There’s never a dull moment when it comes to the Affordable Care Act (ACA). Some people love the law, some people hate it, and others find themselves somewhere in between. However, there’s one thing that’s for certain. The rules are constantly being challenged or changed. Here are three key developments that occurred last week:

Constitutionality of the ACA

Last year, a federal judge in Texas ruled that the ACA was now unconstitutional because there is no more Individual Mandate penalty. The judge found that all portions of the ACA are now void. That ruling has been appealed and is currently under review by the U.S. Court of Appeals for the 5th Circuit in New Orleans.

In response to the Texas ruling, The Trump administration had initially taken the position that only some parts of the ACA had to be repealed (those most closely linked to the Individual Mandate) while other parts of the law could stand. In a new filing by the Justice Department last week, the administration now says the Texas judge’s decision should be affirmed and all parts of the ACA should be invalidated. If the ACA were to be ruled unconstitutional, there is no replacement plan currently in place.

Association Health Plans

Last year, the Department of Labor (DOL) finalized new rules which relaxed regulations pertaining to association health plans (AHPs). The rules made it easier for self-employed persons and small businesses to join forces when purchasing health insurance plans. Under the new rules, AHPs are regulated similarly to large group health plans which are exempt from some ACA market reforms, including the requirement to cover all ten essential health benefits. Because AHPs don’t have to follow all the ACA market reforms, premiums are generally lower.

The legality of the new AHP rules were challenged by proponents of the ACA, and last week a federal judge ruled in their favor. The judge indicated that the new AHP rules are “clearly an end-run around the ACA.” A spokeswoman for the Justice Department indicated the Trump administration disagreed with the court’s decision. The administration can seek a stay and appeal the decision. This would allow the AHP rules to remain in force while an appeal is heard. The DOL could also revisit the rule and issue a different version of the previously finalized rules. It’s unclear at this point how the Trump administration will proceed.

Grandmothered Plans

Health plans in the individual and small group markets that were issued after March 23, 2010 and prior to January 1, 2014 are commonly referred to as grandmothered plans. Grandmothered plans were supposed to be terminated in 2014 because they failed to satisfy all of the ACA’ s market reforms, but the federal government has temporarily allowed these plans to continue. In an announcement last week, the Department of Health and Human Services (HHS) has indicated grandmothered plans can continue to be renewed for plan years beginning on or before October 1, 2020, provided the plans end by December 31, 2020. Absent this announcement, these plans were set to expire at the end of 2019. It should be noted that this extension is is an option for states and carriers, not a requirement.
 

Simple Cafeteria Plans were created by the Affordable Care Act (ACA) and have been an option for eligible employers since 2011. This type of plan provides eligible employers with an automatic pass for many of the non-discrimination tests that that apply to Cafeteria Plans and its component benefits. This is the primary difference between a Simple Cafeteria Plan and other more traditional Cafeteria Plans.

Simple Cafeteria Plans are only available to employers that had an average of 100 or fewer employees during at least one of the two preceding plan years. Employers must make the Simple Cafeteria Plan available to any employee with at least 1,000 hours of service in the preceding plan year. Employers can exclude employees under the age of 21, union employees and employees with less than one year of service. The other general rules for Cafeteria Plan eligibility also apply, which means most types of business owners are ineligible to participate.

Employers must also make minimum contributions to employees participating in the Simple Cafeteria Plan who are not key employees or highly compensated employees. The minimum contributions must be at least:

• A uniform percentage (but not less than 2%) of the employee’s compensation for the plan year, or
• An amount that equals or exceeds the lesser of:
  • 6% of the employee’s compensation for the plan year, or
  • Twice the employee’s salary reductions

Employers can make contributions that exceed the required minimums; however, if they satisfy the minimum contribution requirement by making matching contributions, they cannot make matching contributions on behalf of key employees or highly compensated employees at a rate that is greater than the matching contribution rate for any other employee.

Simple Cafeteria Plans automatically satisfy the eligibility test, contributions and benefits test and the key employee concentration test that apply to Cafeteria Plans. Additionally, the following non-discrimination tests for other component benefits under the Cafeteria Plan are treated as having been satisfied: (i) the eligibility and benefits test for Health FSAs; (ii) the eligibility test, the contribution and benefits test, the more-than-5% owners concentration test, and the 55% average benefits test for Dependent Care FSAs; and (iii) the eligibility and benefits test for group term life insurance.

Simple Cafeteria Plans may be a little more complex than its name suggests, but eligible employers that choose to take advantage of this new type of Cafeteria Plan will avoid the burden of having to perform ongoing non-discrimination testing. Simple Cafeteria Plans also do not require any unique or special type of plan documents. Standard plan documents will suffice for a Simple Cafeteria Plan, but employers may want to document on their own that they are eligible for this type of Cafeteria Plan in the event of an audit.

There are some big changes coming to Medicare Supplement plans in 2020. Plans C, F and High Deductible F will no longer be available for new Medicare enrollees.

In other words, if you become eligible for Medicare on or after January 1, 2020, you won’t be able to enroll in Plans C, F or High Deductible Plan F. However, if you are already enrolled in one of these plans, you’ll be grandfathered into that coverage and can keep that plan in place indefinitely.

Plan F has been considered the “Cadillac” of the Medicare Supplement plan options. It has historically been the most purchased plan because it provides for the greatest amount of coverage. Plan F covers all of Medicare’s deductibles, copays and out-of-pocket expenses.

High Deductible Plan F has become a popular alternative to traditional Plan F over recent years. It typically has the lowest premium amongst the Medicare Supplement plan options. High Deductible Plan F requires Medicare beneficiaries to pay a $2,300 calendar year deductible before providing coverage for the outof-pocket expenses for which Medicare doesn’t cover. High Deductible Plan F typically costs about onethird of the premium of traditional Plan F.

Plan C is identical to Plan F with one exception. Plan C does not provide coverage for Medicare Part B excess charges. Some doctors charge up to 15% more than the Medicare allowable amount (i.e. an excess charge). Plan F covers excess charges whereas Plan C does not. Plan C is typically only a few dollars less expensive than Plan F, so most people go with Plan F when choosing amongst those two options.

Why are these plans going away?

In 2015, Congress passed a law known as the Medicare Access and CHIP Reauthorization Act. Amongst other things, the law called for the elimination of certain Medicare Supplement plans starting in 2020. Some members of Congress believe certain Medicare Supplement plan designs cause an overutilization of healthcare services, and so they passed a law to discontinue the sale of those plans.

What’s next for Medicare Supplement plans?

Plans G and N are likely to thrive in 2020 and beyond.

Plan G is very similar to Plan F, but it doesn’t cover the Part B deductible. The Part B deductible is only $185, and often the premium savings of Plan G versus Plan F exceeds this amount. Plan G is actually a better financial option for most people when comparing it to Plan F. There are also rumors that a High Deductible Plan G may become a new option in the future, but there’s no guarantee.

Plan N includes some cost sharing for members, but these are relatively nominal. There are $20 copays for office visits and $50 copays for emergency room visits. Most other out-of-pocket expenses are covered under Plan N.

And let’s not forget about Medicare Advantage plans. These will continue to be an alternative option to Medicare Supplement plans. Some of these plans even have a $0 premium and include Part D coverage.

SHOP MEDICARE SUPPLEMENT PLANS

When talking about Health Flexible Spending Accounts (FSAs), you may hear the terms carryover, grace period and run-out period, but what do they mean and how do they differ? Here are some simple explanations of each term.

Carryover: 

FSAs have historically been known for their “use-it-or-lose-it” feature. In the past, employees had to forfeit any unused funds at the end of the plan year. In October of 2013, the Department of Treasury issued new regulations which optionally allow employers to include a carryover provision to their FSA. This provision allows employees to carryover up to $500 of unused FSA funds from the previous plan year into the following plan year. The carryover provision is also sometimes referred to as the rollover provision.

Grace Period:

Before the carryover provision became available, a grace period provision was made available by the Department of Treasury. This provision was optionally made available in 2007 and was also issued in response to the use-it-or-lose-it feature. The grace period provision essentially extends the plan year for an additional 2 ½ months, allowing eligible expenses to be incurred over a 14 ½ month time period rather than a 12-month time period. For example, an FSA plan year that started on January 1, 2019 and included the grace period provision would allow employees to be reimbursed for medical expenses incurred through March 15, 2020.

It’s important to point out that an employer can include the carryover provision or the grace period with their FSA, but not both. An employer can also choose not to incorporate either provision.

Run-out Period:

Most FSAs include a period of time after the end of the plan year which allows employees to request a reimbursement for medical expenses that were incurred during the plan year. The run-out period simply gives employees additional time to gather and submit documents and receipts for medical expenses incurred during the plan year. This is especially helpful for employees who incur medical expenses towards the end of the plan year. The run-out period is usually 30, 60 or 90 days. An employer can have a run-out period in addition to carryover or a run-out period in addition to a grace period. Run out periods are not required, but almost every FSA plan includes one.

Annual Medicare Part D reporting is required for all employers who provide health benefits with prescription drug coverage. The reporting is an online filing to the Centers for Medicare & Medicaid Services (CMS), and it lets CMS know if the prescription drug coverage available on the employer’s health plan is “creditable.”

The Medicare Part D reporting helps CMS determine if a person enrolling in a stand-alone Part D plan is subject to a late enrollment penalty. Late enrollment penalties are waived for individuals who delay enrollment in a Part D plan upon first becoming eligible unless they have prescription drug coverage elsewhere that is at least as good as the standard Part D plan (i.e. it is creditable coverage).

It is up to the employer to determine and report the creditable coverage status of their prescription benefits. Most employer plans will be considered creditable, but CMS has put together a simplified determination document to assist employers in that process.

The filing must be done on an annual basis, and it must be submitted within 60 days of the start of the plan year. Those employers with a calendar year plan should be preparing to submit their Medicare Part D reporting by March 1, 2019. The reporting is required for the employer regardless of whether the health plan is fully-insured or self-insured and regardless of whether the employer’s health plan is primary or secondary to Medicare.

• The filing process only takes a few minutes, and no user ID or password is required to complete the reporting. Employers should be prepared to provide the following information for the filing:
• Employer name
• Employer Federal ID number (i.e. Tax ID number)
• Contact information
• Type of plan (usually this will be “Group health plan: Employer sponsored plan”)
• Plan year start and end date
• Approximate number of individuals covered under the plan have Medicare
• Approximate number of individuals covered under the plan have Medicare and who are retirees
• Date Part D creditable coverage notice was provided to employees (must be provided by October 14th of each year)
• Whether creditable coverage status has changed from the previous year

The disclosure form to submit the reporting can be found by clicking here.

Michelle Morse was diagnosed with colon cancer on December 12, 2003. She was a college student at Plymouth State University in New Hampshire when she found out about the diagnosis. Michelle had health insurance coverage through her mother’s employer-sponsored plan, a plan that required her to be a full-time student to qualify for coverage. If Michelle took time off from school to treat her cancer, she would lose her dependent eligibility status and would have to elect COBRA coverage at a significantly higher premium. As a result, Michelle continued to be enrolled as a full-time student while receiving chemotherapy and other treatments.

Sadly, Michelle lost her battle with cancer on November 10, 2005, but her family to continued to fight for her. Michelle’s family believed that no student should have to pay expensive premiums for COBRA or risk losing eligibility for coverage while dealing with a life-threatening illness. In 2006, the state of New Hampshire passed a law to help students in similar situations as Michelle. In 2008, Congress passed a similar federal law, a law which is known as Michelle’s Law.

In general, Michelle’s Law requires employer-sponsored plans (whether fully-insured or self-insured) to allow college students to take a medically necessary leave of absence from school for up 12 months. During the leave of absence, the employer sponsored plan must continue to treat the dependent as if they were a full-time student, and regular premiums (including employer contributions) must continue to apply.

Additionally, Michelle’s Law requires employer-sponsored plans to provide a written notice to employees if student status verification is needed for eligibility of coverage. The notice must include details about the 12-month leave of absence.

Some things have significantly changed since Michelle’s Law was passed. In particular, the Affordable Care Act (ACA) was signed into law. The ACA, among other things, now requires health plans to extend coverage to dependent children up to age 26, regardless of student status.

This means employers cannot base dependent eligibility for coverage on student status, unless the employer-sponsored plan allows coverage for dependents beyond age 26 and bases eligibility for such dependent coverage on student status.

The written notice requirements of Michelle’s Law no longer apply to employer-sponsored plans that only allow for dependent coverage up to age 26, however, those employer-sponsored plans that extend coverage to dependents beyond age 26 will need to continue to comply with Michelle’s Law notice requirements if eligibility for coverage requires the dependent to be a full-time student.

For more information on Michelle’s Law, click here.

You may have heard the phrase “Medicare-for-All,” but what does it really mean? The best answer is that it means something different to different people. Medicare-for-All is generally a concept embraced by some Democratic politicians that would change our healthcare system. To some, Medicare-for-All would be a universal program whereby every American had insurance coverage through Medicare. To some, Medicare-for-All would create a public health plan option and allow people to buy into that program. To some, Medicare-for-All would be an expansion of Medicare allowing people to receive coverage at an earlier age, such as age 55. And to others, it could mean something completely different. Below is a high-level summary of some Medicare-for-All proposals that have been proposed in the past:

The Employer Mandate guidelines state that coverage is affordable when an employee has to pay no more than 9.5% of their household income (inflation-adjusted to 9.78% for the 2020 plan year) for self-only coverage which is offered, but which employers know the household income of an employee? As a result, there are three alternative methods that an employer can rely upon when determining if the coverage they offer is affordable. These methods are explained below and some general examples on how to apply each method have also been provided. Assume in each example that the employer has a calendar plan year for 2020.

W-2 Safe Harbor Method 

Coverage is deemed affordable if the employee is charged no more than 9. 78% of current year wages according to Box 1 of their W-2. Please note that this method is relatively simple to apply, but it uses current year wages which won’t be known until the year is over. That means an employer may not know if coverage is affordable until the year is over.

Example 1:

Joe is employed at XYZ Inc. for the entire year and is offered coverage for all 12 months. His wages according to Box 1 of his W-2 are $28,000. XYZ Inc. will be considered to offer affordable coverage provided Joe is not charged more than $228.20 per month for coverage. The formula is ($28,000 x .0978)/12 = $228.20.

Example 2:

Joe is hired by XYZ Inc. on May 15, 2020 and is offered coverage on August 1, 2020. His W-2 wages according to Box 1 of his W-2 are $20,000. In this scenario, an adjustment can be made to the W-2 wages used in the affordability calculation since Joe was not employed for the entire year and he was subject to a waiting period before coverage was offered.

Formula = W-2 wages * (calendar months offered coverage / months of employment) = $20,000 * (5/8) = $12,500

The W-2 wages used in the affordability calculation are adjusted to \$12,500 for the 5 months Joe is offered coverage. XYZ Inc. will be considered to offer affordable coverage provided Joe is not charged more than $244.50 per month for coverage. The formula is ($12,500 x .0978)/5 = $244.50.

Rate of Pay Safe Harbor Method 

Coverage is deemed affordable if the employee is charged no more than 9.78% of their monthly rate of pay at the start of the coverage period. Always use 130 hours when determining the monthly rate of pay for hourly employees. For non hourly employees, affordability is tied to the monthly salary at the start of the coverage period. The rate of pay method should not be used for employees who receive wages by virtue of tips or employees who are paid solely by commissions. 

Example:

Kathy works for XYZ Inc. and makes $15 per hour as of the start of the plan year.  XYZ Inc. will be considered to offer affordable coverage provided Kathy is not charged more than $190.71 per month for coverage. The formula is ($15 x 130) x .0978 = $190.71. 

Federal Poverty Level (FPL) Safe Harbor Method 

Coverage is deemed affordable if the employee is charged no more than 9.78% of the most recently published mainland FPL for a household of one. Please be advised that a new FPL table is expected to be published in late January. 

Example:

The most recently published mainland FPL for a household of one is $12,490. XYZ Inc. will be considered to offer affordable coverage to employees who are not charged more than $101.79 per month for coverage. The formula is ($12,490 x .0978)/12 = $101.79. 

The materials contained within this communication are provided for informational purposes only and do not constitute legal or tax advice. 

Updated Form 8889, Revised Publication 502 & 2020 Payment Parameters Released

Agency officials were busy last week releasing updated forms and publications while also proposing new rules that would generally impact health plans in 2020. Here are three important releases which are now available:

Form 8889

The Internal Revenue Service (IRS) released Form 8889 and supporting instructions for 2018 tax reporting purposes. Form 8889 requires taxpayers with Health Savings Accounts (HSAs) to report certain information, including information about contributions and distributions. While Form 8889 has been updated, it is very similar to last year’s version. Form 8889 must be attached with Form 1040, which is the primary tax form completed by individuals filing their personal tax return. The IRS will begin accepting tax returns on January 29th. The deadline to submit taxes is April 17th unless an extension is requested.

Publication 502

The IRS also released Publication 502 for 2018 tax reporting purposes. Publication 502 outlines the medical and dental expenses that individuals may deduct on their tax return. Individuals can generally deduct medical and dental expenses that exceed 7.5% of their adjusted gross income. The deductions are claimed on Schedule A of Form 1040.

Publication 502 is also used as a great starting point when determining if an expense may be reimbursable under a Flexible Spending Account (FSA), Health Reimbursement Arrangement (HRA), or Health Savings Account (HSA). While Publication 502 provides guidance as to what constitutes a medical expense under IRS Code § 213(d), it should not be solely relied upon when determining if an expense is reimbursable under an FSA, HRA, or HSA. These accounts have their own rules and may not allow for the reimbursement of some of the medical and dental expenses that are included in Publication 502.

Notice of Benefit and Payment Parameters for 2020

Each year, the Department of Health and Human Services (HHS) proposes rules that would change or modify certain provisions of the Affordable Care Act (ACA). HHS has released a fact sheet which summarizes the proposed changes for 2020. Two of the changes would impact out-of-pocket maximum limits:

1. The maximum out-of-pocket limits are proposed to increase to $8,200 (up $300 from 2019) for single coverage and $16,400 (up $600 from 2019) for family coverage.
2. Health insurance issuers and self-insured group health plans could except certain cost-sharing from the maximum out-of-pocket limit if a consumer selects a brand name prescription drug when a medically appropriate generic prescription drug is available. For example, if a plan had a $10 for generic drugs and a $50 copay for brand drugs, the plan could only apply $10 to the outof-pocket maximum limit if a person chose the brand name prescription drug.

The Notice of Benefit and Payment Parameters are currently open for public comment.

The Employee Retirement Income Security Act of 1974 (ERISA) requires employers to provide a Summary Plan Description (SPD) to employees if they offer health, dental, vision, life, disability or other benefits. To learn more about why group health plans are almost always subject to ERISA, click here. The plan documents that are provided by the insurance carrier fail to include all the required language and disclosures of the ERISA law. That means employers must supplement the carrier materials with additional document or risk costly penalties. Many employers choose to use a single document which “wraps around” all the benefits they offer so that they don’t have to prepare multiple documents, hence the name Wrap Document.

Here is a list of the 25 most common things not included in documents provided by insurance carriers but that are required to be included by the ERISA law:

1. Name of the plan or the plan’s common name.
2. Name and address of the plan sponsor.
3. Name, address and phone number of the plan administrator.
4. Plan year (which may be different than the policy year).
5. Plan number (as defined in the Form 5500 reporting rules).
6. Employer identification number (EIN), also known as the Tax ID number or (TIN).
7. Type of welfare plan (e.g. health, life, disability).
8. How the plan is administered (e.g. self-administered, insured, TPA).
9. Eligibility requirements for participation.
10. Name and contact information of the Agent for Service of Legal Process.
11. COBRA statement of rights.
12. Circumstances that could result in the disqualification, ineligibility, denial, loss, forfeiture, suspension, offset, reduction, or recovery of any benefit.
13. FMLA procedures.
14. Source of premium contributions (e.g. employer and employee contributions).
15. Schedule of premium contributions.
16. Funding medium (e.g. employer general assets or trust).
17. Procedures for qualified medical child support orders (QMSCO).
18. Statement indicating all plan documents will be available free of charge after an adverse benefit determination.
19. Statement of ERISA rights.
20. If the plan is collectively bargained, details on where a copy of the agreement can be found.
21. HIPAA special enrollment rights and privacy procedures.
22. Newborns’ and Mothers’ Health Protection Act disclosure.
23. Women’s Health and Cancer Rights Act disclosure.
24. CHIPRA special enrollment rights disclosure.
25. Terms under which the employer may amend or terminate the plan.