PPACA Regulations Impacting Plan Changes Part II

C o n s u l t i n g | B r o k e r a g e | C o m p l i a n c e | C o m m u n i c a t i o n | A d m i n i s t r a t i o n

PPACA Regulations Impacting Plan Changes Part II

2

Sample Online Screen

3

Patrick C. Haynes, Jr. Education

Temple University School of Law, LL.M.

Rutgers University School of Law, J.D.

Rutgers University School of Business, M.B.A.

Rutgers University College of Arts & Sciences, B.A.

As Crawford Advisors’ GC and Vice President – Compliance, Mr.

Haynes advises employers and plan sponsors in a variety of health and welfare benefit plan compliance matters, including, but not

limited to, tax qualification and other Internal Revenue Code issues,

PPACA, ERISA, COBRA and HIPAA portability, security and privacy issues. Mr. Haynes lectures frequently and has published many

articles on health and welfare benefit plan compliance topics.

Today’s speaker

Practice Areas

Employee Benefits & Exec Comp, ERISA, COBRA, HIPAA, §125, and §§ 105, 106, 129, 132

Admitted to Practice

U.S. Supreme Court Federal and State Courts of New Jersey Pennsylvania Connecticut District of Columbia

4

Today’s Agenda. . .

Healthcare Reform updates – 2016 Part II • IRS Publications 502, 503, 969

• 1094/1095 extended deadlines coming up

• Picking it clean – revisiting IRS Notice 2015-87 (again)

• OOPmaxes, limits and more – plan for 2017 now

• SBC Updates – more changes & more delays

5

IRS Publications – useful links & guidance

IRS Publication 502 – Medical and Dental Expenses • https://www.irs.gov/pub/irs-pdf/p502.pdf • Can I use my HCFSA for ____ or _____?

IRS Publication 503 – Child and Dependent Care Expenses https://www.irs.gov/pub/irs-pdf/p503.pdf

• Can I pay a family member for daycare? • Are overnight camps reimbursable?

IRS Publication 969 – Health Savings Account and Other Tax-Favored

• https://www.irs.gov/pub/irs-pdf/p969.pdf • I am enrolled in Medicare – what affect does that have on my HSA?

Prior Guidance: http://www.crawfordadvisors.com/2016/03/18/irs-releases-publication-969-and-publication-503/

6

IRS Notice 2015-87

• This notice was issued on 12/15/2015 and was applicable to Plan Years on or after 12/16/2015

• It offers 26 Questions and Answers on various topics. These include:

- HCFSA carryovers (rules, rights, calculating COBRA, determining spent vs underspent, etc.)

- EPPs (Employer Payment Plans)

- HRA integration with Medical/Rx plans

- IRC §4980H – PPACA Affordability changes

- IRS Forms 1094/1095 – ER and EE reporting of ER and Individual Mandate requirements

Prior Guidance:

02/18/2016: Guidance on Health Reimbursement Arrangements

12/21/2015: Opt-Out Payment 180! And, ER Shared Responsibility Payments Indexed

7

HCFSA – Carryovers (options)

2013 brought us: • A $2,500 cap on HCFSAs

• The ability to have either a 2.5 grace period (more time to

incur HCFSA claims) or

• The ability to roll-over up to $500 into a subsequent year’s

HCFSA

IRS modified the “use-or-lose” rule to allow

HCFSA carryovers • A HCFSA can provide that up to $500 of unused amounts

at end of PY remain available to reimburse eligible

expenses incurred during entire subsequent PY

• Carryover feature is optional

• Initial guidance was in IRS Notice 2013-71

IRS Notice 2015-87 provides additional guidance

in Q/As 21-25 Carryovers can be limited to individuals who elect to

participate in HCFSA in next PY (Q/A-24)

• HCFSA may provide that carryover from PY1 is available

only if the individual also elects to make salary reductions

to the HCFSA FSA for PY2

• This is permitted even if HCFSA requires a minimum salary

reduction for participation (e.g., $100/year)

• HCFSAs can provide for forfeiture of carryovers not used

within specified period, such as one year (Q/A-25)

Caution: Requires additional administration/tracking.

8

HCFSA – Carryovers (options) Impact on COBRA Carryovers are included in determining the benefit that can be

continued under COBRA for remainder of PY after a QE (Q/A-21)

Qualifying HCFSAs need not offer COBRA coverage unless QB’s

account is “underspent” when QE occurs; carryovers count toward

that determination.

Example: Sally elects HCFSA salary reductions for 2017 of $2,400

($200/month) and carries over $500 from 2016

• Sally terminates employment on May 31, 2017, having submitted

$1,000 of reimbursable claims

• Her remaining annual limit is $1,900 , and the maximum COBRA

premium for the rest of 2017 is $1,428 ($200 × 7, plus 2% add-on)

• Because Sally’s remaining annual limit exceeds the maximum

COBRA premium, her account is underspent

------------------------------------------------------------------------------------------

Carryovers are not included in determining COBRA premiums

(Q/A-22). COBRA premium = employee’s salary reduction election for

PY + any non-elective employer contribution

• Any carryover is disregarded

Example: For 2017, Donald elects HCFSA salary reduction of $1,200,

receives matching contributions of $1,200, and carries over $500 in

unused benefits

• Donald terminates employment on May 31, 2017

• His maximum monthly COBRA premium for the remainder of 2017

(before the 2% add-on) is 1/12 of $2,400 ($1,200 salary reduction

election + $1,200 matching contributions), or $200.

*HCFSAs that allow carryovers must allow them for similarly situated

COBRA beneficiaries (Q/A-23). Subject to same terms, and

notwithstanding the special limited COBRA obligation for qualifying

HCFSAs .

Example: Hillary participates in employer’s HCFSA, which allows

carryovers up to $500.

• Hillary terminated employment on May 31, 2017

• She elects COBRA, and pays the premiums through the end of

2017

• Hillary can carry over up to $500 of unused benefits remaining at

the end of 2017 to reimburse future expenses; no COBRA

premium can be charged

• Amounts carried over must be available until maximum COBRA

period ends (here, November 30, 2018) or until exhausted, if

earlier

9

EPPs – Employer Payment Plans

Notice 2015-87 affirms prior guidance on EPPs HRAs and other EPPs cannot be used to purchase, or reimburse for, individual insurance coverage

• They do not satisfy HCR mandates on a standalone basis and cannot be integrated with individual coverage

– Implications for cafeteria plans (Q/A-6)

• A cafeteria plan that pays for individual insurance coverage—through salary reductions, flex credits, or other employer contributions—is an EPP that cannot be integrated with the individual coverage and thus fails to satisfy HCR mandates

• And, the IRS clarified the narrow exceptions (see below)

Notice 2015-87 clarifies two narrow exceptions

Retiree-only HRAs (Q/A-1)

• Can be used to purchase individual insurance coverage—even if HRA balances include amounts credited while employed and covered by ER’s integrated HRA

• Excepted benefits (Q/A-5)

• Not a violation if plan terms limit the purchase/reimbursement to individual insurance coverage that provides only excepted benefits (e.g., dental coverage)

• Fails to comply if plan is silent—even if, in practice, only excepted-benefit coverage is purchased

HRA integration (Q/A-2) A non-retiree HRA fails to be integrated (and thus fails HCR mandates) if it can be used to purchase individual coverage not limited to excepted benefits, even if—

• Employee has other GHP coverage, or

• Amounts used were credited while HRA was integrated

• HRA integration for family coverage (Q/A-4)

–If an HRA can reimburse family members’ expenses, the family members must be covered by the employer’s other group health plan

• GHP coverage from another employer might be sufficient

–Transition rule waives this requirement for PYs beginning before 2017 if certain conditions are met

IRS Notice 2015-87

10

PPACA – Affordability/Min Value ( §4980H)

Background For ALEs, failure to offer full-time employees (and dependent (natural/adopted) children) coverage that satisfies specified standards risks Code § 4980H penalties when a full-time employee enrolls in subsidized Exchange coverage

• 4980H(a) penalty: Failure to offer MEC to enough full-time employees (and dependent children)

• 4980H(b) penalty: Failure to offer affordable MV coverage

Affordability in a nutshell

• Measures employee contribution required for coverage

• Based on whether employee cost for self-only coverage in lowest-cost MV plan is ≤ 9.5% (as indexed; see later slide) of household income

MV in a nutshell

• Measure s plan’s cost-sharing

• Based on whether plan pays at least 60% of “the total allowed costs of benefits provided under the plan”

Recent guidance on affordability and MV

• Guidance addresses what types of employer contributions count toward affordability and MV

• December 2015 final regulations [next slide]

• Notice 2015-87, Q/As 7-9 (especially opt-out credits).

IRS Notice 2015-87

11

PPACA – Affordability/Min Value ( §4980H)

Final regulations (Dec. 2015) Wellness program incentives • Generally do not count for affordability or MV

• Example: ABC Company charges EEs $25/pay for not

completing a health-risk-assessment. That $25 gets

added to the payroll contributions and counts against

the affordability math (you must assume a non-

well/non-participating position).

• Incentives designed to prevent or reduce tobacco use do count—as if employee qualifies for the incentive (unless you test for the presence of nicotine)

Employer contributions to integrated HRAs ---Amounts available only to pay cost-sharing (not premiums) count toward MV

---Amounts newly available for current year to pay premiums count toward affordability

• Employer “health flex contributions” under cafeteria plan

Count for affordability, so long as contribution: (1) may

not be taken as taxable benefit; (2) may be used to pay

for MEC; and (3) may be used only for Code § 213

medical care

Transition relief for PYs beginning before 2017 Employers may count certain contributions for purposes

of Code § 4980H(b) if requirements are met (Q/A-7-9)

• Future proposed regulations expected to address

“unconditional opt-outs”

Transition relief applies in the interim Special rule for employers subject to certain federal

prevailing wage laws (Q/A-10)

IRS Notice 2015-87

12

PPACA – Affordability/Min Value ( §4980H)

Affordability standard indexed (Q/A-12) 9.5% standard (of family income)is indexed for all provisions under Code § § 4980H and 6056.

Regulations will be amended, and employers may rely on these indexed amounts. As one safe harbor measure, ERs may use these percentages based upon what they pay their EEs—

• 2015: 9.56%

• 2016: 9.66%

• Adjustments to penalty amounts (Q/A-13)

IRS Notice 2015-87

Year 4980H(a) Sledgehammer

4980H(b) Tackhammer

Tackhammer per month

2014 $2,000 $3,000 $250

2015 $2,080 $3,120 $260

2016 $2,160 $3,240 $270

13

PPACA – Other §4980H Clarifications

“Hour of Service” (Q/A-14) • To determine full-time employee status—

- “hour of service” means each hour for which an EE is paid, or entitled to

payment, for the performance of duties for the ER

- Do not count hours after termination of employment or hours paid solely to

comply with workers’ compensation laws

- Generally do count disability leaves if retaining EE-status and receiving ER-

funded disability benefits

- Educational organizations (Q/A-15)

• The special rules for counting service (including breaks in service) apply even if

staffing agencies are used

- ALE status of government employers (Q/As 18-19)

• Apply reasonable, good faith interpretation of Code’s aggregation rules

IRS Notice 2015-87

14

PPACA – 2017 Final Parameters Issued

Notice of 2017 Benefit and Payment Parameters • Final regulations (3/8/2016) with details on many HCR operational items – What’s important for

ERs and Plan Sponsors?

• Notice of Exchange enrollment (narrowed), starts 11/01/2016, ends 01/31/2017.

• Exchanges required to notify ERs only when an EE actually enrolls in Exchange coverage with eligibility for premium tax credit (not for mere eligibility)

• Sample notice from Federal Exchange to be published

Annual cost-sharing limit (out-of-pocket maximum) • For 2017: $7,150 for individual coverage and

$14,300 for family coverage (for non-HSA plans). • See later slides.

IRS Notice 2015-87

15

Relief for good faith efforts to comply

[IRS Notice 2015-87 (Q/A-26)] • For 2015 reporting (in 2016), no penalties for

incorrect or incomplete returns if demonstrate good faith efforts to comply

• Not available to entities that fail to timely file/furnish or cannot show good faith effort to comply

• Deadlines extended for 2015 reporting

IRS Notice 2016-4 announced automatic

extensions • Statements to individuals: March 31, 2016 • Paper returns to IRS: May 31, 2016 • Electronic returns to IRS: June 30, 2016 (must

file electronically if filing 250 or more Forms 1095)

What fines could an Employer/Plan Sponsor

face if they were delinquent/late/etc.?

Under the Good Faith Effort standard, the fines: 1. Could be nothing. 2. Could be $50/Form. 3. Could be $250/Form. Consider - Reasonable cause vs willful neglect

Forms 1094/1095

IRS Notice 2015-87

$250 $50 $0

16

SBCs – Updates On/After 04/01/2017

Proposed revisions to template and other items • In Feb. 2016, agencies proposed further changes to the

versions proposed in Dec. 2014

• Affects template, uniform glossary, and instructions

• Would reduce template to 2.5 double-sided pages

• Request for comments (comment period ends 3/28/2016)

• Implementation date: Part XXX FAQs (3/11/2016)

Expect to finalize in time to apply to first open enrollment period that beginning on or after April 1, 2017

“Important Questions” • As with 2014, eliminates questions on annual limits; services

not covered are addressed elsewhere in SBC

• Rewords some questions (e.g., effect of using networks)

Disclosures • Revises required disclosures about continuation coverage and

grievance and appeals rights

• Adds disclosures about MEC and MV, including specified language explaining significance

Coverage examples • As with 2014 proposal, adds a 3rd example (involving a simple

fracture)

• New proposals provide for clearer information about plan deductibles and coinsurance; and eliminate hypothetical costs for services

Instructions ----Some new instructions added (e.g., on providing information about plan’s coverage of abortion services)

----Updated to reflect earlier guidance (e.g., combining multiple cost-sharing options and explaining effects of HCFSAs, HRAs, HSAs, and wellness programs)

----Uniform glossary – Adds same defined terms as proposed in 2014

• These include, e.g.,: Claim, Cost Sharing, Cost-sharing Reductions, Marketplace, Minimum Essential Coverage, Minimum Value Standard, Formulary, Specialty Drug

- Defined terms would be underlined in SBC and, for electronic SBCs, hyperlinked to glossary

Prior guidance

03/16/2016: New SBC Updates from the DOL

06/22/2015: HHS Releases final regs for SBCs.

03/30/2015: New SBCs Delayed until January 1, 2016

12/29/2014: New SBCs for 2015

17

Wellness on Trial (part 5…or 6?)

EEOC v. Flambeau, Inc. (W.D. Wis. 2015) • Enrollment in ER’s health plan required a medical history questionnaire and biometric

screening

• EEOC challenged under ADA (which generally prohibits requiring EEs to submit to

medical exams)

• ER argued assessments were needed to identify health risks for underwriting purposes

under ADA’s “bona fide benefit plan” safe harbor—and trial court agreed (following Seff v. Broward County)

• Court noted that, even if it were bound by EEOC’s April 2015 proposed ADA regulations, the proposals address only

incentive-based programs, not underwriting

• EEOC has appealed; might address in final regulations

18

HHS has a budget for HIPAA Audits!

Website guidance on the right to access own PHI http://www.hhs.gov/hipaa/for-professionals/privacy/guidance/index.html

Addresses “designated record set,” permitted means of requesting and providing access, third parties, BAAs, fees, etc.

• HIPAA security “crosswalk”

- Helpful tool mapping HIPAA security requirements to existing cybersecurity resources from NIST (National Institute of Standards and Technology)

• Two new fact sheets

- Uses and disclosures of PHI for “health care operations”

- How privacy and security rules apply to developers of health apps (e.g., when is developer a Business Associate of of health plan?)

Enforcement? Fines & Highlights… Rare civil penalty imposed: $239,800 • Home health agency did not cooperate with

investigation involving employees’ transport and storage of PHI

Settlement agreements continue, including— • Provider posting of patient testimonials: $25,000 • Disclosures for marketing require written

authorization • Disclosure of research participants’ PHI: $3.9

million Laptop stolen from employee’s car; investigation found inadequate security management process • MN healthcare system: Lack of BA contract and

organization-wide risk assessment: $1.55 million • HIPAA audits: Still awaiting updated audit

protocol

19

IRS – Guidance on the tax treatment of Identity Protection Services

IRS Announcement 2016-02 (12/30/2015)

Value of ER-provided “identity protection services” is not taxable income—regardless of whether a breach has occurred

• Extends earlier 2015 guidance that applied only to individuals affected by a data breach

• Services include credit reporting and monitoring, identity theft insurance, identity restoration, and other similar services

Guidance does not apply to cash in lieu of services, or to amounts paid under an identify theft insurance policy

20

Transportation Plan Benefits

PATH Act made transit parity permanent • Part of Consolidated Appropriations Act (12/18/2015)

• Combined limit for transit and vanpooling benefits under a qualified

transportation plan equals qualified parking benefits limit

• Applies retroactively to any month after 2014 (but, not realistic for ER-

sponsored plans)

• Combined monthly limit for 2015: $250 (would have been $130); for

2016: $255

IRS Notice 2016-6 • Explained how to correct 2015 FICA tax overpayments and report

income and tax on Forms 941, 941-X, and W-2 (similar to retroactive

increase for 2014)

21

ERISA 510 Actions?

Trial court:

Marin v. Dave & Busters, Inc. ERISA § 510 claim

This class action lawsuit (with 10,000 workers affected) alleged that the ER reduced the workers’ hours to keep them from attaining Full-Time status in order to avoid PPACA’s ER-mandate. Case theory: ERISA Section 510, prohibits ERs/Plan Sponsors interfering with an EE’s attainment of benefits; which, effectively prohibits ERs from reducing work hours for the purpose of avoiding the requirement to offer health coverage under PPACA.

22

Cost Sharing and OOP Maximums

2015-2017

23

* For 2014, non-GF plans (all of them) had to comply with the new OOPMAX limits. But, under a multiple provider transition rule, had another year to work with a separate Rx vendor to impose separate Oopmaxes.

X Time's up on the "double-oopmax" limit, transition rules--one OOPMAX for med/Rx (combined). Also, 2015 was the first year that HDHP-HSA plans were indexed separately.

+ Per HHS guidance, for tiers greater than single, the plans must have an imbedded OOPMAX that does not exceed the PPACA maximum for a single individual (human).

Out of Pocket Maximums 2014 - 2017

24

Out of Pocket Maxes for 2016

Embedded (individual) OOP Max

(on non-single tiers), for non GF-Plans • Applies for the 1st plan year on or after 1/1/2016

• Out of Pocket Maximums for non-HSA plans is $6,850 for single and $13,700 for family coverage

• No single/individual family member may be subject to out of pocket costs exceeding $6,850

• See the DOL’s PPACA Freq. Asked Questions Number 27 here and our 10-year timeline below

http://www.crawfordadvisors.com/wp-content/uploads/2016/01/HCReformemployers_v15_01-20-2016.pdf

+Per HHS guidance, greater than single tier elections must have an imbedded OOP Max that does not

exceed the single-tier OOP Max.

25

If you have any further questions about the information discussed in this

Webinar, please feel to contact us at…

Crawford Advisors, LLC

• HQ: 200 International Circle, Suite 4500, Hunt Valley, MD 21031

• Devon Square Two, 744 West Lancaster Avenue, Suite 215, Wayne, PA 19087

• 1813 Sweetbay Drive, Suite 10, Salisbury, MD 21804

• 2975 W. Executive Parkway, Lehi, Utah 84043

• 280 Granite Run Drive, Suite 250, Lancaster, PA 17601

1-800-451-8519

www.CrawfordAdvisors.com

Via E-mail to: webinars@crawfordwebinars.com

To Download These Slides: http://www.crawfordadvisors.com/webinars/

Questions & Requests: rcrawford@crawfordadvisors.com

Questions