Category: Legal Alerts

On February 20, 2018, the U.S. Departments of Labor, Treasury, and Health and Human Services (Agencies) released proposed regulations that expand the availability of short-term limited duration insurance (STLDI).  STLDI is offered in the individual (non-group) insurance market and is generally used by individuals such as students or individuals between jobs.  Therefore, the direct impact to employers is limited; however, there is some concern that this rule may disrupt the individual and small group markets and is seen by some as a further step by the Trump administration to erode Obama-era regulations. 

The rule reverses prior regulations that limited the duration of STLDI coverage to less than 3 months after the original effective date of the contract.  If finalized, the rule would extend the permitted duration of STLDI to a period of less than 12 months.  The rule does not require issuers to guarantee renewability of STLDI policies; however, it does not prohibit individuals from re-applying for coverage for another 364 days (which would likely be subject to medical underwriting). 

The proposed regulations are in furtherance of an October 2017 Executive Order instructing the Agencies to consider ways to promote healthcare choice and competition by, among other things, expanding the availability of STLDI.  The regulations are open for public comment for 60 days. 

Although STLDI is sold in the individual market, it is exempt from ACA’s insurance mandates, which typically makes it more affordable than the ACA-compliant plans that are required to offer coverage in ten broad categories of essential health benefits and contain other consumer protections.  STLDI, on the other hand, is not required to cover essential benefits and may contain preexisting condition exclusions and annual and lifetime limits.

There is concern that expansion of STLDI availability may result in increased morbidity in the individual and small group markets due to younger, healthier individuals being encouraged to purchase STLDI.  The federal government; however, expects that a relatively low percentage of individual market enrollees will shift to STLDI plans, and that only 10% would have been subsidy eligible had they maintained their Marketplace coverage. 

In addition, increasing the duration of STLDI reduces the risk of a gap in coverage for people who become seriously ill while covered.  Under current rules, they may have a gap in coverage before being able to enroll in a Marketplace plan that provides more robust coverage (another STLDI plan would likely exclude their condition as pre-existing).  Also, since STLDI typically is not network-based, it allows for greater choice of providers, which may be useful in rural areas where provider networks under ACA plans are limited.

The proposed rule does not include an effective date for a final rule; however, the Agencies have proposed that the rule, if finalized, would be effective 60 days after publication of the final rule. 

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About the Author

Stacy H. Barrow, Esq., Compliance Director

This alert was prepared by Stacy Barrow. Mr. Barrow is a nationally recognized expert on the Affordable Care Act and BAN’s Compliance Director. 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 publication 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.

© Copyright 2018 Benefit Advisors Network. Smart Partners. All rights reserved. 

In Rev. Proc. 2018-18, the IRS has released adjusted contribution limits for health savings accounts (HSAs) due to changes made by the Tax Cuts and Jobs Act (TCJA).  As shown below, the new HSA contribution limit for individuals with family high deductible health plan (HDHP) coverage is $6,850, a $50 reduction from the previously announced inflation-adjusted amount for 2018.  Other HSA/HDHP figures remain unchanged.

HSA Contributions in Excess of $6,850

While most employees with family HDHP coverage will not have contributed more than $6,850 through salary reductions at this point in 2018, employers will need to communicate the reduction to employees and reduce elections for employees who have elected $6,900 (and who will not be age 55 by the end of 2018).  If an employer has already funded $6,900 on a non-taxable basis, they should include the additional $50 in the employee’s income and the employee may take a corrective distribution to avoid excess contribution penalties.  

In most cases, the only task for employers will be to inform employees of the adjustment and, specifically, inform those who elected $6,900 (or $7,900 for employees who will be age 55+ at the end of 2018) that their election will be capped at $6,850 (as adjusted for the $1,000 catch-up).

Adoption Assistance Adjustment

The TCJA also reduces the amount that can be excluded from an employee’s gross income for the adoption of a child with special needs from $13,840 to $13,810.  The phase-out also begins at a lower level than previously expected – $207,140 (reduced from $207,580) and is completely phased out for taxpayers with modified adjusted gross income of $247,140 (reduced from $247,580).

Transition Relief for Certain Non-Compliant HDHPs

In separate guidance (Notice 2018-12), the IRS provided transition relief for an issue that threatened to disrupt HSA-eligibility for individuals in states that require certain health insurance policies to provide benefits for male sterilization or male contraceptives without cost sharing (reportedly, California, Illinois, Maryland and Vermont).  Under IRS rules, such coverage does not qualify as preventive when provided to males because they are not preventive care under the Social Security Act, and no applicable guidance issued by the Treasury and the IRS provides for the treatment of those benefits as preventive care.  Thus, the IRS concluded that under current guidance, a health plan isn’t an HDHP if it provides benefits for male sterilization or contraceptives before the minimum deductible for an HDHP is met, regardless of whether the coverage of those benefits is required by state law.  An individual who is not covered by an HDHP isn’t HSA-eligible and cannot contribute or receive employer contributions to an HSA on a tax-free basis.

The IRS understands that states may wish to change their laws in light of the Notice; however, they may be unable to do so in 2018 because of limitations on their legislative calendars or other reasons. Without relief, residents of these states would be unable to establish or contribute to an HSA on a tax-free basis unless their plan is exempt from the state mandate (e.g., they are covered under a self-insured ERISA plan).  Therefore, the Notice provides transition relief for 2018 and 2019 to participants in an HDHP that provides benefits for male sterilization or male contraceptives without a deductible, or with a deductible below the minimum deductible for an HDHP.  Until 2020, these individuals won’t be treated as failing to qualify as HSA-eligible individuals merely because they are covered by such an HDHP. 

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About the Author

This alert was prepared for Benefit Advisors Network by Marathas Barrow Weatherhead Lent LLP, a national law firm with recognized experts on the Affordable Care Act.  Contact Peter Marathas or Stacy Barrow at pmarathas@marbarlaw.com or sbarrow@marbarlaw.com.

Stacy H. Barrow, Esq., Compliance Director

This alert was prepared by Stacy Barrow. Mr. Barrow is a nationally recognized expert on the Affordable Care Act and BAN’s Compliance Director. 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 e-mail 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.

© Copyright 2018 Benefit Advisors Network. Smart Partners. All rights reserved.

On January 22, 2018, President Trump signed H.R. 195:  Extension of Continuing Appropriations Act, 2018, which is a short-term spending bill that re-opened the federal government after a three-day shutdown.  As discussed below, the bill:

• Extends the Children’s Health Insurance Program (CHIP) for six years, through the fiscal year 2023;
• Extends the existing suspensions of the Affordable Care Act’s (ACA) medical device excise tax through 2019 and the tax on high-cost employer-sponsored health coverage (the “Cadillac Tax”) through 2021; and
• Suspends the annual fee on health insurance providers for 2019.

No other changes were made to the ACA as part of this bill.  Last month, as part of the Tax Reform and Jobs Act, the individual mandate penalty was reduced to $0 beginning in 2019. 

Cadillac Tax – Delayed until 2022

The spending bill includes a two-year delay of the 2020 effective date to tax years beginning after December 31, 2021.  The Cadillac Tax – a 40% tax on employer-sponsored health coverage that exceeds $10,200 for individual and $27,500 for family coverage (indexed) – was previously delayed two years (to 2020) under the Protecting Americans From Tax Hikes Act of 2015 (PATH Act).

While the delay was welcome news for many employers, efforts to fully repeal the Cadillac Tax are likely to continue as many employers believe it will increase both employee and employer costs and will cause employers to reluctantly cut benefits to avoid the tax.

Medical Device Tax – Extension of Moratorium for 2018 and 2019

The spending bill includes a two-year extension of the moratorium on the ACA’s 2.3% tax on the sale of medical devices.  Under the spending bill, the tax will not apply to sales during the period beginning on January 1, 2018, and ending on December 31, 2019.  The PATH Act had placed a two-year moratorium on the medical device tax for 2016 and 2017, which is now extended for 2018 and 2019.  

Annual Fee on Health Insurance Providers – Suspended for 2019

The spending bill places a one-year moratorium on the annual fee on health insurance providers for the calendar year 2019.  The PATH Act had placed a one-year moratorium on the fee for 2017.  Although it remains in effect for 2018, it will be suspended again for 2019.  The tax applies to fully insured medical, dental and vision plans based on the carrier’s net premiums and is typically passed through to employers that sponsor such plans.

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About the Author

Stacy H. Barrow, Esq., Compliance Director

This alert was prepared by Stacy Barrow. Mr. Barrow is a nationally recognized expert on the Affordable Care Act and BAN’s Compliance Director. 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.

© Copyright 2018 Benefit Advisors Network. Smart Partners. All rights reserved. 

President Trump Executive Order issued intended to minimize the economic and regulatory burdens of the Affordable Care Act (“ACA”).  The order is somewhat symbolic and has no immediate effect on employers, many of whom are in the process of complying with the ACA’s onerous reporting requirements (Forms 1094 and 1095), which are not rescinded by the order.

The order directs HHS and the heads of other departments and agencies (e.g., U.S. Department of Labor, Treasury Department) to exercise all available authority and discretion to waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal burden on any State or a cost, fee, tax, penalty, or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare services, purchasers of health insurance, or makers of medical devices, products, or medications.  It should be noted that employers are not among those explicitly listed as requiring protection from regulatory burdens.

The order is broadly drafted and does not specify which provisions of the law should be targeted.  However, to the extent that following the order would require revision of regulations issued through notice-and-comment rulemaking, the agencies will need to comply with the Administrative Procedures Act (“APA”).

Under the APA, agencies cannot rescind existing regulations until they engage in a new notice-and-comment rulemaking process (including required public comment period and delayed effective dates) and observe other procedural requirements.  In practical terms, the APA makes it difficult for an incoming President to overturn final regulations implemented by a predecessor.  Regulations that haven’t taken effect can be suspended while they are reviewed to determine if they conform to the new administration’s agenda, or if modification or revocation is necessary.  To that end, the President’s chief of staff has instructed federal agencies to cease issuing new regulations and withdraw rules that have been sent to the Office of the Federal Register until they can be reviewed by the new agency heads.

The order is somewhat symbolic given the constraints imposed by the APA, yet is has some substantive effect.  The directive gives HHS wide latitude when granting hardship exemptions from the individual mandate (it does not, however, waive the requirement for individuals to maintain minimum essential coverage).  The order also signals to states that the federal government may be more receptive to granting Medicaid waivers, which afford states additional flexibility in designing and administering their programs.  Another section of the order instructs the agency heads to work with states to encourage the sale of insurance across state lines, to the maximum extent permitted by law.  Current law (the McCarran-Ferguson Act), protects insurance companies from interstate competition by permitting states to regulate health plans sold in their state, creating a patchwork of state insurance laws across the U.S.

From an employer perspective, employers with 50 or more full-time equivalent employees and sponsors of self-insured health plans are preparing to comply with the ACA’s reporting requirements (Forms 1094 & 1095) over the next couple of months.  They may be tempted to view the order as a sign that the Internal Revenue Service will not enforce the employer mandate or ACA reporting.  However, until further regulatory guidance is released, the final regulations implementing the employer mandate and its reporting requirements remain in effect and are subject to enforcement by the IRS.  The IRS recently indicated in FAQ guidance that it intends to begin notifying employers of their potential liability for an employer shared responsibility payment for the 2015 calendar year “in early 2017”.

Once President Trump’s appointments to the regulatory agencies are seated we’ll likely see new regulations proposed to ease the ACA’s economic and administrative burdens, although the process will take some time.  Also, now that President Trump has taken initial action on the ACA, it may ease the pressure on Congress to attempt an immediate repeal or find a replacement.

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About The Authors

This alert was prepared for Benefit Advisors Network by Stacy Barrow and Mitch Geiger.  Mr. Barrow and Mr. Geiger are nationally recognized experts on the Affordable Care Act.  Their firm, Marathas Barrow & Weatherhead LLP, is a premier employee benefits, executive compensation and employment law firm.  They can be reached at sbarrow@marbarlaw.com  or mgeiger@marbarlaw.com.

This  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.

© Copyright 2017 Benefit Advisors Network. Smart Partners. All rights reserved.

The U.S. Department of Labor (DOL) announced its decision for April 1, 2018, as the applicability date for ERISA-covered employee benefit plans to comply with a final rule (released in December 2016) that imposes additional procedural protections (similar to those that apply to health plans) when dealing with claims for disability benefits.  In October 2017, the DOL had announced a 90-day delay of the final rule, which was scheduled to apply to claims for disability benefits under ERISA-covered benefit plans that were filed on or after January 1, 2018. 

Effective Date

While the DOL’s news release indicates that the DOL has decided on an April 1 applicability date for the final rule, the regulatory provision modified by the 90-day delay specified that the final rule will apply to claims filed “after April 1, 2018.”

Plans Subject to the Final Rule

The final rule applies to plans (either welfare or retirement) where the plan conditions the availability of disability benefits to the claimant upon a showing of disability. For example, if a claims adjudicator must make a determination of disability in order to decide a claim, the plan is subject to the final rule. Generally, this would include benefits under a long-term disability plan or a short-term disability plan to the extent that it is governed by ERISA.  

However, the following short-term disability benefits are not subject to ERISA and, therefore, are not subject to the final rule:

• Short-term disability benefits that are paid pursuant to an employer’s payroll practices (i.e., paid out of the employer’s general assets on a self-insured basis with no employee contributions); and 
• Short-term disability benefits that are paid pursuant to an insurance policy maintained solely to comply with a state-mandated disability law (for example, in California, New Jersey, New York, and Rhode Island).

In addition, if benefits are conditioned on a finding of a disability made by a third-party other than the plan itself (such as the Social Security Administration or insurer/third-party administrator of the employer’s long-term disability plan), then a claim for such benefits is not treated as a disability claim and is also not subject to the final rule. For example, if a retirement plan’s determination of disability is conditioned on the determination of disability under the plan sponsor’s long-term disability plan, then the retirement plan is not subject to the final rule (but the final rule would apply to the underlying long-term disability plan). 

Overview of the Final Rule

The DOL has published a Fact Sheet that provides an overview of the new requirements, which include the following:

• New Disclosure Requirements. New benefit denial notices that include a complete discussion of why the plan denied a claim and the standards it used in making the decision;
• Right to Claim File and Internal Protocols.  New statement required in benefit denial notices that regarding claimant’s entitlement to receive, upon request, the entire claim file and other relevant documents and inclusion of internal rules, guidelines, protocols, standards, or other similar criteria used in denying a claim (or a statement that none were used).
• Right to Review and Respond to New Information Before Final Decision.  Plans may not deny benefits on appeal based on new or additional evidence or rationales that were not included when the benefit was denied at the claims stage, unless the claimant is given notice and a fair opportunity to respond.
• Avoidance of Conflicts of Interest. Claims and appeals must be adjudicated in a manner designed to ensure independence and impartiality of the persons involved in making the decision. For example, a claims adjudicator or medical or vocational expert cannot be hired, promoted, terminated, or compensated based on the likelihood of such person denying benefit claims.
• Deemed Exhaustion of Claims and Appeal Procedures.  If a plan does not adhere to all claims processing rules, the claimant is deemed to have exhausted the administrative remedies available under the plan, unless the violation was the result of a minor error and other conditions are met.
• Certain Coverage Rescissions are Subject to the Claim Procedure Protections.  Rescissions of coverage, including retroactive terminations due to alleged misrepresentation of fact (e.g., errors in the application for coverage) must be treated as adverse benefit determinations, which trigger the plan’s appeals procedures.  Rescissions for non-payment of premiums are not covered by this provision.
• Communication Requirements in Non-English Languages. Language assistance for non-English speaking claimants are required under some circumstances.

Next Steps

Before April 2018, employers should:

• Identify which benefit plans (in addition to long-term disability) it sponsors are subject to the final rule (and consider whether to amend any plan that currently triggers the new rules to rely on the disability determinations of another plan to avoid having to comply with the final rule);
• For any plan subject to the final rule, review and revise claims and appeal procedures prior to April if the plan is not already in compliance with the new rule;
• Update participant communications, such as summary plan descriptions and claim and appeal notices, as needed; and
• Discuss administration of disability benefits with any third-party administrators and insurers to ensure compliance.

About the Author

This alert was prepared for Benefit Advisors Network by Marathas Barrow Weatherhead Lent LLP, a national law firm with recognized experts on the Affordable Care Act.  Contact Peter Marathas, Stacy Barrow or Tzvia Feiertag.

Stacy H. Barrow, Esq., Compliance Director

This alert was prepared by Stacy Barrow. Mr. Barrow is a nationally recognized expert on the Affordable Care Act and BAN’s Compliance Director. 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.

© Copyright 2018 Benefit Advisors Network. Smart Partners. All rights reserved.