DOL ISSUES NEW FAQs REGARDING SBC REQUIREMENT FOR PLANS STARTING ON OR AFTER JANUARY 1, 2014: MANY WORDS…LITTLE CHANGE
April 24, 2013 at 2:58 pm | Posted in Affordable Care Act, Department of Labor, Essential Health Benefits, Flexible Spending Accounts, Health Care, Health Reimbursement Account | Leave a commentTags: department of labor, essential health care benefit, FSA, health insurance, HRA, Summary of Benefits and Coverage (SBC), third party administrators
On April 23rd DOL issued new FAQ guidance for the 2014 SBC requirement for SBC’s issued on or after January 1, 2014. Although the FAQs contain much discussion, there is little in the way of material change.
1. Does the Plan Provide Minimum Essential Benefits and Minimum Value?
The most significant 2014 change in the required template regulations, however, is that the SBC must disclose whether the major medical plan provides (1.) minimum essential benefits and (2.) satisfies the minimum value requirement of the Affordable Care Act? If you have a fully insured plan, your health insurer should be making the necessary attestation to the SBC. If you have a self insured plan, the plan sponsor or its TPA (if applicable) must add the attestation about either satisfying or not satisfying the “minimum essential benefits” and “minimum value” benchmarks under the Affordable Care Act. Moreover, if a health insurer or self insured sponsor cannot make the necessary 2014 modifications, they can satisfy the new SBC regulation by simply issuing a cover letter to all eligible employees with the following content:
- Does this Coverage Provide Minimum Essential Coverage?
The Affordable Care Act requires most people to have health care coverage that qualifies as “minimum essential coverage.” This plan or policy [does/does not] provide minimum essential coverage. - Does this Coverage Meet the Minimum Value Standard?
In order for certain types of health coverage (for example, individually purchased insurance or job-based coverage) to qualify as minimum essential coverage, the plan must pay, on average, at least 60 percent of allowed charges for covered services. This is called the “minimum value standard.” This health coverage [does/does not] meet the minimum value standard for the benefits it provides.
2. DOL will continue to Emphasize Assistance with Compliance in 2014 as Opposed to Enforcement
DOL stated that: “ The Departments’ basic approach to ACA implementation is: “[to work] together with employers, issuers, States, providers and other stakeholders to help them come into compliance with the new law and [to work] with families and individuals to help them understand the new law and benefit from it, as intended. Compliance assistance is a high priority for the Departments. Our approach to implementation is, and will continue to be, marked by an emphasis on assisting (rather than imposing penalties on) plans, issuers and others that are working diligently and in good faith to understand and come into compliance with the new law.”
3. Disappointment: No Further Mention on How to Make a SBC for a HRA or FSA
The FAQ was silent on how to draft a SBC for a HRA or FSA. Until further guidance is provided, plan sponsors should use a good faith effort to satisfy the core SBC principles of transparency and simplicity. In regards to the attestation that a FSA or HRA provides “essential health benefits” or “minimum value”, it is recommended that the SBC communicate that, by itself, the FSA or HRA does not satisfy the “essential health benefits” or minimum value” but that these requirements are satisfied in coordination with the major medical plan of which the FSA or HRA is a component piece.
Copies of the FAQs and 2014 Templates
- A copy of the recently released set of SBC FAQs can be found here: Part XIV
- Click on the following links to download copies of the updated SBC templates for use on or after January 1, 2014: cciio.cms.gov and http://www.dol.gov/ebsa/healthreform/index.html.
Federal Government Says “NO!” to the Idea that Stand Alone HRAs and/or Defined Benefit Contributions Can Take the Place of a Health Insurance Policy for Compliance Purposes
February 26, 2013 at 1:37 pm | Posted in Affordable Care Act, Creditable Coverage, Department of Labor, Federal Laws, Health and Human Services, Health Care, Health Insurance Exchanges, Health Insurance Marketplace, Health Reimbursement Account | Leave a commentTags: ACA, Creditable Coverage, Department of Health and Human Services, department of labor, essential health care benefit, health insurance, Health Insurance Exchange, Health Insurance Marketplace, HHS, HRA, pay or play
The Department of Labor (DOL); the Department of Health and Human Services, and the Treasury Department (collectively “the Agencies”) recently released “FAQs About Affordable Care Implementation Part XI” (FAQs). In regards to HRAs, the sum and substance of the FAQs is that employers are on notice that they cannot avoid the new federal group health plan mandates, and the “pay or play” shared responsibility penalties in particular, if they think they can simply replace group health insurance coverage with a “stand alone” HRA or a defined benefit contribution that would allow the employee to purchase health insurance through a Health Insurance Marketplace. In short, giving the employee a sum of cash or credit through an HRA to purchase health insurance on a Marketplace is not the equivalent of providing compliant group health insurance coverage sponsored by an employer.
The key issue that keeps stand alone HRAs and the defined benefit concept on the sideline for compliance purposes is the Affordable Care Act’s prohibition against annual or lifetime limits on essential health benefits (otherwise known as PHS Act Section 2711). Conversely, an HRA that is integrated with other health coverage as part of a group health plan that does not have annual or lifetime limits on essential benefits does not create non-compliance exposure, since the combined benefits of the two components (the HRA and group health insurance) satisfy compliance requirements. The key FAQS are as follows:
Q: May an HRA used to purchase coverage on the individual market be considered integrated with that individual market coverage and therefore satisfy the requirements of PHS Act section 2711?
No. The Departments intend to issue guidance providing that for purposes of PHS Act section 2711, an employer-sponsored HRA cannot be integrated with individual market coverage or with an employer plan that provides coverage through individual policies and therefore will violate PHS Act section 2711.
Q: If an employee is offered coverage that satisfies PHS Act section 2711 but does not enroll in that coverage, may an HRA provided to that employee be considered integrated with the coverage and therefore satisfy the requirements of PHS Act section 2711?
No. The Departments intend to issue guidance under PHS Act section 2711 providing that an employer-sponsored HRA may be treated as integrated with other coverage only if the employee receiving the HRA is actually enrolled in that coverage. Any HRA that credits additional amounts to an individual when the individual is not enrolled in primary coverage meeting the requirements of PHS Act section 2711 provided by the employer will fail to comply with PHS Act section 2711.
Q: How will amounts that are credited or made available under HRAs under terms that were in effect prior to January 1, 2014, be treated?
The Departments anticipate that future guidance will provide that, whether or not an HRA is integrated with other group health plan coverage, unused amounts credited before January 1, 2014, consisting of amounts credited before January 1, 2013 and amounts that are credited in 2013 under the terms of an HRA as in effect on January 1, 2013 may be used after December 31, 2013 to reimburse medical expenses in accordance with those terms without causing the HRA to fail to comply with PHS Act section 2711. If the HRA terms in effect on January 1, 2013, did not prescribe a set amount or amounts to be credited during 2013 or the timing for crediting such amounts, then the amounts credited may not exceed those credited for 2012 and may not be credited at a faster rate than the rate that applied during 2012.
A link to the FAQs can be found here: http://www.dol.gov/ebsa/pdf/faq-aca11.pdf
IRS Proposes New Excise Tax on Fully Insured and Self Insured Health Plans
June 22, 2012 at 3:04 pm | Posted in Flexible Spending Accounts, Health Care, Health Reimbursement Account, Medical, PPACA, Regulations | Leave a commentTags: "PPACA", 2010 Patient Protection Affordable Care Act, FSA, health insurance, HRA, IRS, tax
The Internal Revenue Service (IRS) has recently proposed regulations concerning the imposition of a new excise tax on fully insured and self insured health plans. The proposed regulations are not final and are subject to change based on pubic comments and a public hearing scheduled in August 2012.
What is the proposed excise tax for?
The excise tax is a product of the Patient Protection Affordable Care Act (PPACA) that is currently being reviewed by the U.S. Supreme Court. The purpose of the tax is to fund an operational account trust fund for a new federally created non-profit corporation called the “Patient Centered Outcomes Research Institute.” The Institute will assist public policy makers in making informed health decisions by advancing the quality and relevance of evidence based medicine.
Who pays the proposed excise tax?
If you have a fully insured health plan, your health insurer will pay the excise tax. If you have a self insured health plan, the plan sponsor will pay the excise tax. The proposed regulation considers both a FSA and a HRA to be “self insured plans” and the plan sponsor of either will be responsible for paying an excise tax if either the FSA or the HRA is integrated with a fully insured health plan. If the FSA or HRA is integrated with a self insured health plan offered by the same plan sponsor, however, the proposed regulation excuses an excise tax on either the FSA or HRA component.
How much is the proposed excise tax?
The proposed regulation generally provides that a per covered life fee will be imposed. The fee is only one step in a two-step process to determine an excise tax. Specifically, the fee will be $1 per covered life for plan years ending on or after October 1, 2012 and before October 1, 2013. The fee then doubles to $2 per covered life for plan years ending after October 1, 2013 and before October 1, 2014. Thereafter, the fee is increased annually based on “increases in the projected per capita amount of National Health Expenditures.
The second step in determining the excise tax is to select a covered lives counting option from a menu of different counting options depending upon whether the health plan is fully insured or self insured. As stated earlier, if you have a fully insured health plan, your health insurer will be responsible for paying the excise tax which will take into account the applicable fee ($1 or $2) and determining the number of covered lives. If you are the plan sponsor of a self insured health plan, FSA, or HRA you will have responsibility for determining the excise tax.
How do you determine the number of covered lives to count under a FSA or HRA?
The plan sponsor may treat each participants FSA or HRA as covering only a single life (no need to count dependents!) that do not participate in another self insured plan. The plan sponsor may use “any reasonable method to determine the average number of lives covered under the plan for the plan year.” The proposed regulation’s reference to “any reasonable method” is not limited to only the menu of other self insured plan counting methods explained below. Remember, the excise tax on a FSA or HRA is only applicable if the FSA or HRA is integrated with a fully insured health plan. The excise tax will not apply if the FSA or HRA is integrated with another self insured health plan.
How do you determine the number of covered lives to count under a self insured health plan (Other than a FSA or HRA)?
The proposed regulation has 3 options for self insured plan sponsors to pick from in regards to how you calculate the applicable number of lives to multiply by the earlier required $1.00 fee. The options are: (1.) the actual count method; (2.) the snapshot method; and (3.) the 5500 method. The option/method chosen must be used for the entire year. Some of the examples in the proposed regulation are helpful in understanding the three options available.
1. The Actual Count Method
Add the total number of lives for each day of the policy year and divide that total by the number of days in the policy year.
Example – Employer A is the plan sponsor of the Employer A Self-Insured Health Plan, which has a calendar year plan year. Employer A calculates the sum of covered lives under the plan for each day of the plan year ending December 31, 2013 as 3,285,000. The average number of covered lives under the plan for the plan year ending December 31, 2013 is 3,285,000 divided by 365, or 9,000. To calculate the fee for the plan for the plan year ending December 31, 2013, Employer A must determine the applicable dollar amount and multiply that amount by the average number of lives covered under the plan.
2. The Snapshot Method
There are a few variations in the proposed regulation of the general “Snapshot Method” that will follow. Determine the average number of lives covered under a policy for a policy year by adding the totals of lives covered on one date in each quarter of the policy year and dividing that total by the number of dates for each quarter. The dates for each quarter must be the same. For example, the first day of a quarter, the last day of a quarter.
Example – Employer B is the plan sponsor of the Employer B Self-Insured Health Plan, which has a calendar year plan year. Employer B has designated the first day of each quarter of the plan year as the date that Employer B counts the covered lives under the Employer B Self-Insured Health Plan. On January 1, 2013, Employer B Self- Insured Health Plan covers 2,000 lives, on April 1, 2013, 2,100 lives, on July 1, 2013, 2,050 lives, and on October 1, 2013, 2,050 lives. Under the snapshot count method, Employer B must determine the average number of covered lives under the Employer B Self-Insured Health Plan for the plan year ending December 31, 2013 as 8,200 (2,000 + 2,100 + 2,050 + 2,050) divided by 4, or 2,050. To calculate the fee for the plan year ending December 31, 2013, Employer B must determine the applicable dollar amount ($1 or $2) and multiply that amount by the average number of lives covered under the plan.
3. The 5500 Method
Use the number of reportable participants for the Form 5500 Annual Return/Report of the Employee Benefit Plan that is filed for the applicable self insured health plan for that plan year. The average number of lives covered under a plan year for a plan offering only “self only” coverage equals the sum of total participants covered at the beginning and the end of the plan year as reported on the form 5500 divided by two.
Example – Employer C is the plan sponsor of the Employer C Self-Insured Health Plan, which has a fiscal year plan year ending on July 31, 2013 and offers only “self only” coverage. Employer C files a Form 5500 for the Employer C Self-Insured Health Plan for the plan year ending July 31, 2013 reflecting 4,000 plan participants on the first day of the plan year and 4,200 plan participants on the last day of the plan year. For purposes of calculating the fee using the Form 5500 method, Employer C must treat the number of covered lives for the plan year ending July 31, 2013 as equal to the sum of 4,000 and 4,200 or 8,200, divided by 2, or 4,100. To calculate the fee for the plan year ending July 31, 2013, Employer C must determine the applicable dollar amount ($1 or $2) and multiply that amount by the average number of lives covered under the plan.
How will the excise tax be paid?
Although the proposed excise tax has not reached the point of a “final regulation”, plan sponsors of either self insured health plans, a FSA or a HRA should appreciate that they could be responsible for paying the excise tax. The proposed regulation identifies IRS Form 720, Quarterly Federal Excise Tax Return, as the proper vehicle to identify and pay the excise tax and that “the first potential due date for filing Form 720 is July 31, 2013.”
A copy of the proposed regulation can be found here: REG-136008-11.
IRS Issues Additional Guidance on what Health Insurance Benefits to Value for W-2 Reporting Requirements
June 4, 2012 at 4:39 pm | Posted in Dental, Flexible Spending Accounts, Health Care, Health Reimbursement Account, Health Saving Account, Medical | Leave a commentTags: FSA, health insurance, HRA, HSA, W-2
In an earlier Protector Group Alert, we advised you of the new W-2 health insurance benefit reporting requirements for large employers (more than 250 employees) which will have to be captured on 2012 W-2s. The reporting requirement will be extended to small employers (less than 250 employees) for 2013.
The IRS recently issued additional guidance on the new requirement, including the chart below which will assist employers in determining what and what not to value for W-2 health insurance reporting requirements.
|
Form W-2 Reporting of Employer-Sponsored Health Coverage |
|||
|
Coverage Type |
Form W-2, Box 12, Code DD |
||
|
Report |
Do Not Report |
Optional |
|
| Major medical |
X |
|
|
| Dental or vision plan not integrated into another medical or health plan |
|
|
X |
| Dental or vision plan which gives the choice of declining or electing and paying an additional premium |
|
|
X |
| Health Flexible Spending Arrangement (FSA) funded solely by salary-reduction amounts |
|
X |
|
| Health FSA value for the plan year in excess of employee’s cafeteria plan salary reductions for all qualified benefits |
X |
|
|
| Health Reimbursement Arrangement (HRA) contributions |
|
|
X |
| Health Savings Arrangement (HSA) contributions (employer or employee) |
|
X |
|
| Archer Medical Savings Account (Archer MSA) contributions (employer or employee) |
|
X |
|
| Hospital indemnity or specified illness (insured or self-funded), paid on after-tax basis |
|
X |
|
| Hospital indemnity or specified illness (insured or self-funded), paid through salary reduction (pre-tax) or by employer |
X |
|
|
| Employee Assistance Plan (EAP) providing applicable employer-sponsored healthcare coverage |
Required if employer charges a COBRA premium |
|
Optional if employer does not charge a COBRA premium |
| On-site medical clinics providing applicable employer-sponsored healthcare coverage |
Required if employer charges a COBRA premium |
|
Optional if employer does not charge a COBRA premium |
| Wellness programs providing applicable employer-sponsored healthcare coverage |
Required if employer charges a COBRA premium |
|
Optional if employer does not charge a COBRA premium |
| Multi-employer plans |
|
|
X |
| Domestic partner coverage included in gross income |
X |
|
|
| Governmental plans providing coverage primarily for members of the military and their families |
|
X |
|
| Federally recognized Indian tribal government plans and plans of tribally charted corporations wholly owned by a federally recognized Indian tribal government |
|
X |
|
| Self-funded plans not subject to Federal COBRA |
|
|
X |
| Accident or disability income |
|
X |
|
| Long-term care |
|
X |
|
| Liability insurance |
|
X |
|
| Supplemental liability insurance |
|
X |
|
| Workers’ compensation |
|
X |
|
| Automobile medical payment insurance |
|
X |
|
| Credit-only insurance |
|
X |
|
| Excess reimbursement to highly compensated individual, included in gross income |
|
X |
|
| Payment/reimbursement of health insurance premiums for 2% shareholder-employee, included in gross income |
|
X |
|
|
Other Situations |
Report |
Do Not Report |
Optional |
| Employers required to file fewer than 250 Forms W-2 for the preceding calendar year (determined without application of any entity aggregation rules for related employers) |
|
|
X |
| Forms W-2 furnished to employees who terminate before the end of a calendar year and request, in writing, a Form W-2 before the end of that year |
|
|
X |
| Forms W-2 provided by third-party sick-pay provider to employees of other employers |
|
|
X |
A copy of the entire IRS guidance can be found at:
CMS Excuses MMSEA Reporting Requirements for HRAs with Annual Benefits Less Than $5,000
October 4, 2011 at 12:12 pm | Posted in CMS, Health Reimbursement Account | Leave a commentTags: CMS, HRA, Medicare Secondary Payer
On September 27th, the Centers for Medicare and Medicaid Services (CMS) issued an alert announcing that effective October 3, 2011 HRAs subject to the Medicare Secondary Payer (MSP) provisions and reporting requirements will only have to report if the annual benefit level is $5,000 or more. HRAs with an annual benefit amount of less than $5,000 are exempt from reporting. Funding deposit amounts rolled over from the previous year’s coverage must be included when calculating the current year’s annual benefit amount.
The new $5,000 annual benefit reporting threshold applies to all new or renewing HRA coverage which becomes effective on or after October 3, 2011. Employers reporting existing coverage will continue to do so at the present threshold until the employer’s HRA benefit period is renewed.
To read the complete CMS alert click on this link https://www.cms.gov/MandatoryInsRep/Downloads/HRACoverage.pdf.
Reminder: Amendment Regarding OTC Drug Reimbursement Restriction Needed for Cafeteria Plans Before July 1st
June 16, 2011 at 1:54 pm | Posted in Archer Medical Savings Account, Cafeteria Plans, Flexible Spending Accounts, Health Reimbursement Account | Leave a commentTags: Cafeteria Plan, FSA, HRA, HSA, IRS, MSA, OTC Drug Reimbursement
a. IRS Notice 2010-59
In September 2010 the IRS announced changes in the scope of allowable tax qualified prescription drug purchases. The announcement was driven by the March 2010 federal health care legislation that changed the rules for the reimbursement of over the counter (“OTC”) drugs. Prior to the enactment of the legislation, employee reimbursements or expenses for OTC purchases allowed under a Flexible Spending Account (“FSA”), a Health Reimbursement Account (“HRA”) or an Archer Medical Savings Account (“MSA”) were not counted as part of an employee’s gross income. The legislation provides, however, that beginning after December 31, 2010, expenses incurred under the above health care accounts for medicine or a drug shall be treated as a reimbursement for medical expenses only if it is a prescribed drug or the drug is insulin. An OTC drug purchase can still be a reimbursable event but only if there is a prescription that directs its purchase or it is a purchase of insulin. Conversely, OTC drugs purchased, without a prescription through December 31, 2010 may still be reimbursed tax free at any time pursuant to the terms of the employer’s plan.
The purchase of medical supplies and diagnostic devices (crutches, eye glasses, blood sugar test kits) are still recognized as a tax qualified expense and are not impacted by the IRS announcement.
The IRS also announced that it would allow retroactive amendments of cafeteria plans to allow for the new restriction if done no later than June 30th.
A complete copy of the notice can be accessed by clicking the following link: www.irs.gov/pub/irs-drop/n-10-59.pdf
b. The Price of Non Compliance
The IRS Notice is unequivocal that payments made from an HSA or Archer MSA for any medicine or drug that does not satisfy the prescription requirement above, will be treated as a nonqualified medical expense which will be included in an individual’s gross income and generally subject to a 20% additional tax.
c. How Do I Retroactively Amend My Cafeteria Plan?
If you have not amended your plan yet, you should do so now. You can amend, in writing, your cafeteria plan at any time during the year. Typically amendments are prospective from the date of the amendment but the IRS has allowed for a retroactive effect in this situation. Review your plan to determine who, i.e. the Board of Directors, the Plan Sponsor or a Plan Administrator, has the authority to approve the amendment. If your FSA or HRA is part of an ERISA plan, caution suggests issuing a summary of material modification to plan participants no later than 60 days after adoption of the amendment since the new plan restriction is reducing the scope of tax free drug purchases allowable under the plan.
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