, plus medical devices

Originally effective 2014, employers with more than 50 Full Time Equivalent employees are now required to offer affordable health insurance

PPACA imposes the Cadillac excise tax on rich benefit plans

Medicare Part D coverage gap is reduced to 25 percent

Reminder: Medicare Part D Creditable Coverage Notice Due by October 15th

With all the attention to the ACA requirements for 2013 and 2014 it’s easy to lose sight of other benefit and human resource requirements.

The Medicare Part D Creditable Coverage Law affects all employer-sponsored group health plans. Entities are required to notify Medicare eligible policyholders whether or not their prescription drug coverage is creditable.

Creditable Coverage means that the coverage is expected to pay, on average, as much as the standard Medicare prescription drug coverage. Notice is due by October 15th.

There are two required disclosure notices for qualifying entities:

  • The first requirement is to provide a written discloser.
  • The second requirement is for entities to complete the Online Disclosure to CMS Form to report the creditable coverage status of their prescription drug plan.

Employee Benefit Advisors is able provide links to model notices.

IRS Clarifies PEOs Position on Eligible Employer-Sponsored Plans

Final IRS regulations clarified PEOs can offer eligible employer-sponsored coverage on behalf of an employer.  In the introductory statement to the final regulations  it unambiguously states that organizations such as PEOs can offer coverage under an eligible employer-sponsored plan on behalf of an employer, yet not be viewed as the employer by reason of offering such coverage. This is true for group fully-insured and self-funded health insurance coverage offered on behalf of an employer to an employee.

Excerpts from The National Law Review Posted August 30, 2013

Exchange Notice Deadline is Oct 1 – What you need to know

Employers must notify employees about health insurance available through state and federal exchanges by October 1, 2013.

Who gets notified

You must send a notice to all full- and part-time employees, whether or not they are on your group health plan. You do not have to notify employees’ dependents or others who are eligible for coverage but are not employees. New employees hired on or after October 1, 2013, must receive this notification within 14 days of their start dates.

Employers can use a template

The U.S. Department of Labor (DOL) created model notices.

Minimum value standard question

If your group health plan does not meet the minimum value standard, your employees may be able to get a tax credit by buying health insurance on a federal or state exchange. Therefore, you must show on the model notice whether your group health plan meets this minimum value standard. Please note: Your health plan meets the ACA’s minimum value standard if it pays for at least 60 percent of each covered employee’s health care costs.


The penalty for not distributing the notice is $100 per worker per day.

DOL Release Sept 11 – If your company is covered by the Fair Labor Standards Act, it should provide a written notice to its employees about the Health Insurance Marketplace by October 1, 2013, but there is no fine or penalty under the law for failing to provide the notice.

Payroll Vendors Play Critical Role In ACA Analysis

Payroll vendors and PEO providers have all the information needed to run the critical analyses need to comply with the complexities of PPACA.  Your companies partnership with your payroll or PEO vendor should equip you with tools to help consult and support you through the many phases of the PPACA. While some providers offer insight into only the parts of the law their system can interpret, best-in-class vendor’s offer a comprehensive solution providing the flexibility and functionality to ensure you are covered in all aspects of the law. Support needs to include:

  • ACA eligibility analysis with
    • Comprehensive employee demographic detail consistent with allowable groupings for measurement periods under Shared Responsibility
    • Optional employee age information (effective as of a user-defined date) assists in determining eligibility for parental dependent coverage or Medicare
    • Statistical detail over user-defined date range includes optional per-month detail of subject hours and average hours per week and month over the user defined date range along with variances from Shared Responsibility full-time standards
  • ACA Affordability Analysis including
    • Ability to calculate the percentage of federal poverty level earned by the employee over the user defined date range to estimate Medicaid eligibility
    • View results of all proposed affordability safe harbor methods on a single report Including a count of how many employees exceed the affordability threshold. Individual employees will be highlighted on this report as well as having potentially unaffordable coverage
  • ACA FTE Determination Report
    • This report will calculate the number of FTEs for an entire organization or subset of employees within a group as allowed within safe harbor Determination Report

PPACA introduces numerous laws, safe harbor provisions and reporting requirements, some of which must be addressed now and some that will affect processes in the future. To make the complexities of this act easier to understand and to effectively manage your companies needs through PPACA, be sure your payroll or PEO vendor can help you and your broker navigate across all these areas.

Delay in ACA Employer Mandate: Opportunity to Regroup

Not All ACA 2013 Tasks Postponed

Don’t be fooled!

Not all aspects of healthcare reform are postponed. Employers face other compliance requirements during or by the end of 2013. Examples:

  • Reducing waiting times for plan eligibility to no more than 90 days;
  • Complying with the rules for the Patient-Centered Outcomes Research Institute (PCORI) fee; and
  • Notifying employees about the availability of state exchanges.

Opportunity for Course Reversal

This delay creates an opportunity for employers to test their compliance strategy for the Shared Responsibility provisions of the Affordable Care Act and to ensure they have the systems and procedures in place to fully comply when required in 2015.

Medical Loss Ratio (MLR) Rebates

Checks will soon be going out to groups from the insurance carriers that represent a rebate of premiums on health insurance costs.

Under PPACA Health Care Reform insurance carriers are required to adhere to certain Medical Loss Ratio (MLR) guidelines.  If a group’s particular MLR is lower than specified thresholds, the carrier must issue a rebate.  Checks going out in August 2013 are for the 2012 calendar year. Employers will have 90 days from receipt of a check to make payments to participants. Groups can elect to use any rebate monies received in varying ways:

1.   To pay future premiums

2.  To allocate to wellness funds or other employee benefit programs

(Employee Benefit Advisors recommends either Options 1 or 2).

3.  To distribute the corresponding percentages to their employees.  This option can be quite cumbersome to calculate the allocation to each employee based upon their respective contributions, time covered on the plan, benefit selections, etc. (it is an administrative nightmare).

If the amount of a premium rebate is de minimis, an employer may determine that the cost of issuing checks will exceed the amount of the checks.

It is the Carrier’s responsibility to notify the groups and administer the process of issuing refunds.  It is then up to the group to decide what to do with the refund.  Remember, in Technical Release No. 2011-04 the DOL announced the rebate checks may be “plan assets” subject to the ERISA fiduciary rules. Therefore, whichever option a company chooses, we recommend that the group notify their accounting departments to keep accurate records.

(MLR variables include small or large group, fully-insured vs. self-funded, and pre or post tax.)

4 Things Employers Should Know About Providing the Health Insurance Exchange Notice

Notice Must Be Distributed to Current Employees No Later Than October 1, 2013

Following a delay in the original effective date, employers will need to comply with the new requirement to provide each employee a written notice with information about a Health Insurance Exchange (also known as a Marketplace) beginning this fall. Below are four important reminders about the notice.

  1. The notice requirement applies to employers covered by the federal Fair Labor Standards Act (FLSA).
  2. Employers must provide the notice to each employee, regardless of plan enrollment status (if applicable) or of part-time or full-time status.
  3. The U.S. Department of Labor has provided two sample notices employers may use to comply with this requirement.
  4. Notices must be provided to each current employee no later than October 1, 2013, and to each new employee at the time of hiring beginning October 1, 2013.

Technical Release 2013-02 includes additional details regarding this notice requirement.

Clients can log into HR Advisor and visit our section on Health Care Reform for information on this and other notices required to be provided and to download additional model notices available for employers and group health plans.

ACA Plan Affordability – Safe Harbors

Under the Employer Mandate (delayed until 2015) of the Affordable Care Act (PPACA), large employers must offer their full-time employees (and their dependents) the opportunity to enroll in “Affordable” coverage.  Employers that offer their employees the opportunity to enroll in coverage will be penalized if the coverage is “unaffordable” or does not provide “Minimum Value,” and an employee receives a premium tax credit or cost-sharing reduction.

Coverage is deemed affordable if the employee’s required contribution for self-only coverage does not exceed 9.5% of the employee’s household income for the taxable year. If an employer offers multiple coverage options, the affordability test applies to the employer’s lowest-cost option that also meets the Minimum Value requirement (discussed below). For purposes of the Affordability test, household income is defined as the modified adjusted gross income of the employee and any members of the employee’s family (including a spouse and dependents) who are required to file an income tax return.

Employers generally will not know their employees’ household incomes. Therefore, the regulations allow employers to use one of three affordability safe harbors to determine whether an employer’s coverage satisfies the 9.5% affordability test.

These safe harbors do not apply when determining an employer’s assessable payment, nor do they affect an employee’s eligibility for a premium tax credit. The safe harbors are optional, and an employer may choose to use one or more of these safe harbors for all employees or for any category of employees as long as it does so on a uniform and consistent basis for all employees in a category. The three affordability safe harbors include:

  1. Form W-2 safe harbor;
  2. Rate of pay safe harbor; and
  3. Federal poverty line safe harbor

W-2 Safe Harbor

Under the Form W-2 safe harbor, an employer may determine affordability by reference to an employee’s wages from that employer. Wages for this purpose would be the total amount of wages required to be reported in Box 1 of Form W-2, Wage and Tax Statement.

Under this safe harbor, an employer will not be subject to a penalty with respect to a particular employee if (1) it offers full-time employees and their dependents the opportunity to enroll in coverage, and (2) the required employee contribution toward the self-only premium for coverage does not exceed 9.5% of the employee’s Form W-2 wages for the calendar year.

For an employee who was not a full-time employee for the entire calendar year, the employee’s Form W-2 wages are adjusted to reflect the period when the employee was offered coverage. These adjusted wages are then compared to the employee share of the premium during that period.

Rate of Pay Safe Harbor

According to the “rate of pay” safe harbor, an employer may take the hourly rate of pay for each hourly employee who is eligible to participate in the health plan as of the beginning of the plan year and multiply this rate by 130 hours per month. The employee’s monthly contribution amount is affordable if it is equal to or lower than 9.5% of the computed monthly wages (applicable hourly pay rate multiplied by 130 hours).  For salaried employees, monthly salary is used instead of hourly salary multiplied by 130.

Federal Poverty Line Safe Harbor

Under the “federal poverty line” safe harbor, an employer may also determine affordability using a federal poverty line-based test. Specifically, under this safe harbor, employer-provided coverage offered to an employee is affordable if the employee’s cost for self-only coverage under the plan does not exceed 9.5% of the federal poverty line for a single individual.

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