Association Health Plans Final Rules Released

On June 19, 2018, the U.S. Department of Labor released the final rule on Association Health Plans (AHPs). The rule seeks to expand health coverage among small employer groups and self-employed individuals. It will make it easier for small business to join together to purchase health insurance without the myriad of regulations individual states and the Affordable Care Act (ACA) imposes on smaller fully insured employers. AHPs are not required to provide the essential health benefits (EHBs) package included in the ACA. The plans have been intended to provide less expensive options for small businesses, regional collectives, and industry groups that may not be able to purchase insurance through the public exchanges.

The rule broadens the definition of an employer under the Employee Retirement Income Security Act of 1974 (ERISA), to allow more groups to form association health plans and bypass rules under the Affordable Care Act. ERISA is the federal law that governs health benefits and retirement plans offered by large employers. Below is a comparison of the original proposed rule and the final rule just released.

association-health-plan-chart
The final rules confirm that self-insured Association Health Plans are considered Multiple Employer Welfare Arrangements (MEWAs) and does not curtail a state’s ability to regulate self-insured AHPs. This means that self-insured AHPs will be subject to MEWA laws in each state where coverage is offered/where members are located. Self-insured AHPs will have to follow the MEWA rules of the state with the most restrictive rule on an issue by issue basis. The final rule did leave an opening for future self-insured AHPs with the following language on page 96 of the 198 page regulation: “a potential future mechanism for preempting State insurance laws that go too far in regulating self-insured AHPs…” But for now, there is not anything in the final regulation designed to help self-insured AHPs thrive.

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ACA Affordability Percentage for 2019

On May 21, 2018, the Internal Revenue Service (IRS) issued Revenue Procedure 2018-34 which indexes the contribution percentages for 2019 for purposes of determining affordability of an employer’s plan under the Affordable Care Act (ACA).  For plan years beginning in 2019, employer-sponsored coverage will be considered affordable if the employee’s required contribution for self-only coverage does not exceed 9.86 percent of the employee’s household income for the year for purposes of the employer shared responsibility rules. This is an increase from the 2018 affordability threshold percentage of 9.56%. The 2019 increase in the affordability percentage for employer shared responsibility purposes means that employers will be able to charge employees a slightly higher price for their health benefits and still  meet the “affordability” test.

Since an employer would not know an employee’s household income, IRS Notice 2015-87 confirmed that ALEs using an affordability safe harbor may rely on the adjusted affordability contribution percentages if they use one of three affordability safe harbor methods. The three safe harbors to measure affordability are Form W-2 wages from that employer, the employee’s rate of pay or the federal poverty line (FPL) for a single individual. The affordability test applies only to the portion of the annual premiums for self-only coverage and does not include any additional cost for family coverage. Also, if an employer offers multiple health coverage options, the affordability test applies to the lowest-cost option that also satisfies the minimum value requirement.

Below is an example of how the percentage change impacts an employer’s monthly affordable amount using the three safe harbor tests.  The example assumes an employee earns $10/hour.

Safe Harbor

$10 / hour

2018

2019

W-2 Income

$165.71

$170.91

Rate of Pay

$124.28

$128.18

Federal Poverty Line*

$96.72

$99.75

*Based on Jan. 2018 FPL of $12,140

Under the ACA, employees (and their family members) who are eligible for coverage under an affordable employer-sponsored plan are generally not eligible for the premium tax credit from the Exchange. This is significant because the ACA’s employer shared responsibility penalty for applicable large employers (ALEs) is triggered when a full-time employee receives a premium tax credit for coverage under an Exchange.

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The IRS Announces Plan to Enforce ACA Employer Mandate Penalties

On November 8, 2017, the IRS announced that, for the first time, it would begin enforcement of the employer mandate under the Affordable Care Act (i.e., the assessment of tax penalties against large employers failing to provide affordable, minimum value health coverage to substantially all employees). The initiation of active enforcement efforts now comes as a surprise, as many anticipated that the IRS would not begin such efforts under the Trump administration.

Over the next few weeks, affected employers will receive an assessment letter to all employers the IRS believes owe ANY penalty under the ACA’s employer mandate. From guidance we have received, this could be due to:

  • Anticipated and appropriately assessed tax
  • Unanticipated, but appropriately assessed tax
  • ACA reporting errors

Any employer anticipating they COULD be receiving an assessment should be on the lookout. If you receive an assessment letter, ACT QUICKLY.

Questions? Concerns? Call Us!

We’re here to help, please contact Carol Parda-Ziolko at (888) 322-2524 ext. 427 or by email.

DG Compliance

Compliance Issues Keep Coming

ComplianceAll the talk about repeal and replace seems to have lulled many plan sponsors into a false sense of security, thinking that ACA regulations weren’t going to be enforced. Unfortunately, the IRS is preparing to begin penalizing non-compliant plans, which is why we continue to encourage our clients to keep their eye on the ball even though it is easier to follow the media frenzy coming from Capitol Hill.

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DG Compliance Alert: 2016 ACA Employer Shared Responsibilities Tracking & Reporting Services

diversified-group-aca-reporting-servicesWe have received a number of inquiries this year as to whether Diversified Group will be providing ACA reporting services for 2016. We are pleased to announce that we are partnering with MZQ Consulting again this year! MZQ Consulting did an exceptional job filing the 2015 1094-C and 1095-C for so many of our self-funded employers.

Last year, employers were granted an extension by the IRS for filing the forms. The IRS has also gone on record stating they will be forgiving if the 2015 forms weren’t necessarily completed correctly or on time. This year, however, it is unlikely the IRS will be as forgiving if forms are not accurate or file on time.

If you struggled with the 1094-C and 1095-C reporting requirement last year, you may want to consider having us help this year.

Click to learn more about our ACA Employer Shared Responsibility Tracking and Reporting Services!

Interested? Contact Diversified Today!
If you are interested in taking advantage of this service or have any questions, please contact Carol Parda-Ziolko today at (888) 322-2524 ext. 427.

TPAs vs ASOs - The Differences Matter