Legal Alerts Archives - Page 20 of 26 - Benefit Advisors Network

Legal Alert: Final Rule Released on Individual Coverage and Excepted Benefit HRAs

Posted on June 14, 2019July 15, 2019 by Stacy Barrow

On June 13, 2019 the Department of Labor, the Department of Health and Human Services, and the Treasury Department (the “Departments”) released the final rule concerning health reimbursement arrangements (HRA) for individual market coverage and excepted health benefits. The rule, based on an executive order from President Trump in 2017, is intended to increase choice in plan options, which could lead to greater flexibility in choice and provide more affordable healthcare. The final rule impacts many different entities and individuals, including employers, health plan issuers, employees, plan sponsors, and those who purchase individual health plans. This rule is effective for plan years starting January 1, 2020.

Background

An HRA is an account-based health plan that allows employers to reimburse employees for medical care expenses. It is funded solely by employer contributions. Amounts reimbursable under an HRA are typically limited to a certain amount during a certain period (for example, $500 for expenses incurred during a calendar year). Under prior IRS rules issued as part of Affordable Care Act (ACA) implementation, HRAs offerings were limited to an extent. Under those rules, an employer may offer an HRA to employees only if the HRA is “integrated” with a qualifying group health plan. Under the new final rule, some of the restrictions have been eliminated, and the Departments have determined that other types HRAs can be integrated with individual market coverage and Medicare in a way that meets statutory requirements.

Notably, under the final rule, an employer of any size could offer an Individual Coverage HRA that can be used to pay for Medicare (e.g., Parts B and D) and Medicare Supplement premiums, as well as other medical care expenses, without violating the Medicare Secondary Payer rules. However, if the employer offers the Individual Coverage HRA to full-time employees it cannot offer group health plan coverage to that class of employees.

What the Rule Does

The final rule essentially adds two new types of HRAs: The Individual Coverage HRA and the Excepted Benefits HRA.

Individual Coverage HRA

Overall, an Individual Coverage HRA is funded exclusively by the employer and may reimburse employees for medical care expenses, including individual market health insurance premiums. The difference under the new rule is that the employee must be enrolled in individual health coverage (or Medicare) and not group health plan coverage. This includes plans purchased on the Marketplace Exchange. It does not include plans that only cover certain excepted benefit, such as dental or vision, or short-term limited-duration plans. An Individual Coverage HRA cannot be offered to employees who are also offered a traditional group health plan. An employer may offer this HRA to different classes of employees (e.g., full-time vs. part-time, salaried vs. hourly) within certain prescribed limits.

While the rule is meant to primarily benefit small and mid-sized employees, large employers may also offer an Individual Coverage HRA. This type of HRA will also be considered an offer of coverage under the ACA for employer mandate purposes. An Individual Coverage HRA can impact eligibility for a premium tax credit; therefore, the employee must have the option to waive or opt-out of future reimbursements. To comply with the employer mandate, the employer should make the determination that the Individual Coverage HRA provides enough contributions for certain Marketplace coverage to meet affordability requirements. Additionally, an employer should have processes in place to verify an employee (and family, if applicable) has individual coverage.

Excepted Benefit HRA

An Excepted Benefit HRA means that an HRA can be offered as an “excepted benefit” by an employer. An “excepted benefit” is an insured or self-insured plan that meets certain requirements but is usually not integral to a major medical health plan. An Excepted Benefit HRA can be used to reimburse medical care expenses in addition to other excepted benefits. The HRA itself is considered an excepted benefit because it is neither integral to a health plan nor is it a health plan itself.

Certain requirements must be met to offer this type of HRA, including that it must be offered to employees along with an option to enroll in a non-excepted group health plan, although enrollment in a group or individual health plan is not required to participate in the Excepted Benefit HRA. This is a significant improvement to HRAs under the final rule. These HRAs cannot be used to reimburse health plan premiums, including Medicare and individual coverage, and can only be used for medical care expenses, COBRA coverage, or premiums under an excepted benefit (e.g., dental, vision or short-term limited duration insurance). Finally, the annual HRA contribution cannot exceed $1,800 (adjusted for inflation starting in 2021).

What Employers Should Expect Next

If an employer wants to offer an Individual Coverage or Excepted Benefit HRA, it is suggested to consult with qualified ERISA counsel. There are additional requirements and guidelines an employer will need to meet in order to comply with the final rule. Special enrollment periods may need to be established in order to allow employees and employers to take advantage of the final rule. The Departments and other federal government agencies, including the IRS, will issue further guidance regarding this rule. Such guidance will be necessary in order to correctly implement either type of HRA under the final rule

About the Author

This alert was prepared for Benefit Advisors Network by Stacy Barrow. Mr. Barrow is a nationally recognized expert on the Affordable Care Act. His firm, Marathas Barrow Weatherhead Lent LLP, is a premier employee benefits, executive compensation, and employment law firm. He can be reached at sbarrow@marbarlaw.com.

Legal Alert: IRS Releases 2020 HSA Contribution Limits and HDHP Deductible and Out-of-Pocket Limits

Posted on May 29, 2019May 29, 2019 by Stacy Barrow

In Rev. Proc. 2019-25, the IRS released the inflation-adjusted amounts for 2020 relevant to HSAs and high deductible health plans (HDHPs). The table below summarizes those adjustments and other applicable limits.

Out-of-Pocket Limits Applicable to Non-Grandfathered Plans

The ACA’s out-of-pocket limits for in-network essential health benefits have also been announced and have increased for 2020.

Note that all non-grandfathered group health plans must contain an embedded individual out-of-pocket limit within family coverage if the family out-of-pocket limit is above $8,150 (2020 plan years) or $7,900 (2019 plan years). Exceptions to the ACA’s out-of-pocket limit rule are available for certain small group plans eligible for transition relief (referred to as “Grandmothered” plans). A one-year extension of transition relief was recently announced extending the transition relief to policy years beginning on or before October 1, 2020, provided that all policies end by December 31, 2020.

Next Steps for Employers

As employers prepare for the 2020 plan year, they should keep in mind the following rules and ensure that any plan materials and participant communications reflect the new limits:
• HDHPs cannot have an embedded family deductible that is lower than the minimum HDHP family deductible of $2,800.
• The out-of-pocket maximum for family coverage for an HDHP cannot be higher than $13,800.
• All non-grandfathered plans (whether HDHP or non-HDHP) must cap out-of-pocket spending at $8,150 for any covered person. A family plan with an out-of-pocket maximum in excess of $8,150 can satisfy this rule by embedding an individual out-of-pocket maximum in the plan that is no higher than $8,150. This means that for the 2020 plan year, an HDHP subject to the ACA out-of-pocket limit rules may have a $6,900 (self-only)/$13,800 (family) out-of-pocket limit (and be HSA-compliant) so long as there is an embedded individual out-of-pocket limit in the family tier no greater than $8,150 (so that it is also ACA-compliant).

About the Author. This alert was prepared by Stacy Barrow. Mr. Barrow is a nationally recognized expert on the Affordable Care Act. His firm, Marathas Barrow Weatherhead Lent LLP, is a premier employee benefits, executive compensation, and employment law firm. He can be reached at sbarrow@marbarlaw.com.

This message is a service to our clients and friends. It is designed only to give general information on the developments actually covered. It is not intended to be a comprehensive summary of recent developments in the law, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion.

Benefit Advisors Network and its smart partners are not attorneys and are not responsible for any legal advice. To fully understand how this or any legal or compliance information affects your unique situation, you should check with a qualified attorney.

Legal Alert: Reminder PCORI Fees Due By July 31, 2019

Posted on May 21, 2019May 22, 2019 by Stacy Barrow

REMINDER: PCORI Fees Due By July 31, 2019

Employers that sponsor self-insured group health plans, including health reimbursement arrangements (HRAs) should keep in mind the upcoming July 31, 2019 deadline for paying fees that fund the Patient-Centered Outcomes Research Institute (PCORI). As background, the PCORI was established as part of the Affordable Care Act (ACA) to conduct research to evaluate the effectiveness of medical treatments, procedures and strategies that treat, manage, diagnose or prevent illness or injury. Under the ACA, most employer sponsors and insurers will be required to pay PCORI fees until 2019 (the fee does not apply to plan years ending on or after October 1, 2019). For employers with calendar year plans, this July’s payment will be their final PCORI filing.

The amount of PCORI fees due by employer sponsors and insurers is based upon the number of covered lives under each “applicable self-insured health plan” and “specified health insurance policy” (as defined by regulations) and the plan or policy year end date. This year, employers will pay the fee for plan years ending in 2018.

• For plan years that ended between January 1, 2018 and September 30, 2018, the fee is $2.39 per covered life and is due by July 31, 2019.
• For plan years that ended between October 1, 2018 and December 31, 2018, the fee is $2.45 per covered life and is due by July 31, 2019.

For example, a plan year that ran from July 1, 2017 through June 30, 2018 will pay a fee of $2.39 per covered life. Calendar year 2018 plans will pay a fee of $2.45 per covered life.

NOTE: The insurance carrier is responsible for paying the PCORI fee on behalf of a fully insured plan. The employer is responsible for paying the fee on behalf of a self-insured plan, including an HRA. In general, health FSAs are not subject to the PCORI fee.

Employers that sponsor self-insured group health plans must report and pay PCORI fees using IRS Form 720, Quarterly Federal Excise Tax Return. If this is the employer’s last PCORI payment and they do not expect to owe excise taxes that are reportable on Form 720 in future quarters, they may check the “final return” box above Part I of Form 720.

Note that because the PCORI fee is assessed on the plan sponsor of a self-insured plan, it generally should not be included in the premium equivalent rate that is developed for self-insured plans if the plan includes employee contributions. However, an employer’s payment of PCORI fees is tax deductible as an ordinary and necessary business expense.

Historical Information for Prior Years
• For plan years that ended between October 1, 2017 and December 31, 2017, the fee is $2.39 per covered life and is due by July 31, 2018.
• For plan years that ended between January 1, 2017 and September 30, 2017, the fee is $2.26 per covered life and is due by July 31, 2018.
• For plan years that ended between October 1, 2016 and December 31, 2016, the fee is $2.26 per covered life and was due by July 31, 2017.
• For plan years that ended between January 1, 2016 and September 30, 2016, the fee is $2.17 per covered life and was due by July 31, 2017.
• For plan years that ended between October 1, 2015 and December 31, 2015, the fee was $2.17 per covered life and was due by August 1, 2016.
• For plan years that ended between January 1, 2015 and September 30, 2015, the fee was $2.08 per covered life and was due by August 1, 2016.
• For plan years that ended between October 1, 2014 and December 31, 2014, the fee was $2.08 per covered life and was due by July 31, 2015.
• For plan years that ended between January 1, 2014 and September 30, 2014, the fee was $2 per covered life and was due by July 31, 2015.
• For plan years that ended between October 1, 2013 and December 31, 2013, the fee was $2 per covered life and was due by July 31, 2014.
• For plan years that ended between January 1, 2013 and September 30, 2013, the fee was $1 per covered life and was due by July 31, 2014.
• For plan years that ended between October 1, 2012 and December 31, 2012, the fee was $1 per covered life and was due by July 31, 2013.

Counting Methods for Self-Insured Plans

Plan sponsors may choose from three methods when determining the average number of lives covered by their plans.

Actual Count method. Plan sponsors may calculate the sum of the lives covered for each day in the plan year and then divide that sum by the number of days in the year.

Snapshot method. Plan sponsors may calculate the sum of the lives covered on one date in each quarter of the year (or an equal number of dates in each quarter) and then divide that number by the number of days on which a count was made. The number of lives covered on any one day may be determined by counting the actual number of lives covered on that day or by treating those with self-only coverage as one life and those with coverage other than self-only as 2.35 lives (the “Snapshot Factor method”).

Form 5500 method. Sponsors of plans offering self-only coverage may add the number of employees covered at the beginning of the plan year to the number of employees covered at the end of the plan year, in each case as reported on Form 5500, and divide by 2. For plans that offer more than self-only coverage, sponsors may simply add the number of employees covered at the beginning of the plan year to the number of employees covered at the end of the plan year, as reported on Form 5500.

Special rules for HRAs. The plan sponsor of an HRA may treat each participant’s HRA as covering a single covered life for counting purposes, and therefore, the plan sponsor is not required to count any spouse, dependent or other beneficiaries of the participant. If the plan sponsor maintains another self-insured health plan with the same plan year, participants in the HRA who also participate in the other self-insured health plan only need to be counted once for purposes of determining the fees applicable to the self-insured plans.

About the Author. This alert was prepared for Benefit Advisors Network by Stacy Barrow. Mr. Barrow is a nationally recognized expert on the Affordable Care Act. His firm, Marathas Barrow Weatherhead Lent LLP, is a premier employee benefits, executive compensation and employment law firm. He can be reached at sbarrow@marbarlaw.com.

Legal Alert: CMS Extends Transition Relief for Non-Compliant Plans through 2020

Posted on April 10, 2019June 24, 2019 by Stacy Barrow

On March 25, 2019, the Centers for Medicare & Medicaid Services (CMS) announced a one-year extension to the transition policy (originally announced November 14, 2013 and extended five times since) for individual and small group health plans that allows issuers to continue policies that do not meet ACA standards. The transition policy has been extended to policy years beginning on or before October 1, 2020, provided that all policies end by December 31, 2020. This means individuals and small businesses may be able to keep their non-ACA compliant coverage through the end of 2020, depending on the policy year. Carriers may have the option to implement policy years that are shorter than 12 months or allow early renewals with a January 1, 2020 start date in order to take full advantage of the extension.

Background
The Affordable Care Act (ACA) includes key reforms that create new coverage standards for health insurance policies. For example, the ACA imposes modified community rating standards and requires individual and small group policies to cover a comprehensive set of benefits.
Millions of Americans received notices in late 2013 informing them that their health insurance plans were being canceled because they did not comply with the ACA’s reforms. Responding to pressure from consumers and Congress, on Nov. 14, 2013, President Obama announced a transition relief policy for 2014 for non-grandfathered coverage in the small group and individual health insurance markets. If permitted by their states, the transition policy gives health insurance issuers the option of renewing current policies for current enrollees without adopting all of the ACA’s market reforms.

Transition Relief Policy
Under the original transitional policy, health insurance coverage in the individual or small group market that was renewed for a policy year starting between Jan. 1, 2014, and Oct. 1, 2014 (and associated group health plans of small businesses), will not be out of compliance with specified ACA reforms. These plans are referred to as “grandmothered” plans.
To qualify for the transition relief, issuers must send a notice to all individuals and small businesses that received a cancellation or termination notice with respect to the coverage (or to all individuals and small businesses that would otherwise receive a cancellation or termination notice with respect to the coverage).
The transition relief only applies with respect to individuals and small businesses with coverage that was in effect since 2014. It does not apply with respect to individuals and small businesses that obtain new coverage after 2014. All new plans must comply with the full set of ACA reforms.

One-year Extension
According to CMS, the extension will ensure that consumers have multiple health insurance coverage options and states continue to have flexibility in their markets. Also, like the original transition relief, issuers that renew coverage under the extended transition relief must, for each policy year, provide a notice to affected individuals and small businesses.
Under the transition relief extension, at the option of the states, issuers that have issued policies under the transitional relief in 2014 may renew these policies at any time through October 1, 2020 and affected individuals and small businesses may choose to re-enroll in the coverage through October 1, 2020. Policies that are renewed under the extended transition relief are not considered to be out of compliance with the following ACA reforms:

• community premium rating standards, so consumers might be charged more based on factors such as gender or a pre-existing medical condition, and it might not comply with rules limiting age banding (PHS Act section 2701);
• guaranteed availability and renewability (PHS Act sections 2702 & 2703);
• if the coverage is an individual market policy, the ban on preexisting medical conditions for adults, so it might exclude coverage for treatment of an adult’s pre-existing medical condition such as diabetes or cancer (PHS Act section 2704);
• if the coverage is an individual market policy, discrimination based on health status, so consumers may have premium increases based on claims experience or receipt of health care (PHS Act section 2705);
• coverage of essential health benefits or limit on annual out-of-pocket spending, so it might not cover benefits such as prescription drugs or maternity care, or might have unlimited cost-sharing (PHS Act section 2707); and
• standards for participation in clinical trials, so consumers might not have coverage for services related to a clinical trial for a life-threatening or other serious disease (PHS Act section 2709).

District Court Judge in Texas Strikes Down the ACA – But Law Remains in Effect for Now

Posted on December 18, 2018December 28, 2018 by Stacy Barrow

On Friday, December 14, a federal judge in Texas issued a partial ruling that strikes down the entire Affordable Care Act (ACA) as unconstitutional. The White House has stated that the law will remain in place, however, pending the appeal process. The case, Texas v. U.S., will be appealed to the U.S. Court of Appeals for the Fifth Circuit in New Orleans, and then likely to the U.S. Supreme Court.

The plaintiffs in Texas (a coalition of twenty states) argue that since the Tax Cuts and Jobs Act zeroed out the individual mandate penalty, it can no longer be considered a tax. Accordingly, because the U.S. Supreme Court upheld the ACA in 2012 by saying the individual mandate was a legitimate use of Congress’s taxing power, eliminating the tax penalty imposed by the mandate renders the individual mandate unconstitutional. Further, the individual mandate is not severable from the ACA in its entirety. Thus, the ACA should be found unconstitutional and struck down.

The court in Texas agreed, finding that the individual mandate can no longer be fairly read as an exercise of Congress’s Tax Power and is still impermissible under the Interstate Commerce Clause—meaning it is unconstitutional. Also, the court found the individual mandate is essential to and inseverable from the remainder of the ACA, which would include not only the patient protections (no annual limits, coverage of pre-existing conditions) but the premium tax credits, Medicaid expansion, and of course the employer mandate and ACA reporting.

Several states such as Massachusetts, New York and California have since intervened to defend the law. They argue that, if Congress wanted to repeal the law it would have done so. The Congressional record makes it clear Congress was voting only to eliminate the individual mandate penalty in 2019; the record indicates that they did not intend to strike down the entire ACA.

It is worth noting that the Trump administration filed a brief early in 2018 encouraging the court to uphold the ACA but strike down the provisions relating to guaranteed issue and community rating.

The ACA has largely survived more than 70 repeal attempts and two visits to the U.S. Supreme Court. We anticipate it will survive this one too, in time. While the Supreme Court lineup has changed, all five justices who upheld the ACA in 2012 are still on the bench. Moreover, the Supreme Court may be reluctant to strike down a federal law as expansive as the ACA, particularly when it has been in place for nearly nine years and affects millions of people. Notably, the Supreme Court was not required to rule on the “severability” issue in 2012. Given a strong tradition of the Supreme Court to avoid, if possible, broad rulings of unconstitutionality in established laws, it is not unlikely that the current Court, if this case makes it that far, will find a way to hold that even if the Court’s 2012 logic with respect to the individual mandate is no longer applicable, the rest of the law is severable and saved, thus avoiding once again a broad ruling on the ACA’s constitutional soundness. The bottom line: employers should continue to comply with the ACA, as its provisions (including the employer mandate and associated reporting) remain the law for the foreseeable future.

About the Author

This alert was prepared for Benefit Advisors network by Stacy Barrow. Mr. Barrow is a nationally recognized expert on the Affordable Care Act. His firm, Marathas Barrow Weatherhead Lent LLP, is a premier employee benefits, executive compensation and employment law firm. He can be reached at sbarrow@marbarlaw.com.