New HHS Regulations “Clarify” that Health Plans Covering Families Must Have “Embedded” Individual Cost-Sharing Limits
Originally posted by Stacy Barrow and Damian A. Myers on March 18, 2015 on www.erisapracticecenter.com.
On February 27, 2015, the Department of Health and Human Services (HHS) released its final HHS Notice of Benefit and Payment Parameters for 2016. The lengthy regulation covers a wide range of topics affecting group health plans, including minimum value, determination of the transitional reinsurance fee, and qualified health plan rates and other market reforms applicable to the group and individual insurance markets.
Within the portion of the regulation’s Preamble explaining insurance issuer standards under the Affordable Care Act (“ACA”), HHS formally adopted a “clarification” to the application of annual cost sharing limitations. By way of background, the ACA requires that all non-grandfathered group health plans adopt an annual cost sharing limit for covered, in-network essential health benefits for self-only coverage ($6,600 in 2015 and $6,850 in 2016) and other than self-only coverage ($13,200 in 2015 and $13,700 in 2016). Until HHS’s clarification, many group health plan administrators applied a single limitation depending on whether the employee enrolled in self-only or other than self-only coverage (e.g., “family” coverage). That is, if an employee enrolled in family coverage, the higher limit applied to the family as a whole, regardless of the amount applied to any single covered individual.
HHS, however, now requires group health plans to embed an individual cost sharing limit within the family limit. For example, suppose an employee and his or her spouse enroll in family coverage with an annual cost sharing limit of $13,000, and during the 2016 plan year, $10,000 of cost sharing payments are attributable to the spouse and $3,000 of cost sharing payments are attributable to the employee. Prior to the HHS’s clarification, the full $13,000 would be payable by the covered individuals because the $13,000 plan limit had not been reached on an aggregate basis. However, with the new embedded self-only limitation, the cost sharing payments attributable to the spouse must be capped at the self-only limit of $6,850, with the remaining $3,150 being covered 100% by the group health plan. The employee would still be subject to cost sharing, however, until the $13,000 plan limit is reached.
The HHS clarification is not effective until plan years beginning on or after January 1, 2016. It is important to note that, at the moment, it is unclear whether the HHS clarification is intended to apply to self-insured plans. The 2016 Benefit and Payment Parameters are rules related to the group and individual insured market, including the Marketplace, and the Preamble section under which the clarification is found is titled “Health Insurance Issuer Standards under the Affordable Care Act, Including Standards Related to Exchanges.” Additionally, all previous cost sharing guidance applicable to self-insured plans have been issued jointly by the HHS, Department of Treasury and Department of Labor. As of the date of this blog entry, the Departments of Treasury and Labor have not issued a similar clarification. Nevertheless, although the HHS clarification is potentially unenforceable with respect to self-insured plans, employers and plans sponsors with self-insured plans should be prepared to adopt an embedded cost sharing limit should the other two agencies follow suit.
Supreme Court Hears Oral Argument in ACA Subsidies Challenge
Originally posted By:
Yesterday morning, the U.S. Supreme Court heard oral arguments in King v. Burwell, the second challenge to the Affordable Care Act (ACA) to reach the Court. This challenge targets the availability of subsidies on the Exchanges that were established by the Department of Health and Human Services (HHS) for the 34 states with HHS-established Exchanges.
The challengers contend that the tax code restricts subsidies to individuals who enroll in coverage through a state run Exchange when it provides that the amount of the subsidy is based on premiums on an Exchange “established by the State.” 26 U.S.C. § 36B(b)(2)(A). The Administration, however, defends an Internal Revenue Service (IRS) rule that makes subsidies available on state-run and HHS-established Exchanges alike, contending that section 1321 of the ACA makes HHS-established Exchanges equivalent to state-run Exchanges.
It is notoriously difficult to ascertain the likely outcome of a case based on oral arguments. Rather, oral arguments merely suggest at the leanings of particular Justices as they prepare to discuss the case and to assign drafting of the opinion(s) in private conference. Nonetheless, oral arguments provide the only public hints of the Justices’ views before the Court issues its decision this summer.
The Likely Swing Votes. As many expected, the tenor of oral arguments suggested that Chief Justice Roberts and Justice Kennedy are the likely swing votes in this case. It appeared that the so-called liberal block of the Court—Justices Ginsburg, Breyer, Kagan, and Sotomayor—are critical of the challengers’ interpretation of the statute. Rather, they seem inclined to conclude that the IRS rule is a permissible interpretation of the statute or that the rule reflects the only viable interpretation of the statute. On the other hand, Justices Scalia and Alito appeared to be highly critical of the Administration’s position. As is his typical practice, Justice Thomas did not ask any questions during oral argument, but most Court watchers expect that his views likely align with those of Justice Scalia and Alito. Some Court watchers had suggested that Justice Scalia might look to context to conclude that the subsidy provision is ambiguous, but his questions appeared to reflect a view that Congress enacted a statute that clearly restricts the availability of subsidies, despite the potential practical consequences of such an enactment.
Federalism and Constitutional Avoidance. One surprise yesterday was Justice Kennedy’s expression of constitutional concerns and potential inclination to avoid a constitutional problem by considering the Administration’s interpretation of the statute. In short, his questions echoed federalism concerns raised in an amicus brief drafted by a number of states. While Justice Kennedy aligned with the conservative block of the Court in NFIB v. Sebelius, he may be amenable to upholding the IRS rule here to the extent that the Administration’s interpretation is viable.
Justice Kennedy’s concerns regarding federalism do not flow from the impact that an adverse decision against the government will have on the newly insured public in states without state operated Exchanges. Rather, his concerns stem from his deeply held belief that the Court owes the utmost respect under the structure of the Constitution to the semi-sovereign states. In his view, Congress is not allowed to coerce states into doing something it wants. Those federalism concerns came to the fore when Justice Kennedy asked challenger’s counsel: “If your argument is accepted, the states were told to establish exchanges in order to receive money [for their citizens] or send the insurance market into a death spiral; isn’t that coercion? Under your argument, there would be a serious constitutional problem.” While the government had not raised the federalism argument, it had been raised by state amici. Citing South Dakota v. Dole, he noted that Congress is required to advise states about the conditions attached to the acceptance of federal grants. Here, clearly, Kennedy views the loss of subsidies for a state’s residents as such an unknown condition. The thinking seems to be that when interpreting a statute, given the warning by the Court about such coercion, Congress could not have intended such result. He hinted as much when later he suggested to government’s counsel that he should argue for the government’s view of the statute to avoid the constitutional concern. If Justice Kennedy is the swing-vote here, it is because he does not believe that Congress intended a reading of the statute that creates an unconstitutional coercion, similar to the Court’s reasoning in striking down the Medicaid provision in NFIB v. Sebelius.
Chevron Deference. Although the decisions of the lower courts in this and similar challenges have focused onChevron v. National Resources Defense Council, the Supreme Court spent little time discussing the potential application of Chevron deference in this case. Instead, it appeared that some members of the Court were more inclined to conclude that there is only one permissible interpretation of the statute—whether that interpretation is the one advanced by the challengers or the Administration.
A brief exchange between Solicitor General Verilli, Justice Kennedy, and Chief Justice Roberts, however, suggests that some members of the Court may be skeptical of the applicability of Chevron deference to tax credits. During this exchange, Justice Kennedy expressed skepticism that a question of this economic magnitude could be left to the Internal Revenue Service. He said, “It seems to me a drastic step for us to say that the [Internal Revenue Service] can make this call one way or the other when there are . . . billions of dollars of subsidies involved . . . . It seems to me our cases say that if the Internal Revenue Service is going to allow deductions using these, that it has to be very, very clear.” Solicitor General Verrilli responded citing to the Court’s 2011 decision in Mayo Foundation for Medical Education & Research v. United States for the notion that “Chevron [deference] applies to the tax code like anything else.” Chief Justice Roberts, however, appeared concerned that, under this approach “a subsequent administration could change” course and adopt a contrary interpretation concerning the availability of tax credits. The Chief Justice asked very few questions during oral argument, but this exchange suggests he may be inclined to interpret the statute as unambiguous and not implicating Chevron deference, whether in favor of the Administration or the challengers.
Standing. The U.S. Constitution establishes that federal court jurisdiction extends only to cases involving an actual injury, economic or otherwise. While media coverage in recent weeks has focused on the standing of the four individual plaintiffs challenging the individual mandate, it does not appear that the Court will avoid reaching the merits of the case based on standing concerns. No fact-finding has taken place in this case because the appeal stems from a motion to dismiss filed by the Government. Therefore, Solicitor General Verrilli indicated that he believes it’s appropriate to take the plaintiffs’ attorney’s word that one or more of the plaintiffs has standing and that the dispute is not moot. While Justice Ginsburg asked early questions indicating a concern with standing, it did not appear that other members of the Court were inclined to take up the issue.
Practical Consequences. Over 85 percent of individuals who enroll in coverage on an Exchange receive subsidies to help pay for the cost of premiums and/or to reduce cost-sharing on the Exchange plan. Most of these individuals reside in the 34 states that have HHS-established Exchanges. Absent these subsidies, some individuals would be unable to afford coverage and would therefore be exempt from the individual mandate. Others may have affordable coverage options but may decline to purchase coverage given the cost. The resulting reduced enrollment would both increase the number of uninsured in states without state-run Exchanges and constrict the risk pool on those Exchanges. As the risk pool trends toward a smaller group of less healthy individuals, premiums would increase, which some believe would threaten a death spiral on the individual market.
In addition, the employer mandate’s operation depends on whether employees can purchase subsidized Exchange coverage absent affordable and sufficient employer coverage. Without subsidies, employers in states with HHS-established Exchanges would not be subject to the employer mandate unless 30 or more of its employees actually reside in a neighboring state with a state-run Exchange. While many observers believe that large employers would continue to offer coverage without the employer mandate, there is some concern that such employer-sponsored coverage might not be affordable among lower income workers, resulting in greater numbers of uninsured individuals.
During oral argument, the challenger’s counsel, Mr. Carvin, contended that there was no evidence that limitations on the subsidies would produce such disastrous consequences. But, it appeared that most of the Justices were concerned about the market consequences if subsidies were eliminated in some markets. Justice Alito, acknowledging these concerns, suggested that the Court might stay the mandate to provide states with an opportunity to establish state-run Exchanges before subsidies on HHS-established Exchanges are eliminated. On the other hand, Justice Scalia expressed confidence that Congress would act to address and mitigate destabilization of the individual market. Thus, at this stage, it is unclear how a reversal of the IRS rule might be implemented and what, if anything, the Court might do to mitigate the impact of the judgment. But certainly the potential market consequences of the elimination of subsidies on HHS-established Exchanges would be significant for plans, providers, and patients alike. Last Tuesday, HHS Secretary Burwell stated in aletter to Congress that the Administration “know[s] of no administrative actions that could . . . undo the massive damage to our health care system that would be caused by an adverse decision.”
Furthermore, if the Court concludes that the challengers’ interpretation is the only viable interpretation of the statute, the decision may prompt further litigation concerning the constitutionality of linking the availability of subsidies to a state’s establishment of a state-run Exchange. Justice Kennedy’s comments and questions during oral argument focused largely on the 10th Amendment and the concern that restricting subsidies to state-run Exchanges may constitute impermissible coercion of the states by the federal government. Judicial resolution of these issues may require a new case challenging to the statute’s constitutionality and addressing the severability of the various subsidy and market reform provisions of the ACA.
But, if the Court upholds the IRS rule and concludes that the Administration’s interpretation is the only viable interpretation of the statute—whether based on the plain text and context of the provision or because of the doctrine of constitutional avoidance—the implementation of the ACA will continue without significant change and stakeholders would have the security of knowing that a future administration would be unable to reverse the IRS rule and restrict subsidies to state-run Exchanges. On the other hand, if the Court upholds the IRS rule based on Chevron deference, a future administration could reverse course and eliminate subsidies on HHS-established Exchanges.
Copyright © 2015 Hooper Lundy & Bookman PC | www.health-law.com
ACA lawsuit could have implications beyond health care
Originally posted by Mike Nesper on November 24, 2014 on BenefitNews.com.
Employers should continue preparations to comply with the Affordable Care Act despite House Republicans’ recent lawsuit against President Obama. The lawsuit, announced Friday, challenges the lawfulness of subsidies for lower-income individuals and Obama’s postponement of the employer mandate.
The lawsuit won’t have any short-term effects on the ACA, says Benefit Advisors Network Executive Director Perry Braun. “I would recommend not delaying any implementation plans and to move forward,” he says.
The Supreme Court is expected to rule on ACA subsidies in June — the high court agreed Nov. 7 to hear an appeal by four Virginians who are attempting to block those tax credits in 36 states. “Depending on the ruling and subsequent appeals, it could take until summer for this to be resolved,” Braun says.
The government will pay $175 billion to insurance companies over the next 10 years to help individuals who earn a yearly salary between $11,670 and $29,175 pay for health insurance. “If the lawsuit is successful, poor people would not lose their health care, because the insurance companies would still be required to provide coverage — but without the help of the government subsidy, the companies might be forced to raise costs elsewhere,” according to a Friday New York Times article.
The latest ACA-related lawsuit could have impacts beyond health care, Braun says. “The lawsuit is part of a potentially larger story, which is to have the judicial branch confirm what authority the president of United States has in changing or amending laws and what is the role of Congress,” he says. “The separation of powers is, in my opinion, the story here.”
It’s likely attempts to alter the health care law won’t be limited to the court room. In less than six weeks, Republicans will control both houses of Congress and top broker organizations expect another vote to repeal the ACA, however, they say, it’s more of a symbolic gesture than anything else. (So far, there have been 54 votes to either repeal or change the ACA).
Alden Bianchi, practice group leader of Mintz Levin’s employee benefits and executive compensation practice, says last week’s lawsuit is along the same line. “There is no substance here,” he says. “This is, as best I can tell, political. I would guess that the intention is to keep the ACA alive as a campaign issue going into 2016.”
Officials Extend Deadline for Submitting Reinsurance Contribution Form
Originally posted November 15th, 2014 on www.thinkhr.com.
Late Friday, federal officials responded to requests for an extension of the deadline for contributing entities to submit their 2014 enrollment counts in connection with Transitional Reinsurance Program contributions. The deadline has now been extended until 11:59 p.m. on December 5, 2014. The January 15, 2015 and November 15, 2015 payment deadlines remain unchanged.
Federal Employment Law Update – October 2014
Source: ThinkHR.com
FAQs about Affordable Care Act Implementation Part XXI
On October 10, 2014, the Departments of Labor, Health and Human Services (HHS), and the Treasury jointly released FAQs about Affordable Care Implementation (Part XXI). The FAQS update prior guidance on cost-sharing limitations for plans using “reference-based pricing.”
The new FAQS set forth specific factors the departments will consider when evaluating whether a non-grandfathered plan that utilizes reference-based pricing (or similar network design) is using a reasonable method to ensure that it provides adequate access to quality providers at the reference-based price.
IRS – 2015 Per Diem Rates for Travel Expense Reimbursements
On October 6, 2014, the IRS released Notice 2014-57. This annual notice provides the 2014-2015 special per diem rates for taxpayers to use to substantiate ordinary and necessary business expenses incurred while traveling away from home, specifically:
- The special transportation industry meal and incidental expenses rates (M&IE).
- The rate for the incidental expenses only deduction.
- The rates and list of high-cost localities for purposes of the high-low substantiation method. Taxpayers using the rates and list of high-cost localities provided must comply with Rev. Proc. 2011-47, I.R.B. 2011-42, 520.
Transportation industry rates
The special M&IE rates for taxpayers in the transportation industry are $59 for any locality of travel in the continental United States (CONUS) and $65 for any locality of travel outside the continental United States (OCONUS).
Incidental expense only rate
The rate for any CONUS or OCONUS locality of travel for the incidental expenses only deduction is $5 per day.
High-low substantiation method
For purposes of the high-low substantiation method, the per diem rates are $259 for travel to any high-cost locality and $172 for travel to any other locality within CONUS. The amount of the $259 high rate and $172 low rate that is treated as paid for meals is $65 for travel to any high-cost locality and $52 for travel to any other locality within CONUS. The per diem rates in lieu of the meal and incidental expenses only substantiation method are $65 for travel to any high-cost locality and $52 for travel to any other locality within CONUS.
High-cost localities changes
San Mateo, Foster City, Belmont, Sunnyvale, Palo Alto and San Jose, California; Glendive and Sidney, Montana; and Williston, North Dakota, have been added to the list of high-cost localities appearing in Notice 2013-65, I.R.B. 2013-44, 440. The portion of the year in which they are high-cost localities has changed for Sedona, Arizona; Napa, California; Vail, Colorado; Fort Lauderdale, Florida; Miami, Florida; and Philadelphia, Pennsylvania. The following localities have been removed from the list of high-cost localities: Yosemite National Park, California; San Diego, California; and Floral Park, Garden City, and Great Neck, New York.
Effective date
The guidance is effective for per diem allowances for lodging, meal and incidental expenses, or for meal and incidental expenses only that are paid to any employee on or after October 1, 2014, for travel away from home on or after October 1, 2014. For purposes of computing the amount allowable as a deduction for travel away from home, this guidance is effective for meal and incidental expenses or for incidental expenses only paid or incurred on or after October 1, 2014.
Read IRS Notice 2014-57
Executive Order 13658 – Final Rule
On February 12, 2014, President Obama signed Executive Order 13658, Establishing a Minimum Wage for Contractors, to raise the minimum wage to $10.10 for all workers on federal construction and service contracts. The Executive Order directed the Department of Labor to issue regulations to implement the new federal contractor minimum wage.
On October 1, 2014, the department announced a Final Rule implementing the provisions of Executive Order 13658. Key provisions of the final rule include:
- It defines key terms used in the Executive Order, including contracts, contract-like instruments, and concessions contracts.
- It provides guidance for contractors on their obligations under the Executive Order.
- It establishes an enforcement process that should be familiar to most government contractors and will protect the right of workers to receive the new $10.10 minimum wage.
- It confirms that approximately 200,000 workers will benefit from the Executive Order.
Executive Order 13658 applies to new contracts and replacements for expiring contracts with the federal government that result from solicitations issued on or after January 1, 2015, or to contracts that are awarded outside the solicitation process on or after January 1, 2015.
The Final Rule will be published in the October 7, 2014 Federal Register.
Read the Final Rule
Read the Fact Sheet on the Final Rule
Read the FAQS on the Final Rule
10 states with the highest uninsured rates post-ACA
Originally posted on https://ebn.benefitnews.com.
While the uninsured rate has dropped to a record low of 13.4% nationwide, according to Gallup figures, rates differ dramatically across states. Here are the 10 states with the highest uninsured rates in the aftermath of health care reform implementation, according to WalletHub.
A decreasing rate of uninsured Americans shows the Affordable Care Act has impacted the number of individuals with health care coverage, but that impact varies widely by state. We’ve already highlighted the 10 states with the lowest uninsured rates post-ACA. Here are the 10 states with the highest uninsured rates, according to WalletHub, which analyzed data from the Kaiser Family Foundation, the Centers for Medicare and Medicaid Services, the Department of Health and Human Services, and the U.S. Census Bureau. Seven states were excluded from analysis because of data limitations.
Pre-ACA uninsured rate: 21.66%
Post-ACA projected uninsured rate: 18.16%
Difference before and after: -3.50%
Pre-ACA uninsured rate: 18.92%
Post-ACA projected uninsured rate: 18.29%
Difference before and after: -0.63%
Pre-ACA uninsured rate: 19.76%%
Post-ACA projected uninsured rate: 18.33%
Difference before and after: -1.43%
Pre-ACA uninsured rate: 20.48%
Post-ACA projected uninsured rate: 18.96%
Difference before and after: -1.52%
Pre-ACA uninsured rate: 26.52%
Post-ACA projected uninsured rate: 19.58%
Difference before and after: -6.94%
Pre-ACA uninsured rate: 24.29%
Post-ACA projected uninsured rate: 19.59%
Difference before and after: -4.69%
Pre-ACA uninsured rate: 24.73%
Post-ACA projected uninsured rate: 19.61%
Difference before and after: -5.12%
Pre-ACA uninsured rate: 22.41%
Post-ACA projected uninsured rate: 20.91%
Difference before and after: -1.50%
Pre-ACA uninsured rate: 18.11%
Post-ACA projected uninsured rate: 21.46%
Difference before and after: 3.34%
Pre-ACA uninsured rate: 26.8%
Post-ACA projected uninsured rate: 24.81%
Difference before and after: -1.99%
Employers face crackdown over worker misclassification
Originally posted September 29, 2014 by Michael Giardina on https://ebn.benefitnews.com.
Since the onset of the recession, there has been a surge in worker misclassification litigation and enforcement against employers that are trying to effectively manage their finances, but are incorrectly classifying their workers. There is also concern around the Affordable Care Act’s employer mandate, which may make misclassifications a tempting alternative to offering group health coverage.
The Department of Labor and the Internal Revenue oversee the federal Fair Labor Standards Act, which establishes minimum wage and overtime pay standards and how much private and public employers should pay their employees. At the state level, there are also a slew of regulations that can make any HR professional or benefit plan sponsor concerned.
Linda Doyle, trial partner at international law firm McDermott Will & Emery, says many employers with large teams of individuals in one category – such as trainers in the tech world or sales representatives in product and promotion businesses – have asked how they could come under the ACA’s coverage limits. This has been an area she’s been docking a lot of analysis in.
“There are benefits, but there are also huge costs and potential liabilities if you get this wrong,” says Doyle. “You know saving health insurance money is a way to avoid the teeth of the Affordable Care Act; it may be a laudable goal, but you may be just putting off extensive liability down the line.”
It doesn’t help that many employers are still trying to climb out from the recession.
“Particularly after the last recession, which I think we are technically are still in, there was a lot of headcount management,” Doyle explains. While noting that “‘temporary’ doesn’t necessarily mean ‘independent contractor’, or ‘work-from-home’ doesn’t mean ‘independent contractor’,” she says “there are really some employers that just don’t understand this is a category – even if the employee or individual agrees to it.”
Nancy Vary, director of the Knowledge Resource Center for Buck Consultants at Xerox, explains the ACA, and employee benefits needs in general, is an influence in these decisions.
“It all factors in, because if you’re an independent contractor, typically you’re not in a situation where you will not be receiving any kind of employee benefit,” Vary says.
In 2012, the National Employment Law Project stated that 10-30% of employers, or even more, misclassify their employees as independent contractors. This equates to millions of misclassifications and billions in revenue losses for state and federal governments. Because employers with independent contractors or other exempt employees are not tied to benefit and payments requirements levied by federal, state and local agencies, this is the conundrum, says Jeff Phelps, chief operating officer at Nelson Compliance, a consultant firm that helps employers figure out their contingent workforces.
“The problem is with independent contractors is, of course, employers are not contributing to the tax base for those individuals,” says Phelps. “That’s the No. 1 driver, that’s why you see the legislation and regulation getting tougher and more enforcement. They want to go after the misclassification issue, because they want to recover taxes that have not been made as well as [future] taxes.”
Phelps adds that typical employee protections afforded to employees such as the FLSA, Title VII of the Civil Rights Act of 1964 and the Family and Medical Leave Act are not offered to independent contractors.
The current severity of misclassification cases and costs, which employment lawyers will tell you rival what was seen in the dot-com era – especially after Microsoft agreed to pay the IRS $97 million to settle a benefits suit that included its independent contractors that were not allowed access to the company’s stock purchase plan.
“If you are an employer and you get this wrong, you have tax liability,” says Doyle. “You also have the problem that Microsoft faced years ago, if you call someone an independent contractor but they are really an employee, and your benefit plans give employees certain buckets of benefits, then you owe them those benefits.”
Under Employee Retirement Income Security Act plans, or state insurance plans, employees cannot waive their rights to benefits, says Doyle, even if they agreed to the exemption. She says a lot of employers rewrote their benefits plans in order to address the issue. But now, as 10 states enacted worker misclassification laws in 2012 and more than 14 regions did so in 2013 – including the District of Columbia – the topic is top of mind for employers.
Meanwhile, the Consolidated Appropriations Act of 2014, enacted in January, was authorized for just this purpose and the DOL has plans to award $10.2 million to fund worker misclassification detection and enforcement activities in 19 state unemployment insurance programs. “This is one of the many actions the department is taking to help level the playing field for employers while ensuring workers receive appropriate rights and protections,” says Thomas E. Perez, the U.S. secretary of labor.
“The DOL has engaged in quite a bit of outreach over the best few years but its focus in many respects has been on educating the workers, educating the employees and providing them assistance in filing complaints,” says Buck Consultants at Xerox’s Vary. But, “you get a sense where the DOL’s head is, and that’s not that different from many government agencies. They are, after all, in the enforcement business.”
Because each state regulation may vary, with some state laws being more strict than those at the federal level, Phelps says the independent contractor classifications, and misclassifications in general, are being labeled as “an unfair business practice.”
“All of those costs that an employer would have satisfy within the W-2, they don’t have to satisfy as a 1099,” Phelps explains.
But all employers want to know whether there will be some reprieve or clarification. According to Doyle, the DOL’s broad strokes of intervention, essentially audit programs and education programs, may help some uninformed organizations. Meanwhile, Vary adds that compliance audit of pay practices and time sheets can help employers skirt some of the liability going forward.
Because misclassifications are neither a function of HR departments or upper management, it’s a puzzle that has not been solved and will likely not be for a while, Phelps says.
“I don’t see anything coming down in terms of regulation that’s going to make this simpler,” says Phelps, who has spent more than 30 years in the human capital management industry. “All we’re seeing is greater enforcement.”
8 tips to share with employees to ensure a successful open enrollment
Originally posted on https://ebn.benefitnews.com.
As open enrollment season approaches, benefit managers are moving into high gear as they prepare to answer employee questions and concerns about their 2015 benefits. And as employees take on more responsibility for their health care, it’s more important than ever for them to understand how they can make the most of the programs and benefits their employers are offering.
Here are eight tips from benefits consulting firm Aon Hewitt that benefit managers can share with employees to help ensure open enrollment runs smoothly.
Employers are taking steps to make enrollment quicker and easier. “Many companies are designing the process so it is similar to an online retail shopping experience, where employees can access decision support tools and other resources that can help them narrow down their choices and weigh them against their specific needs,” says Joann Hall Swenson, health engagement leader at Aon Hewitt. “Employers are also stepping up their efforts to clearly communicate what is changing from previous years, using a variety of communication methods.” Encourage employees to take advantage of the resources you provide.
Understanding their past needs and estimating their future needs will help employees determine what adjustments they may need to make in their benefits selections for 2015. Encourage employees to start by reviewing how much they’ve spent in the past year out-of-pocket, the costs of their regular prescriptions and the number of doctor visits they’ve had. If they are participating in a flexible spending account, encourage them to re-evaluate their contribution levels based on their actual and anticipated expenses for 2015. It’s also important to think about any life changes that may impact their decisions, such as an addition to the family or the development of a new medical condition that may impact health care expenses.
Over the past few years, there have been many changes taking place in the provider community, including doctor’s groups joining together and hospitals and health systems re-contracting with insurers. As a result, health plan options may include vastly different combinations of doctors and hospitals than in the past. Most employers and health plans offer a number of tools and resources that can help employees assess the cost impact and quality of different providers as they make their enrollment decisions.
CDHPs often have lower premiums, which make them an attractive option for individuals who want to reduce the costs taken out of their paychecks each month. While employees may have a higher deductible to meet, many employers couple these plans with health reimbursement accounts or health savings accounts, which employees can use to help pay for eligible out-of-pocket health care costs. HSAs are the most common, and allow employees to save money by contributing, on a pre-tax basis, up to $3,350 in 2015 or $6,650 if they have family coverage, with no use-it-or-lose-it rule. In addition, employers may also contribute to the HSA. It’s important for employees to understand how the employer’s contributions work so they can maximize this subsidy.
If an employee’s spouse, partner or adult children have access to health coverage elsewhere, including through their employer, it may be more cost effective for them to enroll in this coverage instead of being covered by you. Encourage employees to carefully review and compare these plans to ensure they are choosing the coverage they need at the most favorable cost.
Many employers offer a wide range of health and wellness programs, such as health assessments, weight loss programs and health coaching, to help employees get and stay healthy. Taking part in these programs can help employees understand their current health status, and they might even be able to take advantage of a financial incentive for doing so.
2015 will be the second year of coverage available to Americans through the marketplaces, commonly referred to as “public exchanges.” In most cases, individuals with coverage through their employer will not be eligible for federal tax credits for purchase of insurance through the marketplaces. Employees can visit healthcare.gov to learn more about the marketplaces.
As employees assess their health plan options for 2015, it’s important for them to look holistically at their health and financial well-being, including health care, income protection (e.g., life and disability insurance) and retirement planning. Does their spending reflect their needs and priorities? For example, if they aren’t contributing to your 401(k) plan, remind them that now might be a good time to start. Beginning to save earlier in their careers will help ensure they’re on track to meet their long-term savings goals.
IRS drafts instructions for ACA reporting requirements
Originally posted September 11, 2014 by Keith R. McMurdy on https://ebn.benefitnews.com.
They promised they would be coming and now they have. On Aug. 28, the Internal Revenue Service issued draft instructions for Forms 1094-C and 1095-C and Forms 1094-B and 1095-B, which I provided in my July 31 entry.
These forms were provided in draft format and they are used to satisfy Affordable Care Act’s “information reporting requirements.” We also got draft instructions for Form 1095-A that relates to the statement about the Health Insurance Exchange Marketplace. The IRS has indicated that it will finalize the forms and instructions in 2014. On top of that, they issued some FAQs that address the reporting requirements.
As a starting point, the FAQs provide that some short-term penalty relief will be available for incomplete or incorrect information returns that are filed (or employee statements provided to employees) in 2016 for coverage offered, or not offered, in 2015. Under this relief, the IRS will not impose penalties on employers that can demonstrate that they made good faith efforts to comply with the information reporting requirements. This relief applies to returns and statements filed and furnished in 2016 to report offers of coverage in 2015 for incorrect or incomplete information reported on the return or statement, but the relief is not available if you fail to file. You have to show a good faith effort to comply so you cannot simply not file anything an expect relief.
With respect to the instructions themselves, to say that they are lengthy is an understatement. Employers should read them in detail to understand their obligations. However, some key provisions that help in compliance include:
- Clarification that employers must file Forms 1095-C and 1094-C with the IRS, and provide a copy of Form 1095-C to employees.
- A statement that, as noted above, forms 1095-C and 1094-C information returns are not required for 2014. Actual filings are not required until 2016 for the 2015 calendar year but employers may voluntarily file these forms in 2015 for 2014. If by chance an employer does choose to voluntarily files in 2015 for the 2014 year, penalties for the employer mandate payments will not be assessed for 2014.
- Establishment of specific dues dates for Forms 1095-C and 1094-C information returns. They must be filed by February 28 (for paper filings), or March 31 (for electronic filings) of the year following the calendar year to which the return relates.
- Clarification that a Form 1094-C must be attached to any Forms 1095-C filed by an employer. Each employer must file one 1094-C that reports aggregate employer-level data for all the employer’s full-time employees, which is referred to as the “authoritative transmittal” (and denoted accordingly on Line 19 of the Form 1094-C). Only one authoritative transmittal may be filed for each employer.
- Employers also must provide a Form 1095-C to each full-time employee by Jan. 31 of the year after the year to which the form relates (so that would be Jan. 31, 2016 for the 2015 reporting year). Incidentally, employee statements must be furnished to individuals in paper format by mail, unless the individual affirmatively consents to receiving the statement electronically.
As with the forms, the instructions are in draft format and subject to change and finalization. However, between the draft forms and the draft instructions, employers should now be able to ascertain generally what is required of them in reporting. Even though the mandatory reporting requirement does not completely kick in until after 2015, employers should spend some time reviewing these requirements with their plan professionals, preferably sooner rather than later, to get a sense of what data they will have to collect and how who has responsibility for making sure the information is accurate.
3 Takeaways From the Medicare Trustees Report
Originally posted at 9:41 am EST, August 1, 2014 by Drew Altman on https://blogs.wsj.com.
The annual report from the Social Security and Medicare trustees predicted that Medicare will be solvent until 2030, four years later than the trustees predicted last year. That’s thanks to the recent slowdown in Medicare spending and a stronger economy that yields higher revenue through payroll tax contributions to the Medicare trust fund.
The administration and congressional Democrats are taking credit for elements of the Affordable Care Act that have helped to slow the growth in Medicare spending, and they warn against changes to Medicare that they fear would shift costs to seniors and undermine the program.
Republicans, however, see little good in the trustees’ report. “Don’t be fooled by the news that Medicare has a few more years of solvency,” Rep. Kevin Brady, chairman of the House Ways and Means subcommittee on health, said in a statement. More fundamental changes to Medicare are needed, many Republicans argue, such as transforming the program to a premium-support or voucher model.
Here are three points that might have been lost in the back and forth over the report by those on the left and the right:
* Contrary to conventional wisdom, Medicare appears to be outperforming the private sector. Medicare spending per capita rose at a 6.1% annual clip between 2000 and 2012 vs. a 6.5% growth rate for private health insurance. And Medicare spending is projected to rise at a 4% per capita rate between 2013 and 2022 vs. 4.9% for private insurance. (The bad news is that GDP per capita is projected to rise more slowly, at 3.7% per year.) Medicare’s problem is less poor performance and more the challenge of meeting the needs of an aging society and seniors who have modest incomes to pay for their health care.
* The ACA is projected to cut $716 billion in expected increases to providers and insurers between 2013 and 2022. Despite claims that cutting payments to providers and private plans could make the sky fall, there is no evidence so far that the industry or beneficiaries have been adversely affected by the reductions. In fact, enrollment has been growing in the private Medicare Advantage plans, which were hit by the most severe and controversial reductions, and the gains are projected to continue. So far, complex schemes to reform the way Medicare pays doctors and hospitals, which many believe hold promise, have produced mixed results in the effort to cut costs. But as $716 billion in Medicare savings demonstrates, the tried-and-true way to save money continues to be shaving a little off payment increases each year, as long as the health-care industry is still in the black and can absorb it.
* Perhaps the best news from the 2014 trustees report is that the country has a bit more time to hope for a more functional Congress that can figure out how best to finance Medicare for an aging population. It is almost impossible to envision the current Congress and administration working together on these long-term challenges.
With liberals and conservatives at odds over Medicare’s future direction and seniors such a strong voting group, it will be difficult to shift Medicare quickly in any direction. But there is good news for now in the trustees report.