Source: United Benefit Advisors (UBA)
The regulatory agencies issued a number of documents during the month of March, as they have tried to provide needed information with respect to 2014 and 2015 obligations under the Patient Protection and Affordable Care Act (PPACA). Many employers will need to provide reporting on the coverage they offer during the 2015 calendar year; the IRS has now issued final regulations that provide details on this requirement. Open enrollment in the health Marketplaces (also known as the exchanges) for 2014 is scheduled to end on March 31, although the Department of Health and Human Services (HHS) has now said that those who have tried to enroll by that date but were unable to do so because of heavy volume or technical problems, will be given some additional time to enroll. Cost of living adjustments for 2015 and some clarifications of the transitional reinsurance fee also were provided. The ability of states to approve renewal of policies that don’t meet all PPACA requirements was extended through the 2016 renewal. The Internal Revenue Service has issued a memorandum on coordinating health savings accounts with health care flexible spending accounts (FSAs) that include a carryover provision.
On April 1, 2014, President Obama signed a bill that, among other things, repeals the requirement that small group plans limit the deductible to $2,000 for an individual and $4,000 for a family. This change does not affect the requirement that non-grandfathered plans include an out-of-pocket maximum that does not exceed $6,350 for an individual or $12,700 for a family. (The out-of-pocket maximum is indexed; see the Cost of Living Adjustments section of this article for the 2015 maximums.)
On March 11, the Department of the Treasury and the Internal Revenue Service released the final reporting regulation under PPACA. To help verify whether individuals have the coverage needed to satisfy the individual mandate, PPACA requires that insurers and plan sponsors that provide minimum essential coverage supply information on those who were covered. To help verify whether individuals are eligible for premium tax credits and if large employers have offered coverage to full-time employees, employers with 50 or more full-time or full-time equivalent (FTE) employees must report on the coverage they offered to employees.
Detailed reporting on an employee by employee basis will be needed in most situations. The first reporting will be due in early 2016 based on coverage provided in 2015. While the regulations provide quite a few details of the reporting requirement, many additional details will be addressed on the reporting forms themselves and related instructions. The forms and instructions have not been released yet and there is no published target date. The IRS has said the forms and instructions will be available soon.
Cost of Living Adjustments
For 2015, the cost-sharing limits will be:
- A maximum out-of-pocket (for all non-grandfathered plans) of $6,600 for single coverage and $13,200 for family coverage
- A maximum out-of-pocket for stand-alone pediatric dental essential health benefit coverage of $350 for one covered child and $700 for two or more children. These pediatric dental plans must have an actuarial value of either 70% or 85%.
HHS also released the 2015 actuarial value calculator (under Plan Management). The calculator has been updated for the cost of living increases, but otherwise is the same as the 2014 calculator.
Transitional Reinsurance Fee
Both fully insured and self-funded plans must pay a transitional reinsurance fee (TRF) for 2014 through 2016. For 2014, the fee is $63 per covered life. For 2015, the fee will be $44 per covered life. The recent notices confirm that the fee will be collected in two parts, with the reinsurance contribution due early in the next calendar year and the treasury contribution due late in the fourth quarter of the next calendar year (so most of the 2014 fee will be due in January 2015 and the balance will be due in the fourth quarter of 2015).
The fee will only be due on major medical coverage. Major medical coverage is defined as insurance that covers a wide range of medical services and meets the 60% minimum value test. It includes short-term, limited duration coverage that meets this description (even though PPACA requirements normally do not apply to this coverage) as well as student health plans and transitional, non-PPACA compliant renewed 2013 plans. Contributions are not required for people who reside in the U.S. territories.
The TRF is designed so that it will only be paid once per person (which is different from the way the Patient-Centered Outcomes Research Institute [PCORI] fee works).
Open enrollment for the health Marketplaces for 2015 coverage will be from November 15, 2014, through February 15, 2015.
The transition to modified community rating in the small group market has raised questions about premiums and contributions. The recent guidance explains that while insurers must determine premiums for individuals and small groups on an individual basis — based only on age, tobacco use, geographic location, and family size — insurers may offer the small group an average or composite premium (except that any surcharge for tobacco use must be assessed on the individual). If premiums are charged on this basis, the per-employee premium must be fixed at the start of the policy year and cannot be adjusted as employees are added or deleted over the course of the year. If premiums are offered on a composite basis, two tiers of composite premiums must be offered — one for family members age 21 and older and another for family members below age 21. States can adopt other tiered rating approaches. Employers also have the option to charge employees an average or composite rate, even if they receive individual premium rates from the insurer.
Option to Renew Non-Compliant Policies
On March 5, 2014, HHS released a bulletin that allows state insurance departments to permit the renewal through October 1, 2016, of individual and small group policies that do not meet the “market reform” requirements of PPACA. Keep in mind that this bulletin does not mean that the renewal of policies with 2013 benefits and rating is automatic — the state insurance department must allow it, and then the insurance carrier must decide if it wants to keep these policies available.
Coordinating HSAs and Health FSAs with Carryover
Late last year, the IRS released a notice that permits a health care FSA to include a carryover provision that would allow up to $500 of unused health care FSA contributions to carry over to the following year. However, an employee generally may not contribute to a health savings account (HSA) if covered by any group health that is not a high-deductible health plan (HDHP), which means that an employee covered by a general purpose health care FSA may not contribute to an HSA. The IRS has released a memorandum that explains how an employee with access to a health care FSA with a carryover option may still contribute to an HSA. The memorandum states that while any access to dollars in a general purpose health care FSA will make the employee ineligible to contribute to the HSA for the entire year (even once carryover amounts have been spent), an employee may contribute to an HSA despite access to health care FSA carryover if any of these are met:
- The plan is designed so that unused amounts in a general purpose health care FSA are automatically carried over to a limited purpose FSA for all employees enrolled in HDHPs linked to an HSA.
- The employee enrolls in a limited purpose FSA and elects to have unused monies from the prior year’s general purpose FSA carried over to a limited purpose health care FSA.
- The plan allows participants to decline carryover and the employee declines the carryover option by the end of the year for which carryover is available.
Presumably, the employer will have until December 31, 2014, to make any needed plan amendments.
Question of the Month
Q: Must employers offer coverage to seasonal employees?
A: The rules for seasonal employees have evolved and are a bit complicated. The first thing to remember is that small employers do not have to offer coverage to any employees, including seasonal employees, to meet the employer-shared responsibility (“play or pay”) requirement.
Larger employers do need to consider seasonal employees. Seasonal employees are defined and handled differently in different situations. “Seasonal workers” matter when deciding if the employer is large enough for the employer-shared responsibility rules to apply. If the employer exceeds 50 (or 100 in 2014) full-time and full-time equivalent (FTE) employees only because of seasonal workers, then it can exclude seasonal workers when deciding if it has enough employees for this requirement to apply. A seasonal worker is one who actually works fewer than 120 calendar days (or four calendar months) in a year and works during a specific season or seasons.
When deciding if a person is full-time and therefore needs to be offered coverage, the employer must consider seasonal employees. A seasonal employee is one who is scheduled to work fewer than six months in a year, and during a specific season or seasons. Although it has been stated that seasonal employees do not have to be offered coverage, an employer cannot simply disregard these workers. As a practical matter, if the employer uses a 12-month measurement period, it is unlikely that a seasonal employee would average 30 hours over the 12-month period, and so would not be “full-time.” However, to say that these workers can automatically be excluded is an over-simplification.