On December 14th, the U.S. District Court for the Fifth Circuit in Texas ruled the Affordable Care Act (ACA) unconstitutional in light of the Tax Cuts and Jobs Act of 2017 which eliminated the tax penalty under the individual mandate. The district court sided with 20 Republican state attorneys general that argued since the individual mandate was eliminated, the entire law was invalidated. The ruling went further and also ruled that all of the consumer protections under the ACA were tied to the individual mandate and they were also unconstitutional. These include the prohibition against insurers charging patients more for pre-existing conditions, allowing children to stay on their parent’s plans until age 26, and removal of caps on coverage.
The judge in the case did not rule the law has to be enjoined immediately, however, it is unclear when the ruling would take effect. Sixteen Democratic state attorneys general and the District of Columbia filed a motion asking the court to clarify the impact of the ruling and confirm that the ACA “is still the law of the land.” Additionally, a series of appeals will most likely keep the ruling from being enacted anytime in the near future… thus:
- People can still enroll in ACA health plans in states with extended deadlines (without an extension, exchange enrollment ended on December 14th.);
- There is no impact on 2019 plans that people may have recently enrolled in. Immediately following the ruling, Seema Verma, Administrator of the Centers for Medicare & Medicaid Services, stated the ruling “has no impact on current coverage or coverage in a 2019 plan;”
- Employers still face IRS deadlines to file forms 1095-B and 1095-C. (1095-B and 1095-C forms must be delivered to individuals by March 4, 2019. The 1094 and 1095 B & C forms must be filed with the IRS by February 28th if filing paper and April 1st if filing electronically);
- The Employer Mandate is still in force, penalties have been and will continue to be assessed for failure to file these returns;
- With the Employer Mandate still in force, Applicable Large Employers (ALEs) should continue to follow the Employer Shared Responsibility Rules (ESR) to avoid a penalty. This means offering a plan that meets minimum value and affordability to at least 95% of your full time employees (defined as those working at least 30 or more hours per week).
The case will most likely make its way to the U.S. Fifth Circuit Court of Appeals and then to the U.S. Supreme Court before any definitive action can be considered.
The Patient-Centered Outcomes Research Trust Fund fee is a fee on issuers of health insurance policies and plan sponsors of self-insured health plans that helps to fund the Patient-Centered Outcomes Research Institute (PCORI), which was established by the Affordable Care Act (ACA). The institute assists, through research, patients, clinicians, purchasers and policy-makers, in making health decisions by advancing the quality of evidence-based medicine. The institute compiles and distributes comparative clinical effectiveness research findings. Under the ACA, all medical plans are responsible for paying the Patient-Centered Outcomes Research fee to the IRS, based on the number of plan participants. If the plan is fully-insured, the insurance carrier pays the fee on behalf of the policyholder. If the plan is self-insured, the employer/plan sponsor must file the Form 720 for the second quarter and pay the fee to the IRS directly.
The IRS recently published its PCOR fee for policy and plan years ending: January through September 2018 the applicable dollar amount is $2.39, which is multiplied by the number of covered lives determined for the appropriate period. For policy and plan years ending October through December 2018, the applicable dollar amount is $2.45.
All self-insured medical plans, including health FSAs and HRAs must pay the fee unless they are considered an excepted-benefit:
- A health FSA is an excepted-benefit as long as the employer does not contribute more than $500/year to the accounts and offers another medical plan with non-excepted benefits.
- An HRA is an excepted-benefit if it only reimburses for excepted-benefits (e.g., limited-scope dental and vision expenses or long-term care coverage) and is not integrated with the group medical plan.
The PCORI fee is calculated off the average number of lives covered during the policy year. That means that all parties enrolled will have to be accounted for such as dependents, spouses, retirees, and COBRA beneficiaries. For HRA and health FSA plans, just count each participating employee as a covered life.
Payment of the PCOR fee for the calendar 2018 plan year — the last year the fee applies — will be due by July 31, 2019 (payments may extend into 2020 for non-calendar-year plans).
Clients who have elected to have Diversified Group assist with the PCOR fee calculation can expect an email in June 2019, which will include a copy of the completed Form 720 and a PCOR calculation worksheet with supporting documentation. Clients will need to file the Form 720 by July 31, 2019.
Section 1332 of the Affordable Care Act (ACA) permits a state to apply for a State Innovation Waiver to pursue innovative strategies for providing their residents with access to high quality, affordable health insurance while retaining the basic protections of the ACA. Recently several states have applied for waivers and have been approved. Among these is the State of Maine, which sought to reestablish the Maine Guaranteed Access Reinsurance Association – MGARA (originally established in 2012 but later suspended in light of the ACA’s transitional reinsurance program which expired in 2016). Maine’s Section 1332 waiver to reestablish MGARA was approved by the Department of Health and Human Services earlier this year. MGARA is a state instituted reinsurance program that automatically cedes high-risk enrollees with one of eight conditions (including various types of cancer, congestive heart failure, HIV and rheumatoid arthritis) and voluntary cedes other high-risk enrollees to the pool in an attempt to help stabilize individual medical premiums by about 9 percent each year beginning in 2019. The program is slated to initially run from January, 2019 through December, 2023. The Governor’s Office pushed to get the program up and running by January, 2019 in an attempt to substantially lower premiums in the individual market.
One of the funding sources supporting MGARA’s operations is a quarterly assessment due from each insured and self-insured plan that writes or otherwise provides medical insurance in Maine (other than federal or state government plans) beginning in 2019 at $4.00 per month for each covered person enrolled under each such policy or plan. Only federal and state employees are exempt from the assessment. The 2019 Quarterly Assessment will apply to policies and plans initiated or renewed on or after January 1, 2019, with the first assessment due on May 15, 2019, and 45 days from the end of each calendar quarter thereafter. Self-funded plans using a Third Party Administrator (TPA) will be assessed and reported through their TPA similar to other state assessments.
Diversified Group will collect and report the MGARA on behalf of our self-insured clients who have members residing in Maine.
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.
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.
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.
$10 / hour
|Rate of Pay
|Federal Poverty Line*
*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.
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.
All 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.