All posts tagged compliance

On April 4, 2017, the Department of Labor (DOL) announced that the applicability date for the final fiduciary rule will be extended, and published its final rule extending the applicability date in the Federal Register on April 7. This extension is pursuant to President Trump’s February 3, 2017 presidential memorandum directing the DOL to further examine the rule and the DOL’s proposed rule to extend the deadline released on March 2, 2017.

The length of the extension differs between certain requirements and/or components of the rule.  Below are the components and when and how applicability applies:

  • Final rule defining who is a “fiduciary”: Under the final rule, advisors who are compensated for providing investment advice to retirement plan participants and individual account owners, including plan sponsors, are fiduciaries. The applicability date for the final rule is extended 60 days, from April 10 until June 9, 2017. Fiduciaries will be required to comply with the impartial conduct or “best interest” standards on the June 9 applicability date.
  • Best Interest Contract Exemption: Except for the impartial conduct standards (applicable June 9 per above), all other conditions of this exemption for covered transactions are applicable January 1, 2018. Therefore, fiduciaries intending to use this exemption must comply with the impartial conduct standard between June 9, 2017 and January 1, 2018.
  • Class Exemption for Principal Transactions: Except for the impartial conduct standards (applicable June 9 per above), all other conditions of this exemption for covered transactions are applicable January 1, 2018. Therefore, fiduciaries intending to use this exemption must comply with the impartial conduct standard between June 9, 2017 and January 1, 2018 and thereafter.
  • Prohibited Transaction Exemption 84-24 (relating to annuities): Except for the impartial conduct standard (applicable June 9 per above), the amendments to this exemption are applicable January 1, 2018.
  • Other previously granted exemptions: All amendments to other previously granted exemptions are applicable on June 9, 2017.

By Nicole Quinn-Gato, JD
Originally published by www.thinkhr.com

Last fall, President Barack Obama signed the Protecting Affordable Coverage for Employees Act (PACE), which preserved the historical definition of small employer to mean an employer that employs 1 to 50 employees. Prior to this newly signed legislation, the Patient Protection and Affordable Care Act (ACA) was set to expand the definition of a small employer to include companies with 51 to 100 employees (mid-size segment) beginning January 1, 2016.

If not for PACE, the mid-size segment would have become subject to the ACA provisions that impact small employers. Included in these provisions is a mandate that requires coverage for essential health benefits (not to be confused with minimum essential coverage, which the ACA requires of applicable large employers) and a requirement that small group plans provide coverage levels that equate to specific actuarial values. The original intent of expanding the definition of small group plans was to lower premium costs and to increase mandated benefits to a larger portion of the population.

The lower cost theory was based on the premise that broadening the risk pool of covered individuals within the small group market would spread the costs over a larger population, thereby reducing premiums to all. However, after further scrutiny and comments, there was concern that the expanded definition would actually increase premium costs to the mid-size segment because they would now be subject to community rating insurance standards. This shift to small group plans might also encourage mid-size groups to leave the fully-insured market by self-insuring – a move that could actually negate the intended benefits of the expanded definition.

Another issue with the ACA’s expanded definition of small group plans was that it would have resulted in a double standard for the mid-size segment. Not only would they be subject to the small group coverage requirements, but they would also be subject to the large employer mandate because they would meet the ACA’s definition of an applicable large employer.

Note: Although this bill preserves the traditional definition of a small employer, it does allow states to expand the definition to include organizations with 51 to 100 employees, if so desired.

By Vicki Randall
Originally published by www.ubabenefits.com

While many Americans will remember January 20, 2017 as the day the 45th President of the United States was sworn into office, employee benefits experts will also remember it as the day the IRS Office of Chief Counsel (OCC) released this memorandum that clarifies, among other things, the tax treatment of benefits paid by fixed-indemnity plans.

Fixed indemnity plans are generally voluntary benefits employers offer to complement or supplement group health insurance, such as a hospital indemnity plan that pays a fixed dollar amount for days in the hospital. The plans do not meet minimum essential coverage standards and are exempt from the Affordable Care Act.

In the memorandum, the IRS clarified that if an employer pays the fixed-indemnity premiums on behalf of employees and the value is excluded from employees’ gross income and wages or allows employees to pay premiums pre-tax through the employer’s cafeteria plan, the amount of any benefits paid to an employee under the plan will be included in the employee’s gross income and wages. On the other hand, if employees pay the premiums with after-tax dollars, then the benefits are not included in the employees’ gross income and wages.

While this creates a tax burden for the employee, it also creates a burden for employers, as they are tasked with determining whether an employee has received a benefit and the amount of the benefit to determine wages and applicable employment taxes.

Employers that offer employer-paid fixed indemnity plans or allow employees to pay for plans pre-tax are encouraged to work with their counsel, broker, carrier, or other trusted advisor to address their current practices and determine if any changes should be made.

By Nicole Quinn-Gato, JD
Originally published by www.thinkhr.com

Cafeteria plans, or plans governed by IRS Code Section 125, allow employers to help employees pay for expenses such as health insurance with pre-tax dollars. Employees are given a choice between a taxable benefit (cash) and two or more specified pre-tax qualified benefits, for example, health insurance. Employees are given the opportunity to select the benefits they want, just like an individual standing in the cafeteria line at lunch.

Only certain benefits can be offered through a cafeteria plan:

  • Coverage under an accident or health plan (which can include traditional health insurance, health maintenance organizations (HMOs), self-insured medical reimbursement plans, dental, vision, and more);
  • Dependent care assistance benefits or DCAPs
  • Group term life insurance
  • Paid time off, which allows employees the opportunity to buy or sell paid time off days
  • 401(k) contributions
  • Adoption assistance benefits
  • Health savings accounts or HSAs under IRS Code Section 223

Some employers want to offer other benefits through a cafeteria plan, but this is prohibited. Benefits that you cannot offer through a cafeteria plan include scholarships, group term life insurance for non-employees, transportation and other fringe benefits, long-term care, and health reimbursement arrangements (unless very specific rules are met by providing one in conjunction with a high deductible health plan). Benefits that defer compensation are also prohibited under cafeteria plan rules.

Cafeteria plans as a whole are not subject to ERISA, but all or some of the underlying benefits or components under the plan can be. The Patient Protection and Affordable Care Act (ACA) has also affected aspects of cafeteria plan administration.

Employees are allowed to choose the benefits they want by making elections. Only the employee can make elections, but they can make choices that cover other individuals such as spouses or dependents. Employees must be considered eligible by the plan to make elections. Elections, with an exception for new hires, must be prospective. Cafeteria plan selections are considered irrevocable and cannot be changed during the plan year, unless a permitted change in status occurs. There is an exception for mandatory two-year elections relating to dental or vision plans that meet certain requirements.

Plans may allow participants to change elections based on the following changes in status:

  • Change in marital status
  • Change in the number of dependents
  • Change in employment status
  • A dependent satisfying or ceasing to satisfy dependent eligibility requirements
  • Change in residence
  • Commencement or termination of adoption proceedings

Plans may also allow participants to change elections based on the following changes that are not a change in status but nonetheless can trigger an election change:

  • Significant cost changes
  • Significant curtailment (or reduction) of coverage
  • Addition or improvement of benefit package option
  • Change in coverage of spouse or dependent under another employer plan
  • Loss of certain other health coverage (such as government provided coverage, such as Medicaid)
  • Changes in 401(k) contributions (employees are free to change their 401(k) contributions whenever they wish, in accordance with the administrator’s change process)
  • HIPAA special enrollment rights (contains requirements for HIPAA subject plans)
  • COBRA qualifying event
  • Judgment, decrees, or orders
  • Entitlement to Medicare or Medicaid
  • Family Medical Leave Act (FMLA) leave
  • Pre-tax health savings account (HSA) contributions (employees are free to change their HSA contributions whenever they wish, in accordance with the their payroll/accounting department process)
  • Reduction of hours (new under the ACA)
  • Exchange/Marketplace enrollment (new under the ACA)

Together, the change in status events and other recognized changes are considered “permitted election change events.”

Common changes that do not constitute a permitted election change event are: a provider leaving a network (unless, based on very narrow circumstances, it resulted in a significant reduction of coverage), a legal separation (unless the separation leads to a loss of eligibility under the plan), commencement of a domestic partner relationship, or a change in financial condition.

There are some events not in the regulations that could allow an individual to make a mid-year election change, such as a mistake by the employer or employee, or needing to change elections in order to pass nondiscrimination tests. To make a change due to a mistake, there must be clear and convincing evidence that the mistake has been made. For instance, an individual might accidentally sign up for family coverage when they are single with no children, or an employer might withhold $100 dollars per pay period for a flexible spending arrangement (FSA) when the individual elected to withhold $50.

Plans are permitted to make automatic payroll election increases or decreases for insignificant amounts in the middle of the plan year, so long as automatic election language is in the plan documents. An “insignificant” amount is considered one percent or less.

Plans should consider which change in status events to allow, how to track change in status requests, and the time limit to impose on employees who wish to make an election.

Cafeteria plans are not required to allow employees to change their elections, but plans that do allow changes must follow IRS requirements. These requirements include consistency, plan document allowance, documentation, and timing of the election change. For complete details on each of these requirements—as well as numerous examples of change in status events, including scenarios involving employees or their spouses or dependents entering into domestic partnerships, ending periods of incarceration, losing or gaining TRICARE coverage, and cost changes to an employer health plan—request UBA’s ACA Advisor, “Cafeteria Plans: Qualifying Events and Changing Employee Elections”.

By Danielle Capilla
Originally published by www.ubabenefits.com

Employer-sponsored health insurance is greatly affected by geographic region, industry, and employer size. While some cost trends have been fairly consistent since the Patient Protection and Affordable Care Act (ACA) was put in place, United Benefit Advisors (UBA) finds several surprises in their 2016 Health Plan Survey.

Based on responses from more than 11,000 employers, UBA announces the top five best and worst states for group health care costs.

Check out this video and contact us to go over the UBA Health Plan Survey.

 

 

 

 

Determining how an employer develops the most effective formulary, while protecting the financial stability of the plan, is certainly the challenge of this decade. Prescription management used to mean monitoring that the right people are taking medications to control their disease while creating strategies to move them from brand name to generic medications. With the dawn of specialty medications, formulary management has become a game of maximizing the pass-through of rebates, creating the best prior authorization strategies and tiering of benefits to create some barrier to more expensive medications, all without becoming too disruptive. As benefits managers know, that is a difficult challenge. The latest UBA Health Plan Survey revealed that 53.6 percent of plans offer four tiers or more, a 21.5 percent increase from last year and nearly a 55.5 percent increase in just two years. Thus, making “tiering” a top strategy to control drug costs. There are many additional opportunities to improve and help control the pharmacy investment, but focusing on the key components of formulary management and working on solutions that decrease the demands for medications are critical to successful plan management.

When developing a formulary, Brenda Motheral, RPh, MBA, Ph.D., CEO of Archimedes, suggests that chasing rebates is not a strategy to optimize your investment. Some of the highest rebates may be from medications that add no better therapeutic value than an inexpensive medication that does not offer a rebate, but net cost is much lower than the brand or specialty medication being offered. Best formulary management will mean that specific medications that do not offer a significant therapeutic value are removed from the formulary, or are covered at a “referenced price” so the member pays the cost difference. Formulary management will need to focus on where the drug is filled and which medications are available.

When setting up parameters on where a drug is to be filled, the decision needs to be made if a plan will promote mail order. Mail order, if used and monitored appropriately, makes it more convenient for a patient to receive their regularly used medications and may provide savings. In fact, the UBA Health Plan Survey finds that more than one-third (36.3 percent) of prescription drug plans provide a 90-day supply at a cost of two times retail copays. But if mail order programs are not monitored, people can continue to receive medications that are no longer required and never used, adding to medical spend waste. Furthermore, in our analysis, we are finding that not all medications are less expensive through mail order, as shown in Figure 1 below. Therefore, examining the cost differential is critical in a decision to promote, or not promote, mail order.

Figure 1

Drug Name Rx Category Mail Order Retail
Zytiga® Malignancies $8,749 $6,027
Sumatriptan Succinate Migrane / Neurologic $575 $308
Ranexa® Cardiovascular $259 $413

 

Another formulary consideration is in monitoring the increase in same drug pricing. The stories surrounding the price increases of EpiPens® has been well-documented, but how well do you understand the impact of price increases on your plan? Monitoring price increases, as shown in Figure 2, may help an employer turn to their pharmacy benefit manager (PBM) to ask for help in controlling these price increases, or help in decisions related to formulary inclusion.

Figure 2

Drug Name Rx Category Plan Paid per
30-day Supply
(SPLY)
Plan Paid per
30-day Supply
Cialis® Genito-Urinary / Acute Minor $287 $442
AndroGel® Endocrine / Chronic Meidcal $471 $523
Viagra® Genito-Urinary / Acute Minor $615 $978

 

Formulary management solutions can become a cat-and-mouse game. The ultimate approach to manage the total spending on medications is by managing the growing demand. There has been significant press related to the opioid overutilization in the U.S., as illustrated in the article “Prescription Addiction.” But that issue is much broader in our society and relates to taking a pill as a quick solution to solve our medical problems. In March 2016, the Department of Health and Human Services (HHS) stated that 30 percent of the growth in spending related to medications was due to an increase in prescriptions per person. Certainly, medications should be used when there are no alternatives to control disease or pain. However, turning to medications as a first option for chronic condition control for issues like hypertension, blood sugar control, cholesterol control versus improving diet and exercise, etc., is just a band-aid solution that, in most cases, does not resolve the root issue. Yet, because this is sold as a quick fix, we see an increase in the number of individuals on medications. In 2012, 34 percent of plan members engaged in Vital Incite were taking four or more (active ingredients) medications, and that has grown to more than 45 percent in 2016. The data also illustrates that in 2012 more than 42 percent of members were not on any medications, but that group size has shrunk to only 27 percent. No formulary can impact this issue.

Active Ingredient Use, All Clients, All Members 21 Years and Older

This increased use could be considered an improvement in care if their disease were more controlled. Appropriate and medically-impactful utilization would mean that a person is working toward improving diet and exercise and is taking the least expensive, yet effective, medication to control his or her disease.

Considering that diabetes medication options have really expanded, an employer would hope that the more expensive medication is providing the best control of disease. But, taking the medication alone will not control the disease and, at times, the progression of the medication cost can be related to progression of the disease due to a lack of disease management. For instance, a diabetic may have progressed from taking metphormin (marketed under the tradename Glucophage® among others), which costs approximately $27 per month, to metphormin ER (Glucophage® XR), which allows a person to take only one pill a day, so it may provide increased compliance, but costs $274 per month. Now, the option of taking Glumetza® is offered, which can be reimbursed at up to $3,620 per month, and is said to provide more stable results. But, if we examine the A1c control values from Vital Incite, do we find the reduction in A1c values as evidence that this additional investment in medication options is providing better control? Figure 3 provides an example of A1c control by prescription status. The goal would be that those on medications will become controlled. But, in our data, we are not seeing a significant improvement in persons with HgA1c levels above 7 percent. Control is achieved from diet, exercise, and appropriate medications. There are theories that people on these more expensive medications are using that as an approach to help them maintain their unhealthy behaviors. Therefore, taking medications alone does not appear to provide an effective solution and, in fact, providing chronic condition medications for free, without requiring any other effort, may not be the best investment for an employer.

Figure 3

HgA1c Level In Treatment Untreated Discontinued
Treatment
Possibly
Untreated
< 5.7 6 1 2 3
5.7 to 6.4 21 2 1 11
6.5 to 7.0 17 7
> 7.0 53 4 5

 

In conclusion, determining which issues are having the most impact on an employer group will allow benefits managers to determine the company’s priorities. This is not an easy task, but with pharmacy spend increasing at a national average of 7.3 percent annually and becoming a higher percentage of the overall medical spend, new strategies need to be considered. Focusing on the key components that balance formulary management with the correct approach to manage the demand on medications can influence total pharmacy spend.

Originally published by www.ubabenefits.com

 

In a few weeks, a second season of shared responsibility reporting will begin. For some of you, last year’s inaugural year of reporting may have felt eerily similar to Lewis Carroll’s famous book. You know the one. It included a little girl falling down a dark hole, a rabbit frantically checking his watch and a lot of other crazy characters. Now that you have the benefit of one year of reporting under your belt, let’s look at the reporting forms and try to make them less confusing by breaking them down.

Background

The Patient Protection and Affordable Care Act (PPACA), commonly called the Affordable Care Act (ACA), included various mandates to ensure all citizens have affordable coverage for health care expenses. There is a mandate at the individual level and then other mandates at the employer level.

  • Individual Shared Responsibility Mandate: This mandate requires all citizens to have minimum essential coverage (MEC). If they do not, they must qualify for an exception or they will be subject to a penalty. Individuals use the 1095 forms, or a similar statement, to document that they have the required coverage.
  • Employer Shared Responsibility Mandates: These mandates apply to group health plans. One requirement is that all plans that provide MEC must report who is covered by their plan. There are also requirements which only apply to employers that are considered to be an applicable large employer (ALE), which is defined as any employer that employed, on average, at least 50 full-time employees. These requirements mandate that all ALEs must provide MEC to their full-time employees and this MEC needs to be affordable. If they do not provide MEC, they could be subject to a penalty (sometimes referred to as the “A” penalty). If the MEC they provide does not meet the definition of affordable, then the ALE could be subject to a different penalty (sometimes referred to as the “B” penalty).

In general, the objective of 1094/1095 reporting is (1) to verify those individuals who had the required MEC; and, (2) to make sure ALEs are offering affordable MEC to their full-time employees. If this isn’t happening, 1094/1095 reporting provides the information necessary for the IRS to know whether a penalty to the individual, or to the ALE, is in order.

1095-B vs. 1095-C, “I don’t understand the difference!”

1095-B

Form 1095-B provides evidence that an individual had MEC. It provides reporting strictly for the individual shared responsibility mandate. It will not trigger any employer shared responsibility penalties. It is used to provide documentation for an individual to preclude them from an individual penalty. The 1095-B is required of employer group health plans in two situations:

Situation 1: the plan is fully-insured. It is the insurance carrier’s responsibility to file the 1094/1095-B with the IRS.

Situation 2: the plan is self-insured and you are not an ALE. It is the employer’s responsibility to file with the IRS.

In these situations, a Form 1095-B is to be generated for all covered individuals regardless of employment status.

When is a Form 1095-B required

1095-C

Form 1095-C provides evidence that an ALE offered, or did not offer, affordable MEC to all full-time employees. In other words, it documents whether an ALE met the employer shared responsibility requirements. For self-insured ALEs, Form 1095-C also provides documentation that an individual had MEC, thereby meeting the individual shared responsibility requirement.

Because, in some situations, this form reports on both the employer and the individual shared responsibility mandates, it can feel nonsensical at times. To make sense, a short history lesson may be helpful.

History of Form 1095-C

When the proposed reporting regulations were first released for comment, the 1095-B was to be used for individual shared responsibility reporting and the 1095-C was to be used exclusively for employer shared responsibility reporting. As such, the 1095-C was only a two-part form with Part I being employer identification information and Part II being information on the offer of coverage that was made to full-time employees.

If the reporting forms had remained as initially proposed, self-insured ALEs would have been required to make two filings (the 1094/1095-B filing and 1094/1095-C filing). Why? Because they have a responsibility to report everyone that has MEC through their plan and they also have a responsibility to report on the offers of coverage they made to full-time employees.

Debate over this double filing requirement ensued and ultimately resulted in change. This change eliminated the double filing requirement for self-insured ALEs by revising the 1095-C. The resulting form still has Parts I and II referenced above, but it now also has Part III where employers can report the individual coverage information that was originally proposed to be reported on the 1095-B.

All ALEs are required to file Form 1095-C. However, which parts of the Form 1095-C you complete will be determined according to three situations as follows:

Situation 1 – Fully-insured Health Plan: You will complete Parts I and II for all individuals that were full-time employees at some point during the year. Part III information will be reported by your insurance company on Form 1095-B.

Situation 2 – Self-insured Health Plan: You will complete Parts I, II and III for all individuals that were full-time employees at some point during the year, as well as for individuals that have MEC through your plan.

Situation 3 – No Health Plan: If you are an ALE with no health plan, you will complete Parts I and II for all individuals that were full-time employees at some point during the year.

Which parts of Form 1095-C does an ALE need to complete

Let’s recap the 1095-C:

  • The 1095-C is required of all ALEs.
  • The 1095-C is a three-part form.
    Part I captures employer identification information.Part II is the area used to report what offers of coverage were made and whether or not those offers were affordable. This part addresses the employer shared responsibility mandates and determines whether or not employers are at risk for an employer penalty.Part III, which only gets completed if you have a self-insured plan, is the area used to report who had MEC through your plan. This part addresses the individual shared responsibility mandate and determines whether or not an individual is at risk for an individual penalty.

Final Thoughts

Keep in mind, if you have a self-insured plan, a Form 1095-C is required for all full-time employees, as well as anyone who had coverage through your plan, so there may be situations where you are required to produce a 1095-C for individuals that do not meet the ACA full-time employee definition that identifies those employees for whom you have an employer shared responsibility requirement. In these situations, Part II can cause concern, or an initial fear, that a penalty could be assessed because these individuals may not meet the affordability requirement. Remember, these individuals do not meet the full-time definition, therefore, they cannot trigger an employer shared responsibility penalty.

That’s 1095-B and 1095-C in a nutshell, albeit a very large nutshell. Although there are still a lot of crazy characters associated with ACA reporting, perhaps this has shed some light on the dark hole you may feel like you fell into and, hopefully, you can parlay it into a smoother reporting process in the new year. Happy reporting!

Resources

Employers that did not fulfill all of their obligations under the employer shared responsibility provision (play or pay) in regard to the 2015 plan year might owe a penalty to the IRS. In addition, employers will be notified if an employee who either was not offered coverage, or who was not offered affordable, minimum value, or minimum essential coverage, goes to the Exchange and gets a subsidy or “advance premium tax credit.” To understand this “Employer Notice Program” the appeals process, and how affordability must be documented, request UBA’s newest ACA Advisor, “IRS reporting Now What?”

UBA has created a template letter that employers may use to draft written communication to employees regarding what to expect in relation to IRS Forms 1095-B and 1095-C, and what employees should do with a form or forms they receive. The template is meant to be adjustable for each employer, and further information could be added if it is pertinent to the employer or its workforce. Employers can now request this template tool from a local UBA Partner.

Originally published by www.ubabenefits.com

Recently, the Department of the Treasury, Department of Labor (DOL), and Department of Health and Human Services (HHS) (collectively, the Departments) issued FAQs About Affordable Care Act Implementation Part 34 and Mental Health and Substance Use Disorder Parity Implementation.

The Departments’ FAQs cover two primary topics: tobacco cessation coverage and mental health / substance use disorder parity.

Tobacco Cessation Coverage

The Departments seek public comment by January 3, 2017, on tobacco cessation coverage. The Departments intend to clarify the items and services that must be provided without cost sharing to comply with the United States Preventive Services Task Force’s updated tobacco cessation interventions recommendation applicable to plan years or policy years beginning on or after September 22, 2016.

Mental Health / Substance Use Disorder Parity

Generally, the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) requires that the financial requirements and treatment limitations imposed on mental health and substance use disorder (MH/SUD) benefits cannot be more restrictive than the predominant financial requirements and treatment limitations that apply to substantially all medical and surgical benefits.

A financial requirement (such as a copayment or coinsurance) or quantitative treatment limitation (such as a day or visit limit) is considered to apply to substantially all medical/surgical benefits in a classification if it applies to at least two-thirds of all medical/surgical benefits in the classification.

If it does not apply to at least two-thirds of medical/surgical benefits, it cannot be applied to MH/SUD benefits in that classification.

If it does apply to at least two-thirds of medical/surgical benefits, the level (such as 80 percent or 70 percent coinsurance) of the quantitative limit that may be applied to MH/SUD benefits in a classification may not be more restrictive than the predominant level that applies to medical/surgical benefits (defined as the level that applies to more than one-half of medical/surgical benefits subject to the limitation in the classification).

In performing these calculations, the determination of the portion of medical/surgical benefits subject to the quantitative limit is based on the dollar amount of all plan payments for medical/surgical benefits in the classification expected to be paid under the plan for the plan year. The MHPAEA regulations provide that “any reasonable method” may be used to determine the dollar amount of all plan payments for the substantially all and predominant analyses.

MHPAEA’s provisions and its regulations expressly provide that a plan or issuer must disclose the criteria for medical necessity determinations with respect to MH/SUD benefits to any current or potential participant, beneficiary, or contracting provider upon request and the reason for any denial of reimbursement or payment for services with respect to MH/SUD benefits to the participant or beneficiary.

However, the Departments recognize that additional information regarding medical/surgical benefits is necessary to perform the required MHPAEA analyses. According to the FAQs, the Department have continued to receive questions regarding disclosures related to the processes, strategies, evidentiary standards, and other factors used to apply a nonquantitative treatment limitation (NQTL) with respect to medical/surgical benefits and MH/SUD benefits under a plan. Also, the Departments have received requests to explore ways to encourage uniformity among state reviews of issuers’ compliance with the NQTL standards, including the use of model forms to report NQTL information.

To address these issues, the Departments seek public comment by January 3, 2017, on potential model forms that could be used by participants and their representatives to request information on various NQTLs. The Departments also seek public comment on the disclosure process for MH/SUD benefits and on steps that could improve state market conduct examinations or federal oversight of compliance by plans and issuers, or both.

 

By Danielle Capilla, Originally published by United Benefit Advisors – Read More

Following the November 2016 election, Donald Trump (R) will be sworn in as the next President of the United States on January 20, 2017. The Republicans will also have the majority in the Senate (51 Republican, 47 Democrat) and in the House of Representatives (238 Republicans, 191 Democrat). As a result, the political atmosphere is favorable for the Trump Administration to begin implementing its healthcare policy objectives. Representative Paul Ryan (R-Wis.) will likely remain the Speaker of the House. Known as an individual who is experienced in policy, it is expected that the Republican House will work to pass legislation that follows the health care policies in Speaker Ryan’s “A Better Way” proposals. The success of any of these proposals remains to be seen.

Employers should be aware of the main tenets of President-elect Trump’s proposals, as well as the policies outlined in Speaker Ryan’s white paper. These proposals are likely to have an impact on employer sponsored health and welfare benefits. Repeal of the Patient Protection and Affordable Care Act (ACA) and capping the employer-sponsored insurance (ESI) exclusion for individuals would have a significant effect on employer sponsored group health plans.

Trump Policy Proposals

President-elect Trump’s policy initiatives have seven main components:

  • Repeal the ACA. President-elect Trump has vowed to completely repeal the ACA as his first order of Presidential business.
  • Allow health insurance to be purchased across state lines.
  • Allow individuals to fully deduct health insurance premium payments from their tax returns.
  • Allow individuals to use health savings accounts (HSAs) in a more robust way than regulation currently allows. President-elect Trump’s proposal specifically mentions allowing HSAs to be part of an individual’s estate and allowing HSA funds to be spent by any member of the account owner’s family.
  • Require price transparency from all healthcare providers.
  • Block-grant Medicaid to the states. This would remove federal provisions on how Medicaid dollars can and should be spent by the states.
  • Remove barriers to entry into the free market for the pharmaceutical industry. This includes allowing American consumers access to imported drugs.

President-elect Trump’s proposal also notes that his immigration reform proposals would assist in lowering healthcare costs, due to the current amount of spending on healthcare for illegal immigrants. His proposal also states that the mental health programs and institutions in the United States are in need of reform, and that by providing more jobs to Americans we will reduce the reliance of Medicaid and the Children’s Health Insurance Program (CHIP).

Speaker Ryan’s “A Better Way” Proposal

In June 2016, Speaker Ryan released a series of white papers on national issues under the banner “A Better Way.” With Republican control of the House and Senate, it would be plausible that elected officials will begin working to implement some, if not all, of the ideas proposed. The core tenants of Speaker Ryan’s proposal are:

  • Repeal the ACA in full.
  • Expand consumer choice through consumer-directed health care. Speaker Ryan’s proposal includes specific means for this expansion, namely by allowing spouses to make catch-up contributions to HSA accounts, allow qualified medical expenses incurred up to 60 days prior to the HSA-qualified coverage began to be reimbursed, set the maximum contribution of HSA accounts at the maximum combined and allowed annual high deductible health plan (HDHP) deductible and out-of-pocket expenses limits, and expand HSA access for groups such as those with TRICARE coverage. The proposal also recommends allowing individuals to use employer provided health reimbursement account (HRA) funds to purchase individual coverage.
  • Support portable coverage. Speaker Ryan supports access to financial support for an insurance plan chosen by an individual through an advanceable, refundable tax credit for individuals and families, available at the beginning of every month and adjusted for age. The credit would be available to those without job-based coverage, Medicare, or Medicaid. It would be large enough to purchase a pre-ACA insurance policy. If the individual selected a plan that cost less than the financial support, the difference would be deposited into an “HSA-like” account and used toward other health care expenses.
  • Cap the employer-sponsored insurance (ESI) exclusion for individuals. Speaker Ryan’s proposal argues that the ESI exclusion raises premiums for employer-based coverage by 10 to 15 percent and holds down wages as workers substitute tax-free benefits for taxable income. Employee contributions to HSAs would not count toward the cost of coverage on the ESI cap.
  • Allow health insurance to be purchased across state lines.
  • Allow small businesses to band together an offer “association health plans” or AHPs. This would allow alumni organizations, trade associations, and other groups to pool together and improve bargaining power.
  • Preserve employer wellness programs. Speaker Ryan’s proposal would limit the Equal Employment Opportunity Commission (EEOC) oversight over wellness programs by finding that voluntary wellness programs do not violate the Americans with Disabilities Act of 1990 (ADA) and the collection of information would not violate the Genetic Information Nondiscrimination Act of 2008 (GINA).
  • Ensure self-insured employer sponsored group health coverage has robust access to stop-loss coverage by ensuring stop-loss coverage is not classified as group health insurance. This provision would also remove the ACA’s Cadillac tax.
  • Enact medical liability reform by implementing caps on non-economic damages in medical malpractice lawsuits and limiting contingency fees charged by plaintiff’s attorneys.
  • Address competition in insurance markets by charging the Government Accountability Office (GAO) to study the advantages and disadvantages of removing the limited McCarran-Ferguson antitrust exemption for health insurance carriers to increase competition and lower prices. The exemption allows insurers to pool historic loss information so they can project future losses and jointly develop policy.
  • Provide for patient protections by continuing pre-existing condition protections, allow dependents to stay on their parents’ plans until age 26, continue the prohibitions on rescissions of coverage, allow cost limitations on older Americans’ plans to be based on a five to one ratio (currently the ratio is three to one under the ACA), provide for state innovation grants, and dedicate funding to high risk pools.

Speaker Ryan’s white paper also addresses more robust protection of life by enforcing the Hyde Amendment (which prohibits federal taxpayer dollars from being used to pay for abortion or abortion coverage) and improved conscience protections for health care providers by enacting and expanding the Weldon Amendment.

Speaker Ryan also proposes other initiatives including robust Medicaid reforms, strengthening Medicare Advantage, repealing the Independent Payment Advisory Board (IPAB) that was once referred to as “death panels,” combine Medicare Part A and Part B, repealing the ban on physician-owned hospitals, and repealing the “Bay State Boondoggle.”

Process of Repeal

Generally speaking, the process of repealing a law is the same as creating a law. A repeal can be a simple repeal, or legislators can try to pass legislation to repeal and replace. Bills can begin in the House of Representatives, and if passed by the House, they are referred to the Senate. If it passes the Senate, it is sent to the President for signature or veto. Bills that begin in the Senate and pass the Senate are sent to the House of Representatives, which can pass (and if they wish, amend) the bill. If the Senate agrees with the bill as it is received from the House, or after conference with the House regarding amendments, they enroll the bill and it is sent to the White House for signature or veto.

Although Republicans hold the majority in the Senate, they do not have enough party votes to allow them to overcome a potential filibuster. A filibuster is when debate over a proposed piece of legislation is extended, allowing a delay or completely preventing the legislation from coming to a vote. Filibusters can continue until “three-fifths of the Senators duly chosen and sworn” close the debate by invoking cloture, or a parliamentary procedure that brings a debate to an end. Three-fifths of the Senate is 60 votes.

There is potential to dismantle the ACA by using a budget tool known as reconciliation, which cannot be filibustered. If Congress can draft a reconciliation bill that meets the complex requirements of our budget rules, it would only need a simple majority of the Senate (51 votes) to pass.

Neither President-elect Trump nor Speaker Ryan has given any indication as to whether a full repeal, or a repeal and replace, would be their preferred method of action.

The viability of any of these initiatives remains to be seen, but with a Republican President and a Republican-controlled House and Senate, if lawmakers are able to reach agreeable terms across the executive and legislative branches, some level of change is to be expected.

A cafeteria plan is an employer-provided written plan that offers employees the opportunity to choose between at least one permitted taxable benefit and at least one qualified employee benefit. There is no federal law that requires employers to establish cafeteria plans; however, some states require employers to have cafeteria plans for employees to pay for health insurance on a pre-tax basis.

To comply with Internal Revenue Code Section 125, a cafeteria plan must satisfy a set of structural requirements and a set of nondiscrimination rules. Violations of the structural requirements will disqualify the entire plan so that no employee obtains the favorable tax benefits under Section 125, even if the plan meets the nondiscrimination rules. Violations of the nondiscrimination rules have adverse consequences only on the group of employees in whose favor discrimination is prohibited.

A cafeteria plan must pass an eligibility test, a contributions and benefits test, and a concentration test for highly compensated individuals to receive the tax benefits of Section 125. Failure to meet these nondiscrimination requirements has no effect on non-highly compensated cafeteria plan participants.

The IRS issued proposed cafeteria plan regulations on August 6, 2007. Final regulations have not been issued. According to the proposed regulations, taxpayers may rely on the proposed regulations for guidance pending the issuance of final regulations.

The proposed cafeteria plan regulations make it clear that the plan must meet the nondiscrimination tests. Also, the plan must not discriminate in favor of highly compensated participants in its operation. For example, a plan might be considered discriminatory if adoption assistance is added to the plan when the CEO is in the process of adopting a child and adoption assistance is dropped when the adoption is final.

Be aware that Section 125 nondiscrimination rules are separate from and unrelated to Section 105(h) nondiscrimination rules. Further, Section 125 nondiscrimination rules apply to all cafeteria plans regardless of their status as fully insured, self-funded, church plan, or governmental plan.

As a practical matter, these nondiscrimination rules prohibit executive health plans offered through a cafeteria plan.

Nondiscrimination testing can help employers avoid rule violations. But there are a number of definitions of key terms used in the tests that must be understood prior to completing the tests:

Highly Compensated Individuals. Highly compensated individuals are defined as:

  • Officers
  • Five percent shareholders
  • Highly compensated employees (HCEs)
  • Spouses or dependents of any of the preceding individuals

Highly Compensated Participant. A highly compensated participant is a highly compensated individual who is eligible to participate in the cafeteria plan.

Officers. Officers include any individual who was an officer of the company for the prior plan year (or current plan year in the case of the first year of employment).

Five Percent Shareholders. Five percent shareholders include any individual who – in either the preceding plan year or current plan year – owns more than five percent of the voting power or value of all classes of stock of the employer, determined without attribution.

Highly Compensated. Highly compensated means any individual or participant who – for the prior plan year or the current plan year in the case of the first year of employment – had annual compensation from the employer in excess of the compensation amount specified in the Internal Revenue Code and, if elected by the employer, was also in the top-paid group of employees for the year. For 2016, the applicable compensation amount is $120,000.

Key Employee. A key employee is a participant who, at any time during the plan year, is one of the following:

  • An officer with annual compensation greater than an indexed amount ($170,000 for 2016)
  • A five percent owner of the employer
  • A one percent owner having compensation in excess of $150,000

For comprehensive information on the eligibility test—including the safe harbor and unsafe harbor percentages and example scenarios—as well as the contributions and benefits test, and safe harbors, request UBA’s Compliance Advisor, “Nondiscrimination Rules for Cafeteria Plans”.

Originally published by www.ubabenefits.com