Cadillac Tax May Finally Be Running Out of Gas

The Cadillac tax - a 40 percent tax on the most generous employer-provided health insurance plans - may be about to change. The Cadillac tax was supposed to take effect in 2018 but has been delayed twice and recently, the House voted to repeal this tax entirely. Read this blog post to learn more about this potential change.


The politics of healthcare are changing. And one of the most controversial parts of the Affordable Care Act — the so-called Cadillac tax — may be about to change with it.

The Cadillac tax is a 40% tax on the most generous employer-provided health insurance plans — those that cost more than $11,200 for an individual policy or $30,150 for family coverage. It was supposed to take effect in 2018, but Congress has delayed it twice. And the House recently voted overwhelmingly — 419-6 — to repeal it entirely. A Senate companion bill has 61 co-sponsors — more than enough to ensure passage.

The tax was always an unpopular and controversial part of the 2010 health law because the expectation was that employers would cut benefits to avoid paying the tax. But ACA backers said it was necessary to help pay for the law’s nearly $1 trillion cost and help stem the use of what was seen as potentially unnecessary care. In the ensuing years, however, public opinion has shifted decisively, as premiums and out-of-pocket costs have soared. Now the biggest health issue is not how much the nation is spending on healthcare, but how much individuals are.

“Voters deeply care about healthcare still,” said Heather Meade, a spokeswoman for the Alliance to Fight the 40, a coalition of business, labor and patient advocacy groups urging repeal of the Cadillac tax. “But it is about their own personal cost and their ability to afford healthcare.”

Stan Dorn, a senior fellow at Families USA, recently wrote in the journal Health Affairs that the backers of the ACA thought the tax was necessary to sell the law to people concerned about its price tag and to cut back on overly generous benefits that could drive up health costs. But transitions in healthcare, such as the increasing use of high-deductible plans, make that argument less compelling, he said.

“Nowadays, few observers would argue that [employer-sponsored insurance] gives most workers and their families’ excessive coverage,” he wrote.

The possibility of the tax has been “casting a statutory shadow over 180 million Americans’ health plans, which we know, from HR administrators and employee reps in real life, has added pressure to shift coverage into higher-deductible plans, which falls on the backs of working Americans,” said Rep. Joe Courtney (D-Conn.).

Support or opposition to the Cadillac tax has never broken down cleanly along party lines. For example, economists from across the ideological spectrum supported its inclusion in the ACA, and many continue to endorse it.

“If people have insurance that pays for too much, they don’t have enough skin in the game. They may be too quick to seek professional medical care. They may too easily accede when physicians recommend superfluous tests and treatments,” wrote N. Gregory Mankiw, an economics adviser in the George W. Bush administration, and Lawrence Summers, an economic aide to President Barack Obama, in a 2015 column. “Such behavior can drive national health spending beyond what is necessary and desirable.”

At the same time, however, the tax has been bitterly opposed by organized labor, a key constituency for Democrats. “Many unions have been unable to bargain for higher wages, but they have been taking more generous health benefits instead for years,” said Robert Blendon, a professor at the Harvard T.H. Chan School of Public Health who studies health and public opinion.

Now, unions say, those benefits are disappearing, with premiums, deductibles and other cost sharing rising as employers scramble to stay under the threshold for the impending tax. “Employers are using the tax as justification to shift more costs to employees, raising costs for workers and their families,” said a letter to members of Congress from the Service Employees International Union.

Deductibles have been rising for a number of reasons, the possibility of the tax among them. According to a 2018 survey by the federal government’s National Center for Health Statistics, nearly half of Americans under age 65 (47%) had high-deductible health plans. Those are plans that have deductibles of at least $1,350 for individual coverage or $2,700 for family coverage.

It’s not yet clear if the Senate will take up the House-passed bill, or one like it.

The senators leading the charge in that chamber — Mike Rounds (R-S.D.) and Martin Heinrich (D-N.M.) — have already written to Senate Majority Leader Mitch McConnell to urge him to bring the bill to the floor following the House’s overwhelming vote.

“At a time when healthcare expenses continue to go up, and Congress remains divided on many issues, the repeal of the Cadillac tax is something that has true bipartisan support,” the letter said.

Still, there is opposition. A letter to the Senate on July 29 from economists and other health experts argued that the tax “will help curtail the growth of private health insurance premiums by encouraging employers to limit the costs of plans to the tax-free amount.” The letter also pointed out that repealing the tax “would add directly to the federal budget deficit, an estimated $197 billion over the next decade, according to the Joint Committee on Taxation.”

Still, if McConnell does bring the bill up, there is little doubt it would pass, despite support for the tax from economists and budget watchdogs.

“When employers and employees agree in lockstep that they hate it, there are not enough economists out there to outvote them,” said former Senate GOP aide Rodney Whitlock, now a healthcare consultant.

Harvard professor Blendon agrees. “Voters are saying, ‘We want you to lower our health costs,’” he said. The Cadillac tax, at least for those affected by it, would do the opposite.

SOURCE: Rovner, J. ( 19 August, 2019) "Cadillac tax may finally be running out of gas" (Web Blog Post). Retrieved from https://www.employeebenefitadviser.com/articles/obamacare-excise-tax-may-be-at-an-end


IRS to reject returns lacking health coverage disclosure

 Where does the IRS stand on ACA (Affordable Care Act)? It's time to know. Check out this article from Benefits Pro for more information.


The Internal Revenue Service has announced that for the first time, tax returns filed electronically in 2018 will be rejected if they do not contain the information about whether the filer has coverage, including whether the filer is exempt from the individual mandate or will pay the tax penalty imposed by the law on those who don’t buy coverage.

Tax returns filed on paper could have processing suspended and thus any possible refund delayed.

The New York Times reports that the IRS appears to be acting in contradiction to the first executive order issued by the Trump White House on inauguration day, in which Trump instructed agencies to “scale back” enforcement of regulations governing the ACA.

The move by the IRS reminds people that they can’t just ignore the ACA, despite the EO. Although only those lacking coverage have to pay the penalty, everyone has to indicate their insurance coverage status on their filing.

While the uninsured rate for all Americans dipped to a historic low of 8.6 percent in the first three months...5 states with lowest, highest uninsured rates

According to legal experts cited in the report, the IRS is indicating that although the administration may have leeway in how aggressively it enforces the mandate provision, it’s still in effect unless and until Congress specifically repeals it.

While many people thought they didn’t have to bother with reporting, and many insurers have raised rates anticipating that the lack of a mandate would lead to lower enrollments and higher costs for them, that’s not the case. Initially the IRS did not reject returns because the law was new.

The penalty is pretty steep; for those who don’t have coverage, it can range from $695 for an individual to a maximum of $2,085 for a family or 2.5 percent of AGI, whichever is higher. Not everyone without coverage would be penalized, though; if their income is too low or if the lowest-priced coverage costs more than 8.16 percent of their income, they’ll avoid the penalty.

That said, it’s not known how stringently the IRS will be in enforcing the mandate. But at least taxpayers will know whether they’re exempt from the penalty or whether they’re obligated to buy coverage.

 

 You can read the original article here.
Source:
Satter M. (23 October 2017). "IRS to reject returns lacking health coverage disclosure" [Web blog post]. Retrieved from address http://www.benefitspro.com/2017/10/23/irs-to-reject-returns-lacking-health-coverage-disc?ref=hp-top-stories&slreturn=1509378329

Are You Ready for the Marketplace Notices?

Original Post from ThinkHR.com

By: Laura Kerekes

Under the Affordable Care Act (ACA), each Health Insurance Exchange (Marketplace) must notify employers when they have an employee who has received a government subsidy to enroll in a health plan through the Marketplace. These notices will begin being sent to employers in the coming weeks and months, either individually or in batches. Because the notice procedure is being phased in, you may or may not receive notices, even if you have employees who received subsidies through a Marketplace. Here’s what you need to know.

Reason for Notice

These notices, also called 1411 Certifications in reference to the pertinent section of the ACA, will be sent to employers as part of the government’s verification efforts regarding persons who received Marketplace subsidies for individual health insurance. Marketplaces want to confirm whether the individual was eligible for, or enrolled in, an employer’s health plan since those facts can affect someone’s eligibility for subsidies.

You may receive a notice (similar to the sample found here) for each employee that received a subsidy to enroll in insurance through a Marketplace. The notice only informs you that the employee was granted a subsidy — it is not a notification that you have been assessed any penalty. Under the ACA’s play or pay rules, penalties may be assessed later by the Internal Revenue Service to applicable large employers for failing to offer full-time employees affordable minimum value coverage; however, play or pay penalties, and notice of them, are a separate process entirely.

What You Should Do

  • Even if you do not believe that any of your employees obtained individual coverage through a Marketplace, be on the lookout for these notices because you have 90 days from the date of the notice to file an appeal, if necessary. Notices may go to a subsidiary instead of the parent company or to a particular worksite instead of the employer’s main office, depending on the information the employee provided to the Marketplace. Alert all departments and worksites to watch for mail in envelops from a government agency or insurance Marketplace.
  • Important:Keep these notices confidential because employers are prohibited by law from discriminating or retaliating against employees who may receive subsidies. Consider segregating functions so staff involved in reviewing notices is separate from staff involved in employment or benefit plan decisions.
  • Establish your audit process for reviewing any notices you may receive and for filing appeals when appropriate. Confirm that the information is correct based on your employment and payroll records. If you are an applicable large employer subject to the ACA’s play or pay rules, you also should check if the employee was a full-time employee and, if so, whether you had offered affordable minimum value coverage to the employee. Read more about the notice and appeal process here.
  • File an appeal within 90 days of receipt of the notice if any of the information is incorrect. To do this, be sure to retain the notice and follow the directions for appeal. Remember that these notices will not advise you of any penalties on large employers, so appeals at this stage are to correct any mistakes in employment information. In addition:
    • If you are a small employer and not subject to the ACA play or pay rules, you are not impacted directly but your appeal may alert the Marketplace that the individual was enrolled in your group health plan and not eligible for subsidies.
    • If you are an applicable large employer who is subject to the ACA’s play or pay rules, you should be proactive in appealing the Marketplace’s subsidy determination if any information is incorrect. (An applicable large employer generally is one that employed an average of 50 or more full-time and full-time-equivalent employees in the prior calendar year. Related employers in a controlled group are counted together.) Although Marketplaces cannot access play or pay penalties, your appeal may help establish the facts and head off later penalty action by the IRS.

You may not receive Marketplace notices, but if you do, be prepared, review them thoroughly, and appeal incorrect information quickly.


Compliance Alert: New Affordable Care Act FAQs Released

Original post jdsupra.com

The U.S. Department of Labor, the Department of Health and Human Services, and the Department of the Treasury (collectively, the “Departments”) have jointly issued a new set of answers to frequently asked questions about the Affordable Care Act (the “ACA”). Below are some highlights from the FAQs.

Rescissions of Coverage

The FAQs provides some specific guidance regarding rescissions of coverage that is of interest for K-12 schools and higher education institutions. Under the ACA, a plan generally cannot retroactively cancel coverage (referred to as a “rescission” of coverage) unless the participant commits fraud or makes an intentional misrepresentation of material fact prohibited by the terms of the plan. The FAQs answer a very specific question about rescissions, which may have broader application. The question raised by the FAQs is whether a school can retroactively cancel coverage for a teacher who was employed on a 10-month contract from August 1 to May 31 and gave notice of resignation on July 31. The plan attempted to terminate coverage retroactively to May 31. According to the FAQs, such a rescission violates the ACA’s restrictions.

Preventive Care Mandate

Under the ACA, non-grandfathered group health plans must cover certain preventive services without imposing any cost-sharing requirements.  In the new FAQs, the Departments issued the following guidance regarding preventive services:

  • Any required preparation for a preventive screening colonoscopy is an integral part of the procedure and must be covered without cost-sharing.
  • Plans and issuers that use reasonable medical management techniques for specific methods of contraception can develop a standard exception form and instructions for providers to use in prescribing a particular service or FDA-approved item based on medical necessity.  The Medicare Part D Coverage Determination Request Form can be used as a model in developing a standard exception form.

Additionally, the FAQs clarify that if a non-grandfathered plan pays a fixed amount (a “reference price”) for a particular procedure, the plan must either (1) ensure that participants have adequate access to quality providers that accept the reference price as payment in full or (2) count an individual’s out-of-pocket expenses for providers who do not accept the reference price toward the individual’s maximum out-of-pocket limit.

Out-of-Network Emergency Services Coverage

The ACA also prohibitsnon-grandfathered group health plans from imposing cost-sharing on out-of-network emergency services in an amount that is greater than that imposed for in-network emergency services. The statute does not specify whether “balance billing” is included in the definition of cost-sharing. “Balance billing” is the practice of providers billing a patient for the difference between the provider’s billed charges and the amount collected from the plan plus the amount collected from the patient in the form of a copay or coinsurance. To avoid circumvention of the ACA requirements, the Departments previously issued regulations requiring a plan or issuer to pay a reasonable amount before the patient becomes responsible for balance billing. Under this regulation, the plan or issuer must provide benefits at least equal to the greatest of: (1) the median amount negotiated with in-network providers for the emergency service; (2) the amount for the emergency service calculated using the same method the plan generally uses to determine payments for out-of-network services; or (3) the amount that would be paid under Medicare for the emergency service (collectively, the “Minimum Payment Standards”). The FAQs now make clear that plans that are subject to the Employee Retirement Income Security Act must disclose the documentation and data they use to calculate the Minimum Payment Standards (1) upon request by a participant (or authorized representative) or (2) if relevant to an appeal of an adverse benefit determination.

Mental Health Parity

Lastly, the Mental Health Parity and Addiction Equity Act (“MHPAEA”) and underlying regulations generally prohibit group health plans from imposing more restrictions on financial requirements and treatment limitations provided for mental health/substance abuse disorder services than the “predominant” financial requirements and treatment limitations that apply to “substantially all” medical/surgical services. “Substantially all” for this purpose is a requirement or limitations that apply to at least 2/3 of all medical/surgical benefits in a classification. If a limitation meets the substantially all requirement, then the “predominant” level that may apply to the mental health/substance abuse disorder benefits is the one that applies to more than half of the medical/surgical benefits within the classification. In the FAQs, the Departments clarify that when calculating the “substantially all” and “predominant” tests, a plan or issuer may not base its analysis on an issuer’s entire book of business for the year. Group health plan-specific data must be used where available. If not available, data from plans with similar structures and demographics can be used.

The FAQs also clarify that under MHPAEA, criteria for medical necessity determinations must be made available to any current or potential enrollee in a group health plan, not just active participants.

This is the 31st set of FAQs issued by the Departments on the ACA, which reflects the complexity of implementing the ACA’s many requirements.


IRS pinpoints ACA affordability percentage for safe harbor

Original post by Helen Karakoudas, shrm.org

The IRS has announced that the inflation-adjusted percentage used to determine what is “affordable” health coverage for individuals will also apply to the safe harbor for employers.

Under a safe harbor set forth in the Affordable Care Act’s (ACA’s) employer shared-responsibility provisions (also known as “pay or play”), health coverage has been deemed to satisfy the requirement to be affordable if the lowest-cost self-only coverage option available to employees does not exceed 9.5 percent of any one of the following:

  • The employee’s W-2 wages.
  • The employee’s rate of pay.
  • The federal poverty level.

The three-pronged affordability safe harbor is used so that employers have penalty protection for what they declare as “affordable” on Line 16 of IRS Form 1095-C. The safe harbor concept is the standardized way IRS regulations address the fact that employers would not know their employees’ household incomes.

For 2015, the IRS increased the applicable threshold percentage for purposes of “household income” from 9.5 percent to 9.56 percent to account for increases in health insurance premiums and income growth, with a further increase to 9.66 percent announced for 2016. But the IRS did so with regard to the affordability percentage that marketplace exchanges can use to test compliance with the ACA individual mandate. The IRS did not explicitly increase the percentage for use in the employer safe harbor test above the statutory 9.5 percent. That led many benefit attorneys to advise their clients to continue using a contribution percentage of 9.5 percent to measure their plan’s affordability.

While the controversy over the affordability percentage has divided employee benefits attorneys and confused business owners and HR professionals, new guidance clarifying the issue was released on Dec. 16.

According to IRS Notice 2015-87:

Treasury and IRS intend to amend the regulations under § 4980H to reflect that the applicable percentage in the affordability safe harbors should be adjusted … so that employers may rely upon the 9.56 percent for plan years beginning in 2015 and 9.66 percent for plan years beginning in 2016.

Legal Significance for ACA Safe Harbors

The phrases “intend to amend” and “should be adjusted” are key. Before this guidance, there was no official connection between Section 4980H—the ACA regulations in the Internal Revenue Code that detail the employer shared responsibility requirements—and any percentage other than 9.5 percent, which remained the only rate given in ACA regulations for affordability testing.

Though official word about the syncing of the safe-harbor percentage with the marketplace percentage came bundled with end-of-year housekeeping items, hints about a clearing of the fog came this fall:

  • In a September webinar of the ACA Information Returns (AIR), the monthly group call for software developers learning about the new IRS processing engine specific to the 1095 series of forms, attendees were told that hard coding for the 9.5 percent affordability percentage for employer returns was being undone and revised for specifications that could be changed from year to year. Further references to this reformatting were also made in the October and November calls.
  • On page 11 of the instructions for IRS Forms 1095-C and 1094-C, which also came out in September, there was this paragraph: “References to 9.5 percent in the affordability safe harbors and alternative reporting methods may be subject to change if future IRS guidance provides that the percentage is indexed in the same manner as that percentage is indexed for purposes of applying the affordability thresholds under Internal Revenue Code section 36B (the premium tax credit). In general this should not affect reporting for 2015, but taxpayers may visit IRS.gov for any related updates.”

“Admittedly, the door was open to possible updates. But one would have thought that, by Dec. 16, nothing would change the result for 2015,” said Paul Hamburger, co-chair of the employee benefits and executive compensation practice center for Proskauer Rose in Washington, D.C.

“Now, the [Dec. 16] guidance allows employers, essentially, to [use the inflation-adjusted percentage] for 2015 in measuring affordability even though the instructions and forms are based on 9.5 percent,” he added. “However, with vendors already having programmed their systems with unadjusted numbers, I’m not sure how it will all play out. For example, if an IRS form was completed on the basis of unaffordability at 9.5 percent but it would have been affordable at 9.56 percent, will the IRS review cause a penalty to potentially be imposed, only to be negotiated away once the numbers are put forward? We will see,” Hamburger said.

Premium contribution strategies for 2016 were the concern of Ken Mason of Spencer Fane in Kansas City, Mo. “The recent guidance comes too late to affect ACA-compliance efforts for 2015,” Mason said. “Given the usual open enrollment periods of October or November for calendar-year plans, it’s probably also too late for most calendar-year plans to take advantage of the 9.66 percent figure when setting premiums designed to fall within the ACA safe harbors for 2016.”

The ‘Christmas Present’ Rule

Hamburger also widened the lens for perspective on this news: “Over the years, it seems that year-end IRS guidance with brand-new rules is part of the year-end tradition,” he remarked. “I remember a pension-related notice that came out at the end of 1987 where the IRS issued a somewhat lenient optional tax-related rule and we colloquially referred to it as the ‘Christmas present’ rule. Since then, the IRS seems to always remember the employee benefits community at this time of year.”


Supreme Court's Ruling Means No ACA Compliance Reprieve

Originally posted by Stephen Miller on June 26, 2015 on shrm.org.

In what many are viewing as an anticlimax, the U.S. Supreme Court’s June 25 ruling in King v. Burwell left the status quo in place regarding the Affordable Care Act’s (ACA's) tax-credit subsidies for individual “marketplace” coverage and, indirectly, the employer mandate to provide group health care coverage. Under the ACA, employer penalties are triggered when employees receive insurance tax credits because their employer-provided plan failed to meet ACA coverage specifications.

But health care policy wonks are pointing out what should have been obvious, though it is a lesson that some plan sponsors may have forgotten: As long as the law is the law, it's the law. In other words, some might wish that the courts, Congress or a future administration will alter or rescind the statute. But unless and until that happens, employers should take all necessary steps to maintain compliance with the ACA's coverage and reporting requirements—and not delay doing so in the hopes of a last-minute penalty reprieve.

Ruling's Impact for Employers

In an online commentary posted the day of the ruling, Timothy G. Verrall and Hera S. Arsen, attorneys with law firm Ogletree Deakins, explained that:

Importantly, the Court’s decision does not alter employer responsibilities under the ACA’s “employer mandate” and its related tax reporting obligations. Since the enforcement mechanism behind the employer mandate—tax penalties under Code Section 4980H—are premised on the availability of tax-credit subsidies for exchange coverage, had the Court rejected the IRS’s approach, the “teeth” of the employer mandate would have effectively been removed in the majority of states where federal exchanges operate. However, the Court’s decision affirms the IRS’s regulatory approach, thereby preserving the employer mandate as well.

“This court’s decision confirms the advice we have given since the Affordable Care Act was adopted,” added Joel A. Daniel, the practice group leader for Ogletree Deakin’s employee benefits practice, in the same commentary. “Employers should plan their compliance strategies based on the assumption that the act and the regulations issued under it are here to stay.”

In a similar vein, Shawn Jenkins, CEO of benefits management and administration firm Benefitfocus, commented that the ruling “is another strong indication that ACA is here to stay. The result is more clarity for employers and carriers as to the stability of ACA allowing them to move confidently forward in their benefits planning.”

Driving the point home, the takeaway highlighted in an analysis of the decision by consultancy PricewaterhouseCoopers confirmed that “full on implementation of the ACA may now proceed,” adding:

Employers and insurers are facing the ACA mandates and associated reporting, and must be diligent to gather all the required information and implement the processes and procedures to comply with these requirements and provide the annual forms to individuals and the IRS next January. Planning to avoid the employer mandate penalties, as well as the 2018 tax on high cost plans, will occupy the attention of tax professionals, HR administrators and payroll departments, as well as internal audit and finance.

Many HR benefit managers will consider that an understatement.

Options for Small Businesses

Maintaining the status quo doesn't imply there will be no other ramifications from the ruling beyond affirming the need for vigilant compliance, but the effects will likely be most pronounced on firms that are not subject to the ACA’s “shared responsibility” mandate to provide health coverage.

By upholding premium tax credits to individual policyholders for health care purchased through the ACA’s public exchanges, including the federal Healthcare.gov marketplace, the King ruling makes it more likely that small employers not subject to the coverage mandate (those with fewer than 50 full-time employees or part-time equivalents) will shift away from group coverage.

“Small business owners, who are most affected by increasing premiums, now have the certainty needed to help transition themselves and employees to the individual market, which we expect to increase to more than 100 million by 2025," predicted Zane Benefits, which helps small businesses reimburse employees for individual health insurance plans. “We expect small businesses [not subject to the employer mandate] to continue to offer health benefits to employees in the form of monthly allowances (or ‘stipends’)” in lieu of providing group health coverage.

Not the End of the Story

While it should not deter employers from complying with the act, there could still be some rather significant fixes and adjustments made to the ACA. “Knowing that the ACA will be upheld, one would expect Congress to get more aggressive in working to improve it rather than rescind it,” said Jenkins.

Congress is already moving to pass and send revisions of the law to the president (which he, of course, may veto). These include, as Zane Benefits pointed out, measures to simplify the overly complex employer IRS reporting requirements, and to change the definition of a full-time employee to 40 hours per week (versus the current 30), while at the same time adjusting the definition of large employers to only include employers with 100 or more employees.

Similarly, the ERISA Industry Committee (ERIC), representing benefit plan sponsors, issued a statement contending that while the Supreme Court had removed a source of potential uncertainty with its decision, much legislative work is still needed to fix the underlying law.

“With the legal case settled, Congress should use this opportunity to repeal the burdensome and unnecessary taxes, mandates and reporting requirements imposed by the ACA,” said Annette Guarisco Fildes, president and CEO of ERIC. “Specifically, we want Congress to repeal the 40 percent health care excise tax, the employer mandate and all the related reporting requirements.”

The Society for Human Resource Management (SHRM) also took note that “While [the tax-credit subsidy] provision of the statute remains intact, other challenges in the ACA remain for employers. SHRM pledges to work with policymakers to address these challenges, including the definition of a full-time employee, the pending excise tax on high-value health care plans, and employer flexibility in offering wellness programs.”

Adding to the litany, the Business Roundtable, representing corporate CEOs, released a statement saying that “Moving forward, we believe Congress and the administration should address the problems that still accompany the Affordable Care Act, such as the medical device tax, insurance tax, pharmaceutical tax and the complexity of complying with the regulatory requirements.”

So while the Supreme Court's ruling ends a frontal assault on the act that could have undermined the foundation on which employer penalties rest, legislative skirmishes will continue. But that's no excuse for employers not complying with the ACA as it currently stands.


Final Rule Issued on Summary of Benefits and Coverage

Originally posted by Stephen Miller on June 16, 2015 on shrm.org.

The departments of Health and Human Services, Labor, and the Treasury issued a final rule regarding the health care Summary of Benefits and Coverage (SBC) and uniform glossary that must be provided to employees under the Affordable Care Act (ACA). The new rule was published in the Federal Register on June 16, 2015.

However, revisions to the SBC template and the uniform glossary included with the SBC, along with new coverage examples, are not anticipated to be finalized until January 2016, after the departments complete consumer testing and receive additional input from the public, including the National Association of Insurance Commissioners. The revisions will apply to SBCs for coverage beginning on or after Jan. 1, 2017.

The final regulation make few changes to the rule proposed in December 2014, which itself was a revision to an earlier final rule published in February 2012. However the new rule does include streamlined processes to help health insurance issuers and group health plans provide the required information to employees. For instance, it allows for avoiding unnecessary duplication when a group health plan uses a binding contractual arrangement in which another party assumes responsibility to provide the SBC. The rule also adopts the safe harbor for electronic delivery set forth in earlier FAQs.

“These clarifications will also make it easier for issuers and group health plans to provide the most accurate health coverage information to consumers,” according to a statement from the federal Centers for Medicare and Medicaid Studies, which also posted a fact sheet about the final rule.

SBC Requirements

In commentary on the final rule posted on the Health Affairs blog, Timothy Jost, a professor at the Washington and Lee University School of Law in Lexington, Va., noted that:

• A group health plan or group health insurer must offer participants and beneficiaries an SBC for each benefit package offered by the plan or insurer for which the participant or beneficiary is eligible.

• If the plan or insurer distributes application materials for plan enrollment, the SBC must be provided with the application materials.

• If the plan or insurer does not distribute application materials, the SBC must be provided no later than the first date on which a participant or beneficiary is eligible to enroll.

Under the new rule, health insurance issuers must also provide online access to a copy of the individual coverage policy for each plan or group certificate of coverage. And these documents must be made publicly available to all potential enrollees so that these individuals are clearly informed about what a plan will and will not offer.

“The SBC must include 12 elements under the statute and the 2012 rule,” Jost said. “The final rule does not address most of these elements, although the proposed template did and the final template is likely to do so.”

Also, the ACA requires that SBCs be presented in a uniform format not exceeding four pages in length, with a font size not smaller than 12 points. The federal departments interpreted the four-page requirement to mean four double-sided pages, or eight pages. “The departments indicated they will address the page length issue upon the publication of the final template,” Jost noted.


High-Deductible Health Plans Cut Costs, At Least For Now

Originally posted on March 26, 2015 on www.npr.org.

Got a high-deductible health plan? The kind that doesn't pay most medical bills until they exceed several thousand dollars? You're a foot soldier who's been drafted in the war against high health costs.

Companies that switch workers into high-deductible plans can reap enormous savings, consultants will tell you — and not just by making employees pay more. Total costs paid by everybody — employer, employee and insurance company — tend to fall in the first year or rise more slowly when consumers have more at stake at the health-care checkout counter whether or not they're making medically wise choices.

Consumers with high deductibles sometimes skip procedures, think harder about getting treatment and shop for lower prices when they do seek care.

What nobody knows is whether such plans, also sold to individuals and families through the health law's online exchanges, will backfire. If people choose not to have important preventive care and end up needing an expensive hospital stay years later as a result, everybody is worse off.

A new study delivers cautiously optimistic results for employers and policymakers, if not for consumers paying a higher share of their own health care costs.

Researchers led by Amelia Haviland at Carnegie Mellon University found that overall savings at companies introducing high-deductible plans lasted for up to three years afterwards. If there were any cost-related time bombs caused by forgone care, at least they didn't blow up by then.

"Three years out there consistently seems to be a reduction in total health care spending" at employers offering high-deductible plans, Haviland said in an interview. Although the study says nothing about what might happen after that, "this was interesting to us that it persists for this amount of time."

The savings were substantial: 5 percent on average for employers offering high-deductible plans compared with results at companies that didn't offer them. And that was for the whole company, whether or not all workers took the high-deductible option.

The size of the study was impressive; it covered 13 million employees and dependents at 54 big companies. All savings were from reduced spending on pharmaceuticals and doctor visits and other outpatient care. There was no sign of what often happens when high-risk patients miss preventive care: spikes in emergency-room visits and hospital admissions.

The suits in human resources call this kind of coverage a "consumer-directed" health plan. It sounds less scary than the old name for coverage with huge deductibles: catastrophic health insurance.

But having consumers direct their own care also requires making sure they know enough to make smart choices. That means getting vaccines and skipping dubious procedures like an expensive MRI scan at the first sign of back pain.

Not all employers are doing a terrific job. Most high-deductible plan members surveyed in a recent California study had no idea that preventive screenings, office visits and other important care required little or no out-of-pocket payment. One in five said they had avoided preventive care because of the cost.

"This evidence of persistent reductions in spending places even greater importance on developing evidence on how they are achieved," Kate Bundorf, a Stanford health economist not involved in the study, said of consumer-directed plans.

"Are consumers foregoing preventive care?" Bundorf asks. "Are they less adherent to [effective] medicine? Or are they reducing their use of low-value office visits and corresponding drugs or substituting to cheaper yet similarly effective prescribed drugs?"

Employers and consultants are trying to educate people about avoiding needless procedures and finding quality caregivers at better prices.

That might explain why the companies offering high-deductible plans saw such significant savings even though not all workers signed up, Haviland said. Even employees with traditional, lower-deductible plans may be using the shopping tools.

The study doesn't close the book on consumer-directed plans.

"What happens five years or 10 years down the line when people develop more consequences of reducing high-value, necessary care?" Haviland asked. Nobody knows.

And the study doesn't address a side effect of high-deductibles that doctors can't treat: pocketbook trauma. Consumer-directed plans, often paired with tax-favored health savings accounts, can require families to pay $5,000 or more per year in out-of-pocket costs.

Three people out of 5 with low incomes and half of those with moderate incomes told the Commonwealth Fund last year their deductibles are hard to afford.

As in all battles, the front-line infantry often makes the biggest sacrifice.


Supreme Court debates future of Affordable Care Act

Originally posted on March 5, 2015 by Ariane de Vogue on www.wqad.com.

WASHINGTON (CNN) — The future of health care in America is on the table — and in serious jeopardy — Wednesday morning in the Supreme Court.

After more than an hour of arguments, the Supreme Court seemed divided in a case concerning what Congress meant in one very specific four-word clause of the Affordable Care Act with respect to who is eligible for subsidies provided by the federal government to help people buy health insurance.

If the Court ultimately rules against the Obama administration, more than 5 million individuals will no longer be eligible for the subsidies, shaking up the insurance market and potentially dealing the law a fatal blow. A decision likely will not be announced by the Supreme Court until May or June.

All eyes were on Chief Justice John Roberts — who surprised many in 2012 when he voted to uphold the law — he said next to nothing, in a clear strategy not to tip his hand either way.

“Roberts, who’s usually a very active participant in oral arguments, said almost nothing for an hour and a half,” said CNN’s Supreme Court analyst Jeffrey Toobin, who attended the arguments. “(Roberts) was so much a focus of attention because of his vote in the first Obamacare case in 2012 that he somehow didn’t want to give people a preview of how he was thinking in this case. … He said barely a word.”

The liberal justices came out of the gate with tough questions for Michael Carvin, the lawyer challenging the Obama administration’s interpretation of the law, which is that in states that choose not to set up their own insurance exchanges, the federal government can step in, run the exchanges and distribute subsidies.

Carvin argued it was clear from the text of the law that Congress authorized subsidies for middle and low income individuals living only in exchanges “established by the states.” Just 16 states have established their own exchanges, but millions of Americans living in the 34 states are receiving subsidies through federally facilitated exchanges.

But Justice Elena Kagan, suggested the law should be interpreted in its “whole context” and not in the one snippet of the law that is the focus of the challengers.

“We look at the whole text. We don’t look at four words,” she said. Kagan also referred to the legal challenges to the law as the “never-ending saga.”

Justice Sonia Sotomayor was concerned that in the states where the individuals may not be able to receive subsidies, “We’re going to have the death spiral that this system was created to avoid.”

And Sotomayor wondered why the four words that so bother the challengers did not appear more prominently in the law. She said it was like hiding “a huge thing in a mousetrap.”

“Do you really believe that states fully understood?” she asked, Carvin, that those with federally run exchanges “were not going to get subsidies?”

Justice Ruth Bader Ginsburg suggested the four words at issue were buried and “not in the body of the legislation where you would expect to find” them.

Justice Anthony Kennedy asked questions that could be interpreted for both sides, but he was clearly concerned with the federalism aspects of the case.

“Let me say that from the standpoint of the dynamics of Federalism,” he said to Carvin. “It does seem to me that there is something very powerful to the point that if your argument is accepted, the states are being told either create your own exchange, or we’ll send your insurance market into a death spiral.”

He grilled Carvin on the “serious” consequences for those states that had set up federally-facilitated exchanges.

“It seems to me that under your argument, perhaps you will prevail in the plain words of the statute, there’s a serious constitutional problem if we adopt your argument,” Kennedy said.

The IRS — which is charged with implementing the law — interprets the subsidies as being available for all eligible individuals in the health exchanges nationwide, in both exchanges set up by the states and the federal government. In Court , Solicitor General Donald B. Verrilli, Jr. defended that position. He ridiculed the challengers argument saying it “revokes the promise of affordable care for millions of Americans — that cannot be the statute that Congress intended.”

But he was immediately challenged by Justice Antonin Scalia.

“It may not mean the statute they intended, the question is whether it’s the statute they wrote,” he said.

Although as usual, Justice Clarence Thomas said nothing, Justice Samuel Alito was also critical of Verrilli’s argument. He said if it were true that some of the states were caught off guard that the subsidies were only available to those in state run exchanges, why didn’t more of them sign amicus briefs. And he refuted the notion that the sky might fall if the challengers were to prevail by saying the Court could stay any decision until the end of the tax season.

On that point Scalia suggested Congress could act.

“You really think Congress is just going to sit there while all of these disastrous consequences ensue?” he asked.

Verrilli paused and to laughter said, “Well, this Congress? ”

Kennedy did ask Verrilli a question that could go to the heart of the case wondering if it was reasonable that the IRS would have been charged with interpreting a part of the law concerning “billions of dollars” in subsidies.

Only Ginsburg brought up the issue of standing — whether those bringing the lawsuit have the legal right to be in Court which suggested that the Court will almost certainly reach the mandates of the case.

President Barack Obama has expressed confidence in the legal underpinning of the law in recent days.

“There is, in our view, not a plausible legal basis for striking it down,” he told Reuters this week.

Wednesday’s hearing marks the third time that parts of the health care law have been challenged at the Supreme Court.

In this case — King v. Burwell — the challengers say that Congress always meant to limit the subsidies to encourage states to set up their own exchanges. But when only 16 states acted, they argue the IRS tried to move in and interpret the law differently.

Republican critics of the law, such as Texas Sen. Ted Cruz, filed briefs warning that the executive was encroaching on Congress’ “law-making function” and that the IRS interpretation “opens the door to hundreds of billions of dollars of additional government spending.”

In a recent Washington Post op-ed, Orrin Hatch, R-Utah, and two other Republicans in Congress said that if the Court rules in their favor, “Republicans have a plan to protect Americans harmed by the administration’s actions.”

Hatch said Republicans would work with the states and give them the “freedom and flexibility to create better, more competitive health insurance markets offering more options and different choices.”

In Court, Verrilli stressed that four words — “established by the state” — found in one section of the law were a term of art meant to include both state run and federally facilitated exchanges.

He argued the justices need only read the entire statute to understand Congress meant to issue subsidies to all eligible individuals enrolled in all of the exchanges.

Democratic congressmen involved in the crafting of the legislation filed briefs on behalf of the government arguing that Congress’ intent was to provide insurance to as many people as possible and that the challengers’ position is not consistent with the text and history of the statute.

Last week, Health and Human Services Secretary Sylvia Mathews Burwell warned that if the government loses it has prepared no back up plan to “undo the massive damage.”


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.