Doing What We Can

dgb-doing-what-we-can-blogWe often hear of professional athletes succeeding under pressure by staying “in the moment” and remaining focused on the things that are within their control. This challenge can be applied to the uncomfortable position all of us find ourselves in today – somewhere between complying with existing laws and anticipating the unknowns coming from Washington.

While the IRS has relaxed enforcement of the individual mandate and acknowledged problems in the ACA reporting system, it has confirmed that an applicable large employer is still subject to an employer shared responsibility payment if it fails to offer coverage to 95% of its full-time employees. We continue to help large employers offer minimum essential coverage to avoid penalties, when appropriate, and track offers of coverage to comply with reporting requirements on IRS forms 1094 and 1095.

Other matters remain up in the air as well, including the so-called Cadillac tax on high-cost health plans and any changes in maximum contributions that may be made to HSAs, which would require legislative action. While any significant ACA repeal, replace or repair efforts appear to be overshadowed by the Administration’s interest in tax reform, we continue to monitor developments in healthcare reform and keep our clients and partners informed. It’s our way of doing what we can and remaining “in the moment.”

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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

Great News for Self-Funded Plans: Senators Want to Quash ACA Sec 6056

The article below was published on October 10, 2017 by MyHealthGuide, written by Matthew Albright.

capital-hillA bipartisan group of senators introduced a bill the first week in October that will significantly ease the Affordable Care Act reporting mandates for employer-sponsored health plans.

The bill, called the Commonsense Reporting Act of 2017, in effect rolls back the employer reporting requirements of Section 6056 and creates a voluntary reporting system in its place. Self-funded plans must comply with both 6055 and 6056, though it’s less clear how the bill would affect Section 6055 requirements.

Technically, the bill proposes that an employer does not have to meet the 6056 IRS reporting requirements, as long as the employer takes part in a prospective reporting system set up by the bill.

The bill also relieves employers of the requirement to send notices to all employees under 6056, as long as the employer provides notices to employees who have been reported as having enrolled through an Exchange.

Current Sections 6055 and 6056 mandate that employers report detailed coverage information to the IRS and give notices to all employees. Under 6055 and 6056, the IRS requires detailed information about each covered employee and the employee’s covered dependents. The information in the filing is intended to be used by the IRS to appropriately apply premium tax credits to consumers who purchase insurance through an Exchange.

According to the sponsors of the bill, Senators Mark Warner (D-VA) and Rob Portman (R- OH), current sections 6055 and 6056 do not create an effective way to administer the premium tax credits. The current administration has been looking for a regulatory solution to relieve the reporting burdens of 6055 and 6056, but concluded that legislative action would be needed.

The prospective reporting system proposed by the bill requires high-level information about an employer’s coverage, including:

  • the time period (months) that coverage is available;
  • waiting periods that may apply;
  • certification that the employer’s coverage meets the definition of minimum essential coverage and the minimum value requirement; coverage is offered to part-time employees, dependents and/or spouses of employees;
  • certification that the employer’s coverage meets affordability safe harbors; and
    certification that the employer reasonably expects to be liable for any shared responsibility payment.

In addition, there are a few other elements to the Commonsense Reporting Act that are important to note:

  • Allows payers to electronically transmit employee notices. The current statute now requires paper statements sent via snail mail.
  • Allows payers to use names and dates-of-birth in place of the currently required Social Security numbers when filing reports with the IRS.

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How employers are preparing for the Cadillac tax

The article below was published on September 20, 2017 by Employee Benefit News, written by Victoria Finkle.

Although the Cadillac tax isn’t set to go into effect until 2020, employers are already adjusting their health plans in an effort to avoid the added expense.

The 40% excise tax on high-cost healthcare, which was created to help fund parts of the Affordable Care Act, has long been one of the most controversial aspects of the law for employers, because it could ultimately impose significant costs.

Lawmakers discussed delaying the tax to 2025 or 2026 as part of the healthcare debate in Congress over the summer, but for now, the tax remains slated to go into effect just over two years from now.

“The time frame for plan changes at big companies is easily 18 months — and we’re not that far away,” says Jim Klein, president of the American Benefits Council.

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A survey published last month by the National Business Group on Health found that uncertainty surrounding the surcharge is influencing efforts to control healthcare costs for about 8% of large employers surveyed, looking out over the coming year.

Still, while the majority of employers said they are maintaining their strategies to rein in costs regardless of the tax, Steve Wojcik, vice president of public policy for NBGH, says that the issue remains a “top priority” for many employers.

“Although our data show that the uncertainty about it isn’t having a huge influence on healthcare strategy, it’s definitely top of mind,” he says.

Kim Flett, compensation and benefits services managing director at accounting firm BDO, says that she advises clients to form internal committees of benefits experts to discuss employer options for tweaking healthcare offerings, in light of the upcoming tax, in addition to consulting with health insurance providers and accountants.

As part of that process, employers are considering certain tradeoffs across their benefits package — for example, whether cuts in retirement contributions might be required to maintain high-priced plans that could trigger the tax.

“Now that it’s looming, we’re seeing a lot more concern from employers,” she says.

Observers say there are a number of changes employers can make to their health plans to help reduce the cost of coverage and avert the tax, at least temporarily. Those include efforts to shift healthcare costs onto employees, through raising deductibles and increasing co-payments or co-insurance rates. Such changes face some statutory limits, however, as the ACA requires all out-of-pocket expenses to be capped at $7,150 for individuals and $14,300 for families in 2017.

More employers also are considering the move to high-deductible plans. The NBGH survey found that the vast majority (90%) of large employers are likely to offer consumer-driven healthcare plans by 2018, with 39% of employers offering only higher deductible plans by that time. Consumer-driven healthcare plans are most commonly designed as high-deductible plans paired with a tax exempt health savings account, and the plans have been shown to help reduce healthcare costs.

While many employers were already moving toward offering high-deductible plans, the threat of the tax has “really turbo-charged the growth” of the plans, says Christopher Beinecke, a Dallas-based lawyer at law firm Haynes and Boone, who specializes in employee benefits issues.

NBGH’s Wojcik says that employers also are exploring improvements to their healthcare offerings in an effort to reduce coverage costs. Some are looking to provide tele-health options and worksite or nearby clinics to manage primary and preventative care. Other employers are partnering with accountable care organizations, which are networks of doctors and hospitals that provide coordinated care to patients.

“You’re paying for better delivered care that costs less,” Wojcik says of the efforts.

Experts said that the pacing of any changes to reduce healthcare costs is likely to be spread out based on an employer’s specific needs. Some companies already began making plan adjustments in the years following passage of the ACA in 2010, because the tax was initially designed to go into effect in 2018. (It was delayed for two years in December 2015.)

Other employers are likely to make changes based on when their plans are expected to become subject to the tax. The tax is projected to go into effect for plans in excess of $10,800 for individual coverage and $29,050 for family coverage in 2020. Those figures will adjust each year with inflation.

“Employers by and large, if they haven’t already, will probably begin to make their gradual changes two or three years out from hitting the excise tax,” Beinecke says.

NBGH found last year that 53% of large employers expected at least one of their health plans will exceed the tax threshold in 2020, while 56% estimated that their most popular health plan will hit the threshold by 2022. By 2030, 95% of employers estimated that their highest enrollment health plan will be subject to the tax.

That’s why many employers are starting to make changes gradually over time in advance of those dates.

“The fact of the matter is you cannot make drastic changes to benefits overnight without causing a fiasco,” says James Gelfand, senior vice president of health policy at the ERISA Industry Committee.

tpas-vs-asos-the-differences-matter-cta

How employers are preparing for the Cadillac tax

The article below was published on September 20, 2017 by Employee Benefit News, written by Victoria Finkle.

Although the Cadillac tax isn’t set to go into effect until 2020, employers are already adjusting their health plans in an effort to avoid the added expense.

The 40% excise tax on high-cost healthcare, which was created to help fund parts of the Affordable Care Act, has long been one of the most controversial aspects of the law for employers, because it could ultimately impose significant costs.

Lawmakers discussed delaying the tax to 2025 or 2026 as part of the healthcare debate in Congress over the summer, but for now, the tax remains slated to go into effect just over two years from now.

“The time frame for plan changes at big companies is easily 18 months — and we’re not that far away,” says Jim Klein, president of the American Benefits Council.

aca-signs

A survey published last month by the National Business Group on Health found that uncertainty surrounding the surcharge is influencing efforts to control healthcare costs for about 8% of large employers surveyed, looking out over the coming year.

Still, while the majority of employers said they are maintaining their strategies to rein in costs regardless of the tax, Steve Wojcik, vice president of public policy for NBGH, says that the issue remains a “top priority” for many employers.

“Although our data show that the uncertainty about it isn’t having a huge influence on healthcare strategy, it’s definitely top of mind,” he says.

Kim Flett, compensation and benefits services managing director at accounting firm BDO, says that she advises clients to form internal committees of benefits experts to discuss employer options for tweaking healthcare offerings, in light of the upcoming tax, in addition to consulting with health insurance providers and accountants.

As part of that process, employers are considering certain tradeoffs across their benefits package — for example, whether cuts in retirement contributions might be required to maintain high-priced plans that could trigger the tax.

“Now that it’s looming, we’re seeing a lot more concern from employers,” she says.

Observers say there are a number of changes employers can make to their health plans to help reduce the cost of coverage and avert the tax, at least temporarily. Those include efforts to shift healthcare costs onto employees, through raising deductibles and increasing co-payments or co-insurance rates. Such changes face some statutory limits, however, as the ACA requires all out-of-pocket expenses to be capped at $7,150 for individuals and $14,300 for families in 2017.

More employers also are considering the move to high-deductible plans. The NBGH survey found that the vast majority (90%) of large employers are likely to offer consumer-driven healthcare plans by 2018, with 39% of employers offering only higher deductible plans by that time. Consumer-driven healthcare plans are most commonly designed as high-deductible plans paired with a tax exempt health savings account, and the plans have been shown to help reduce healthcare costs.

While many employers were already moving toward offering high-deductible plans, the threat of the tax has “really turbo-charged the growth” of the plans, says Christopher Beinecke, a Dallas-based lawyer at law firm Haynes and Boone, who specializes in employee benefits issues.

NBGH’s Wojcik says that employers also are exploring improvements to their healthcare offerings in an effort to reduce coverage costs. Some are looking to provide tele-health options and worksite or nearby clinics to manage primary and preventative care. Other employers are partnering with accountable care organizations, which are networks of doctors and hospitals that provide coordinated care to patients.

“You’re paying for better delivered care that costs less,” Wojcik says of the efforts.

Experts said that the pacing of any changes to reduce healthcare costs is likely to be spread out based on an employer’s specific needs. Some companies already began making plan adjustments in the years following passage of the ACA in 2010, because the tax was initially designed to go into effect in 2018. (It was delayed for two years in December 2015.)

Other employers are likely to make changes based on when their plans are expected to become subject to the tax. The tax is projected to go into effect for plans in excess of $10,800 for individual coverage and $29,050 for family coverage in 2020. Those figures will adjust each year with inflation.

“Employers by and large, if they haven’t already, will probably begin to make their gradual changes two or three years out from hitting the excise tax,” Beinecke says.

NBGH found last year that 53% of large employers expected at least one of their health plans will exceed the tax threshold in 2020, while 56% estimated that their most popular health plan will hit the threshold by 2022. By 2030, 95% of employers estimated that their highest enrollment health plan will be subject to the tax.

That’s why many employers are starting to make changes gradually over time in advance of those dates.

“The fact of the matter is you cannot make drastic changes to benefits overnight without causing a fiasco,” says James Gelfand, senior vice president of health policy at the ERISA Industry Committee.

tpas-vs-asos-the-differences-matter-cta

Improving the ACA: What’s on employers’ wish list

The article below was published on September 27, 2017 by Employee Benefit News, written by John Barkett and Julie Stone.

The Affordable Care Act brought some significant changes to employer-sponsored healthcare, which employers factored into their long-term healthcare strategies. Revised plans were built to comply with the law’s many complex requirements, even though employers hoped for relief from the law’s more onerous provisions. Yet, despite the recent legislative drama and the promise of repeal and replace, seven years later the ACA is still the law of the land.

But just because employers continue to execute on their ACA-compliant healthcare strategies, doesn’t mean they aren’t yearning for improvements to the existing law. In fact, there are a number of items on their “ACA improvements wish list.”

Of greatest concern to employers about the ACA is the Cadillac tax, the excise tax on what the law defines as “high-value” health plans. Even though imposition of the tax is delayed until 2020, most employers believe it will constrain their flexibility to expand or improve benefits as competition for talent intensifies. They also worry that with low limits on plan values and many open questions on the administration of the tax, it has the potential to prevent them from creating a total rewards portfolio aligned with their overall talent strategy.

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Image Source: Benefitnews.com

A 2014 Willis Towers Watson analysis, completed when the Cadillac tax was set to go into effect in 2018, found that nearly half of large U.S. employers would start to incur the tax in its first year. In response, many employers redoubled their efforts to anticipate and modify plans to avoid the tax.

Regardless, employers want the tax eliminated. If that cannot be accomplished, they would like to see regulatory guidance that addresses the provision’s inherent flaws and challenges. Employers would also want the thresholds that trigger the tax revised upward, which would give them more latitude to offer a slate of benefits that meets their business need.

Another ACA provision employers would like to see eliminated is the employer mandate. The mandate requires employers with 50 or more full-time equivalent employees to offer affordable healthcare coverage or face penalties. Employers object to this provision more on principle than out of a desire to discontinue offering healthcare benefits; they want to see less government involvement in employer-sponsored healthcare. But our research shows that the vast majority of employers — especially large employers — have no intention of discontinuing employee health benefits.

A more tactical reason employers want to see the mandate eliminated is because it created onerous compliance and reporting requirements that have significantly increased employers’ annual administrative costs and the complexity of day-to-day management.

Recently, it was revealed that a bipartisan group of lawmakers in the House have been quietly working on a bill that, among other things, would raise the employer mandate size limit from 50 to 500 full-time equivalent employees. Although completely eliminating the employer mandate would be preferred, this would be a welcomed by some employers while exacerbating inequities in the law for others.

Looking even more broadly at ways to improve the ACA, high on employers’ wish list are provisions that would address the high cost of healthcare. Reducing costs was a stated goal of the ACA, but as the law took shape and was debated in Congress, there was little to no agreement on how to achieve this. Interestingly, one of the most significant provision aimed at lowering costs was the creation of the excise tax.

Bottom line: When the ACA was first passed, most employers were apprehensive about several of the law’s provisions and worried about their ability to meet some of its requirements. Seven years later, nearly all employers have made the changes necessary to co-exist with the law. And now, after several attempts to pass healthcare legislation friendlier to employers have failed, many are now hoping Congress will turn its attention to the more productive work of improving existing law.

Legislators forsake $60M in savings by rejecting self-insurance

The article below was published on August 19, 2017 by Green Bay Press-Gazette, written by Mike Ferguson.

Wisconsin lawmakers are at an impasse over the state budget. Senate leaders can’t agree with their Assembly counterparts on how to fund road repairs, schools, and various agencies.

Resolving this dispute would be easier if lawmakers hadn’t rejected a reform of the state’s costly health insurance program. Switching state employees and their families to a “self-insured” plan could have freed up tens of millions of dollars.

Under such a plan, the state would have covered employees’ medical expenses directly, instead of paying a traditional health insurer and hoping premiums don’t increase. Cutting out the insurance company middleman could have saved millions and enabled Wisconsin to offer higher quality benefits to government workers. It’s a missed opportunity — one that lawmakers should reconsider next year.

The purpose of health insurance is to minimize financial risk. Individuals’ health spending can fluctuate from one year to the next. That’s why people pay premiums to insurers to protect themselves against costly, unpredictable events.

Organizations with hundreds of thousands of employees like the state of Wisconsin don’t experience such fluctuations. They have a steady mix of young and old workers, and healthy and sick ones, making expenses for the entire organization predictable.

The risk of a spike in expenses is virtually nonexistent. So it makes sense for employers like Wisconsin — which offers health coverage to 250,000 government workers and family members — to pay for care directly rather than fork over premiums to traditional insurers.

Budget analysts predicted that self-insuring would save Wisconsin at least $60 million over two years, according to the Wisconsin Group Insurance Board. Private research firm Segal Consulting found that switching to a self-insured plan would save the government $42 million annually.

Despite these projections, Wisconsin’s politicians rejected self-insurance. Instead, the state will continue buying traditional premiums from 17 local insurance carriers.

Some legislators worried that shifting state employees onto a self-insurance plan would deprive traditional insurers of business and force them to raise premiums on other large organizations.

That’s akin to arguing that taxpayers should continue wasting millions of dollars on inflated premiums to subsidize coverage for other large organizations.

Others argued that a switch to a self-insured plan is risky, given the uncertainty surrounding Congress’s attempts to repeal the Affordable Care Act.

But this uncertainty is actually an excellent reason to switch. Self-insured organizations don’t have to worry about premiums swinging wildly or facing a raft of new compliance burdens. Self-insurance is governed by a 40-year-old federal law that will be largely unaffected no matter what happens in Washington.

Instead of addressing the rising health care costs that drive up premiums, Wisconsin lawmakers have decided to shift those costs onto workers in the form of higher deductibles. They’re also raiding the state’s rainy day fund to help pay the coming year’s premiums. This isn’t a strategy for cutting costs.

Twenty-nine states already self-insure their employees’ coverage. Nineteen others self-insure at least some of their health plans. In fact, Wisconsin has been self-insuring its employees’ dental and pharmaceutical benefits for years with excellent results.

Private companies further prove the model’s effectiveness. Fifty-eight percent of all private sector employees are enrolled in self-funded plans. Businesses that self-insure save up to 12 percent on health expenses.

It’s unclear why state lawmakers left tens of millions of dollars on the table by rejecting self-insurance this budget session. But they’ll have the chance to correct their mistake during next year’s inevitable budget crunch.

For the sake of taxpayers and state employees, let’s hope they take it.

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