ACA Status Update

It appears that the Affordable Care Act (ACA) will live on as the “law of the land,” in the words of Speaker Ryan. Last week left many heads spinning as voting on the American Health Care Act (AHCA) was first delayed and then called off entirely. Employers must continue to administer their plans in compliance with existing ACA rules and regulations, including the employer mandate and employer reporting requirements, for the foreseeable future. The only thing that has changed is that the IRS is accepting 2016 tax returns with no proof that individuals obtained minimum essential coverage. So now the question is…what’s next?

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Republicans Release Health Policy Proposed Legislation

House Republicans have released the "American Health Care Act" (ACHA), the first official draft of ACA "repeal and replace" legislation. As of March 9, the legislation is being reviewed, debated, and changed in the relevant House committees, so details are likely to change; however, much of what is contained in this draft is likely to move forward as Congress tries to finalize legislation that can pass both the House and the Senate.

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Draft of House ACA “Replace” Legislation Leaked to the Press

A draft of a House "repeal and replace" bill has been leaked to the press. Although it's only a draft, and there is no confirmation that it is authentic, but if it is, the document is the most detailed we have seen to date on Republican plans to replace the ACA. The draft bill largely follows the priorities outlined in the recent white paper issued by House Republicans. It is also very similar to the 2015 ACA repeal legislation passed by Congress and vetoed by President Obama. 

It appears that the bill does not repeal the ACA, rather it repeals sections of the ACA, leaving other areas intact including: covering preexisting conditions; not allowing health status in underwriting factors, requiring coverage for adult children up to age 26 and the capping of out-of-pocket limits and removal of lifetime & annual limits. This draft also does not appear to impact ACA's Medicare cuts and reforms.

Limits on the Tax Exclusion for Employer Sponsored Health Benefits

The draft bill does repeal the Cadillac tax, but the biggest news for employers is the proposal to limit the tax exclusion on employer sponsored health benefits. Republicans have been talking ab out this for a long time as an avenue to pay for proposed tax credits and for the repeal of other fees and taxes contained in the ACA. 

As a point of reference, the Congressional Budget Office released an analysis last December that showed the impact of a tax exclusion on the Federal Budget. In one example in the study, the limit on the tax exclusion was set at the 75th percentile of health insurance premiums. In that analysis, the CBO projects that in 2020, the 75th percentile threshold will be $10,800 for individual coverage and $29,100 for family coverage. Based on the CBO estimates, the proposed tax beginning in 2019 and set at the 90th percentile of premiums will apply to annual plan costs above approximately $12,300 for individual and $33,200 for family coverage. The cap would be indexed to increase at the Consumer Price Index plus 2%. We know that historically, health care costs have risen at a rate faster than CPI, so more and more plan would be subject to the tax each year.

The bill proposes, beginning in 2019, the tax exclusion for employer-provided health benefits would be capped at the 90th percentile of average health insurance premiums. Any amount above that limit would be treated as taxable income to the employee.

There are a lot of questions regarding the method that will be used to calculate health insurance premiums, but those questions are not addressed in the bill, rather it instructs the IRS to draft regulation to determine the appropriate costs that will be the basis for the tax. 

Applicable Large-Employer “Penalties” Under §4980H Reduced to $0

The draft legislation is designed to be able to pass both the House and Senate using budget reconciliation. This would allow Republicans in the Senate to avoid a Democratic filibuster and pass a bill with a simple 51-vote majority. However, budget reconciliation cannot be used for a full repeal of the §4980H employer shared responsibility rules that require applicable large employer requirements to provide health insurance to full-time employees. So instead, the bill leaves the requirement in place, but eliminates the penalty for violating the rules. There will be much debate about what this exactly means if this approach is what ends up in whatever is eventually passed into law.

Please contact your Verus account management team or for more information.

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Trump Issues Executive Order Regarding the ACA

On his first day in office, President Trump issued an executive order instructing regulatory agencies with authority over the Affordable Care Act (ACA) to take any action possible "to the maximum extent permitted by law…to waive, defer, grant exemptions from, or delay the implementation of...[the ACA]." The order itself does not actually change any current rules or regulations. It also does not grant agency heads any additional regulatory authority over what they already possess. However, it signals the Administration’s plan to make changes to the law through regulatory action as quickly as possible, even while Congress tries to address issues that will require statutory changes.

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Highlights for 2017 Compliance

This ACA Overview provides a short checklist of the ACA’s key changes in 2017. As 2016 draws to a close, employers should review this checklist to help confirm they are ready to comply with the ACA’s 2017 requirements. Please contact Verus Insurance Services, LLC for assistance or if you have questions about changes that were required in previous years.

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Employer Reporting – 2016 Draft Forms and Instructions

The IRS has released the 2016 draft forms and instructions for the ACA employer reporting requirement.  The 2016 draft forms are very similar to the 2015 forms with only a few small changes; the most significant ones explain how to indicate §4980H transition relief for non-calendar year plans on Form 1094-C and coding conditional offers of coverage to spouses on Line 14 of Form 1095-C. The 2016 draft instructions are also similar, but now contain additional language and examples in many of the sections that incorporate clarification of existing requirements, including much of the guidance previously provided only via FAQ and other informal IRS guidance.  

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OCR Phase 2 HIPAA Audits Underway

The Office for Civil Rights (OCR) of the Department of Health and Human Services (HHS) has begun Phase 2 of its HIPAA Audit Program. The scope of this national audit includes covered entities and business associates of various industries and sizes, and all covered entities and business associates are eligible to be audited. Employers offering plans subject to HIPAA, along with employers acting as business associates for covered entities, should review current HIPAA compliance efforts to make sure all requirements are addressed; watch for communications from OCR; and respond to any inquiries from OCR within the required time frames.

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Significant Changes Proposed to Form 5500

On July 21, 2016, a proposed rule was published by federal regulators that seeks to modernize and improve the Form 5500 annual return/report that is filed by employee benefit plans. In general, the changes are expected to apply for plan years beginning on or after Jan. 1, 2019.

While the Form 5500 is periodically updated so that it stays current with legal and market developments, these proposed updates are significant because of their focus on group health plans. Significantly, the proposed rule would eliminate the current filing exemption for small group health plans and require group health plans to complete a new detailed schedule.

In addition to these changes, the proposed changes would expand the Form 5500’s financial and compliance reporting, analytics capability and service provider information.

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§4980H Affordability – Opt-Out Guidance

The Internal Revenue Service (IRS) has released proposed rules addressing the relationship between opt-out arrangements and affordability for purposes of subsidy eligibility through a public Exchange and potential §4980H(b) penalties. First addressed in Notice 2015-87 last December, the proposed rules confirm and further clarify that unconditional opt-out payments need to be added to the employee contribution for purposes of determining affordability, while conditional opt-outs generally do not.

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Final SBC Template and Related Materials

The Departments of Labor, Treasury, and Health and Human Services (“the Departments”) have released final versions of the Uniform Summary of Benefits and Coverage (SBC) template, instructions, sample language, and Uniform Glossary (“glossary”), along with a Coverage Examples Calculator and related instructions. Group health plans and issuers must begin using the final templates on the first day of the first open enrollment period, plan year, or policy year beginning on or after April 1, 2017.

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HHS Releases Discrimination Rule Affecting Transgender Benefits

The Department of Health and Human Services (HHS) recently released the Final Rule implementing Section 1557 of the Affordable Care Act (ACA), which prohibits certain types of entities from discriminating in health programs on the basis of race, color, national origin, age, disability, or sex (including gender identity-based discrimination). Most affected entities are not likely to have discrimination issues related to most of these categories; however, the new rules include significant requirements related to health coverage for transgender individuals that may force changes to current benefits.

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Employer Reporting Errors

Now that the deadline under Sections 6055 and 6056 for issuing statements to employees/covered individuals has passed, employers may begin to identify errors in the statements issued. And once statements are filed with the IRS, the IRS may identify errors or information that does not match its records. In both cases, employers must take steps to rectify the errors or address inconsistencies (or demonstrate reasonable cause) to avoid potential penalties under Code §§6721 and 6722.

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Employer Exchange Subsidy Notices - Appeal or Not?

Employers are starting to receive notices from public Exchanges indicating that one or more employees are currently receiving a subsidy when purchasing individual health insurance coverage through a public Exchange, which could potentially trigger employer penalties under §4980H. If an employer receives such a notice for one of its employees, the employer has a right, but is not required, to appeal when they feel an employee should not be receiving a subsidy because the employer offers minimum value, affordable coverage.

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EEOC Issues Final Rules on Wellness Programs

The Equal Employment Opportunity Commission (EEOC) has released two separate sets of final regulations relating to wellness program compliance under the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA). Despite a few recent court rulings against the EEOC's voluntary requirements for wellness programs, the final rules generally clarify and confirm what was previously set forth in the proposed rules issued last year while expressing EEOC's reasons for disagreeing with the court decisions. The EEOC made some significant changes as well, extending the incentive limitations and notice requirements to all wellness programs that fall under ADA or GINA, regardless of whether they are tied to a group health plan, in addition to adjusting the calculations for the 30% maximum incentive limitations.

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IRS Announces HSA Limits for 2017

  • On April 28, 2016, the Internal Revenue Service released Revenue Procedure 2016-28 announcing the annual inflation-adjusted limits for health savings accounts for calendar year 2017.

  • 2017 HSA Contribution Limits:

    • Single: $3,400 (an increase of $50 from 2016)

    • Family: $6,750 (no change from the 2016 limit)

    • Catch-up contributions for those age 55 and older remains at $1,000

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New Guidance on the ACA, Mental Health Parity, and Other Health Plan Issues

  • The U.S. Department of Labor, the IRS, and the Department of Health and Human Services issues FAQs about Affordable Care Act Implementation.

  • The FAQs cover health market reform topics including coverage of preventive services, mental health parity implementation and implementation of the Women’s Health and Cancer Rights Act.

  • The FAQs also include information on out-of-network emergency services.

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