Category: Affordable Care Act

Affordable Care Act: Will Your Group Health Plan be Affordable in 2019?

Unlike the Individual Mandate, the Affordable Care Act’s Employer Mandate isn’t going anywhere in 2019. Employers with 50 or more full-time and full-time equivalent employees will still have to offer “affordable” health coverage to avoid ACA penalties. But, there is a sliver of good news. Next year, employers will be able to increase the required employee contribution for coverage under their group health plans.

To satisfy the ACA’s initial affordability requirement, an employee’s required contribution for the lowest cost, self-only coverage could not be more than 9.5 percent of the employee’s household income. However, the initial affordability percentage is adjusted annually by the Internal Revenue Service. In 2019, the affordability percentage will be 9.86 percent.

When compared to prior years, the 2019 affordability adjustment represents the largest percentage increase under the ACA.

2014    9.5

2015    9.56

2016    9.66

2017    9.69

2018    9.56

2019    9.86

We can use the ACA’s affordability safe harbors to translate this percentage increase into dollars and cents. These safe harbors provide various methods for calculating the most an employer can charge employees for the lowest cost, self-only health coverage option without exceeding the ACA’s affordability threshold.

  • W-2 Safe Harbor. The maximum monthly contribution for a federal minimum wage employee ($7.25 per hour) who works 40 hours per week for 52 weeks in 2019 will be $123.91 (+ $3.77).
  • Rate of Pay Safe Harbor. The maximum monthly contribution for a federal minimum wage employee ($7.25 per hour) in 2019 will be $92.93 (+ $2.83).
  • Federal Poverty Line Safe Harbor. Based on the 2018 single individual FPL of $12,140, the maximum monthly contribution in 2019 will be $99.75 (+ $3.03).

These increases may be modest, but they can add up quickly for very large employers. They can also provide some much-needed wiggle room for employers teetering on the edge of unaffordability. The ultimate impact of the 2019 affordability percentage increase can be inconsequential or substantial. Employers will need to reevaluate their cost-sharing structure to find out.

Please contact us if you would like to learn more about ACA-compliant group health plans.

Up In Smoke? Clearing the Workplace Haze of Medical Marijuana

Marijuana, the most commonly used illicit drug in America at home and in the workplace, is earning respect from mainstream citizens who support its ‘legalized’ use for medical reasons. If estimates are true, and millions of workers are stoned on the job, the question and concern is: how many of these users will move to legitimize their use of the drug, on the job, and what impact will its use have on the productivity and quality of the American worker.

Legalized marijuana has sparked a new concern for employers that can’t simply be passed around until it burns out. While it may be a bit early to draw any conclusions, there are some facts and myths that should put an employer’s mind at ease, and yet, others that will require employers to proceed with caution (particularly when state and federal law are in conflict).

Myth: It’s not illegal to use medical marijuana if your state allows it.

Fact: Federal law supersedes state law, and marijuana is illegal under federal law. It’s in the same category as heroin and cocaine.

Myth: Employees legally using medical marijuana (under state law) are protected by the Americans with Disabilities Act (ADA).

Fact: The ADA generally does not protect current users of drugs that are illegal under federal law, like marijuana. But, employees using medical marijuana may still suffer from a disability that is protected by the ADA. If medical marijuana comes up, employers should engage in the interactive process to determine whether the employee may be entitled to a reasonable accommodation that does not involve marijuana use.

Myth: The legalization of medical marijuana will not affect my business or workplace.

Fact: Sooner or later, most businesses will be affected by the legalization of medical marijuana. In some cases, accommodating the use of medical marijuana can have unexpected consequences. For example, it may violate applicable federal laws or regulations, like DOT requirements for safety-sensitive positions or OSHA requirements to provide a safe working environment. And, if an employee using medical marijuana hurts someone else, the employer may be sued for negligent hiring, retention or entrustment.

More myths and facts will emerge now that the marijuana debate is burning at both ends. Until the picture gets clearer, employers should proceed cautiously. In the meantime, employers should consider Employment Practices Liability Insurance to protect against inadvertent violations.

Please contact us if you would like to learn more about protecting your business against employment-related liabilities. To receive regular updates about developments which may affect your business, subscribe to Setnor Byer Insurance & Risk’s weekly risk management news brief

The Affordable Care Act: What Does President Trump’s Executive Order Mean for Employers?

It wasn’t long before campaign promises to repeal Obamacare became official White House policy. On his first day in office, President Trump issued an Executive Order stating that “it is the policy of my Administration to seek the prompt repeal of the Patient Protection and Affordable Care Act.” This clearly marks the beginning of a long period of uncertainty about the future of Obamacare. What isn’t so clear is how the President’s Executive Order will affect employers.

Let’s start by clarifying that the Executive Order did not amend or repeal the Affordable Care Act (ACA). Only an act of Congress can do that. Instead, President Trump essentially issued marching orders to the heads of executive agencies about how their ACA-related authorities and responsibilities must be exercised under his administration. As head of the Executive Branch, this is within the President’s authority.

Specifically, the President directed these executive agencies to exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay the implementation of any ACA provision or requirement that would impose costs, fees, taxes, penalties or regulatory burdens. Can a directive as simple as this really change the ACA?

No, it can’t change the law itself. What it can do is change how the ACA is interpreted and enforced. This is because Congress sometimes uses broad strokes to enact a law. It then empowers one or more federal agencies to fill in the details. When it comes to the ACA, Congress did this quite a bit.

For example, Congress gave various federal agencies, including the Department of Health and Human Services(HHS) and the Internal Revenue Service (IRS), the general authority to promulgate any rules and regulations that may be necessary or appropriate to carry out a number of ACA provisions. Congress also gave these agencies some very specific and significant authority.

  • Hardship Exemptions. Congress included a hardship exemption in the ACA so deserving individuals can avoid the penalty for failing to have health insurance. Congress authorized HHS to define and determine whether someone qualifies for a hardship exemption.
  • Large Employer Reporting Requirements. Congress required applicable large employers to furnish and file information reports detailing offers of health insurance coverage to full-time employees. Congress authorized the IRS to determine how these reports must be prepared and when they are due.
  • Reasonable Cause Waivers. Congress included a waiver provision in the ACA so employers showing reasonable cause could avoid the penalty for failing to comply with the ACA’s reporting requirements. Congress authorized the IRS to define and determine whether an employer qualifies for a reasonable cause waiver.
  • Large Employer Penalty. Congress created a penalty for applicable large employers failing to offer full-time employees a minimum level of health insurance coverage, which must be paid when the employer receives a notice and demand for payment. Congress made the IRS responsible for not only determining when payments would be due, but for sending the actual demand for payment.

As you can see, various executive agencies have quite a bit of power to affect how the ACA is interpreted, applied and enforced. This power was given to them by Congress when the ACA was enacted. The Executive Order merely directs how these agencies must exercise the authorities and powers they already had under the ACA.

However, there are limits to this power. Formal rule and regulatory changes should be subject to the Administrative Procedure Act’s notice and publication requirements. This process can take months, possibly years. There may be a bit more flexibility when it comes to less-than-formal agency actions, but there are still statutory and constitutional limits that cannot be exceeded.

How far will President Trump and the executive agencies take the Executive Order to push their agenda? How far will opponents let them go before pushing back? How will the courts rule if (when) lawsuits are filed? The only thing we know for sure is that change is coming.

Setnor Byer Insurance & Risk is committed to guiding you through the constantly developing health care landscape. Check back with us periodically for future informational updates about the Affordable Care Act or contact us if you would like to discuss how we can help you comply with health care reform.

To receive regular updates about developments which may affect your business, subscribe to Setnor Byer Insurance & Risk’s weekly risk management news brief.

IRS Extends Deadline to Furnish ACA Forms to Individuals and Good-Faith Relief from ACA Reporting Penalties

On November 18, 2016, the Internal Revenue Service gave employers averaging at least 50 full-time or full-time equivalent employees in 2015 (Applicable Large Employers or ALEs) an early holiday gift. The IRS extended the Affordable Care Act’s due date to furnish 2016 Forms 1095-C to individuals from January 31, 2017 to March 2, 2017. The IRS also extended last year’s transition relief to protect ALEs from penalties if they make a good-faith effort to comply with the ACA’s 2016 information and reporting requirements.

The IRS did NOT extend the due date for ALEs to file their 2016 Forms 1094-C and 1095-C, which must still be filed with the IRS by February 28, 2017 (March 31, 2017, if filed electronically).

Under the ACA, ALEs are required to annually furnish Form 1095-C (Employer-Provided Health Insurance Offer and Coverage) to individuals on or before January 31 of the following calendar year. ALEs must also file Forms 1095-C and 1094-C (Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns) with the IRS on or before February 28 (March 31 if filed electronically) of the following calendar year.

The IRS determined that a substantial number of employers need additional time beyond January 31, 2017 to prepare and furnish their 2016 Forms 1095-C to individuals, which is why the due date was extended to March 2, 2017. This extension does not require the submission of a request or other documentation. However, the IRS determined that employers do not need additional time to meet filing deadline, so the due date to file 2016 Forms 1095-C and 1094-C with the IRS remains February 28, 2017 (March 31, 2017, if filed electronically).

Perhaps more important is the extension of last year’s transition relief from penalties that may be imposed for failing to comply with the ACA’s 2016 information and reporting requirements, which can be substantial. The penalty for failing to timely furnish correct Forms 1095-C to individuals is generally $250 per individual. The penalty for failing to timely file correct Forms 1095-C with the IRS is generally $250 per form.

To avoid these penalties, an ALE must show that it made a good-faith effort to comply with the ACA’s 2016 requirements to furnish information about employer-provided health insurance coverage to individuals and file this information with the IRS. This relief only applies to forms with incorrect or incomplete information, such as missing or inaccurate taxpayer identification numbers, dates of birth, etc. It does not apply to ALEs that do not make a good-faith effort to comply with the reporting requirements or that fail to file or furnish forms by the due dates.

In determining good faith, the IRS will consider whether an ALE made reasonable preparation efforts to furnish and file the necessary forms, such as gathering and transmitting the necessary data to an agent to prepare the data for filing with the IRS or testing its ability to transmit information to the IRS. The IRS will also consider the extent to which an ALE is taking steps to ensure that it will be able to comply with the 2017 reporting requirements.

These extensions only apply to the ACA’s 2016 reporting requirements. The IRS does not anticipate extending this transition relief, either with respect to the due dates or with respect to good faith relief from penalties, to reporting for 2017.

Setnor Byer Insurance & Risk is committed to helping clients protect their businesses and navigate the ACA’s reporting requirements. Please contact us for more information about our online tool for preparing, furnishing and filing ACA forms.

To receive regular updates about developments which may affect your business, subscribe to Setnor Byer Insurance & Risk’s weekly risk management news brief.

Supreme Court Requests Compromise Options in ACA Contraception Case

In Zubik v. Burwell, the U.S. Supreme Court is considering whether the rights of religiously affiliated nonprofit organizations are violated by the Affordable Care Act’s contraceptive-coverage mandate. Given the sensitive, often contentious issues raised in this case, the public is anxiously awaiting the Court’s decision. However, many were surprised when less than a week after hearing oral arguments, the Court ordered the parties to provide potential compromise solutions.

The ACA generally requires group health insurance plans to cover preventive care and screenings for women without cost sharing elements (copayment, coinsurance, deductible), including all contraceptive methods approved by the Food and Drug Administration. Though generally mandatory for nonprofit employers with no religious affiliation and for-profit employers that are not closely-held (the Hobby Lobby case), religious and religiously affiliated employers can avoid the contraceptive-coverage mandate, either by exemption or accommodation.

  • Exemption. Federal regulations authorize an exemption for nonprofit religious employers, including churches and their integrated auxiliaries. These employers are not bound by the contraceptive-coverage mandate. Their employees and dependents do not have guaranteed contraceptive coverage.
  • Accommodation. Religiously affiliated nonprofit corporations may obtain an accommodation that relieves them from complying with the mandate. These employers must notify their insurance company, third-party administrator or the Department of Health and Human Services of their religious objections to providing insurance coverage for contraceptives.

Under the ACA, religious employers are exempt from the mandate, but religiously affiliated employers must take steps to obtain an accommodation. Nevertheless, these employers are not required to contract, arrange or pay for contraceptive coverage. According to the Secretary of Health and Human Services (Burwell), the regulatory process to obtain an accommodation does not substantially burden religiously affiliated employers seeking to avoid the mandate.

Though some of the employers in Zubik are entitled to an accommodation, they argue that the process itself violates their sincerely held religious beliefs. According to these employers, complying with the regulatory mechanism to obtain an accommodation would make them “complicit in providing contraceptive coverage” in violation of their religion.

The passing of Justice Scalia leaves only eight justices to decide this case. Many believe they are evenly divided. In the event of a 4-4- tie, the lower court rulings would remain intact, which could lead to inconsistent application of the law nationally because the Zubik case is actually a consolidation of several different cases from across the country. Perhaps this explains why the Court issued an order directing the parties to discuss ways to reach an acceptable compromise.

We may never know for sure why the Court did this, but it will be interesting to see if this exercise produces any results. Fortunately, we shouldn’t have to wait long because the Court didn’t give the parties much time. All briefs must be filed by April 20, 2016.

Stay tuned…

At Setnor Byer Insurance & Risk, we are committed to guiding you through the constantly changing health care landscape. In addition to our other valuable risk management solutionse, Setnor Byer Insurance & Risk has an online tool to help clients complete their ACA information reports.

Please contact us if you have any questions or would like to discuss how we can help you comply with health care reform.

Is Your Group Health Plan Considered ‘Affordable’ under the ACA?

Applicable Large Employers (ALEs) are generally employers that average at least 50 full-time and full-time equivalent employees. Under the Affordable Care Act, ALEs can either provide health insurance coverage to employees or pay a penalty. To avoid a penalty, ALEs must offer health coverage to at least 95% (70% in 2015) of its full-time employees and their dependents. But, not any old group health insurance coverage will do.

Coverage that is offered must provide minimum value and must be affordable. The minimum value requirement is generally met if the plan covers at least 60% of the costs of benefits. To be affordable, the employee’s share of the premium cannot be more than 9.5% of that employee’s annual household income.

Since employers generally will not know each full-time employee’s household income, employers may use one or more of the ACA’s three affordability safe harbors. If an employer satisfies one or more of these safe harbors, coverage will be considered affordable even if it costs more than 9.5% of a particular employee’s annual household income.

Form W-2. Coverage will generally be considered affordable if the employee’s required calendar year contribution for the employer’s lowest cost self-only coverage does not exceed 9.5 percent of that employee’s Form W-2 wages.

  • Calculated on an employee-by-employee basis at the end of the calendar year.
  • Employee’s required contribution amount or percentage must be consistent throughout the calendar year, so discretionary adjustments to employee contribution requirements for a pay period are not allowed.
  • Wages are adjusted if coverage is not offered for an entire calendar year.
  • Generally produces the highest ‘affordable’ monthly contribution because the calculation is based on wages for all hours worked and paid time off wages (sick, vacation, etc.).
  • Optimal for employers with a relatively stable workforce that are unlikely to reduce compensation levels during the year.

 

Rate of Pay. Coverage will generally be considered affordable if the employee’s required monthly contribution for the lowest cost self-only coverage does not exceed 9.5% of an amount equal to 130 multiplied by the employee’s lowest hourly rate of pay during the calendar month or the hourly rate on the first day of the coverage period (generally the first day of the plan year), whichever is lower. Monthly salaries are used for non-hourly employees.

  • Calculated monthly on an employee-by-employee basis.
  • Employees credited with 130 hours of work per month, regardless of hours actually worked.
  • Generally produces a lower ‘affordable’ monthly contribution than the Form W-2 safe harbor because the calculation is based on wages for 130 hours of work per month (30 hours per week).
  • The maximum monthly ‘affordable’ contribution for an employee making the federal minimum wage of $7.25 per hour is $89.54 ($7.25 x 130 = $942.50 x .095 = $89.54). The monthly maximum would be $123.50 for an employee making $10 per hour and $148.20 for an employee making $12 per hour.

 

Federal Poverty Line. Coverage will generally be considered affordable if the employee’s required monthly contribution for the lowest cost self-only coverage does not exceed 9.5% of the applicable calendar year’s federal poverty line (FPL) for a single individual, divided by 12.

  • The 48 contiguous states are given a single FPL; Alaska and Hawaii each have their own FPL.
  • The 2015 FPL for the 48 contiguous states is $11,770, so the maximum monthly ‘affordable’ contribution would be $93.18.
  • Generally produces the lowest ‘affordable’ monthly contribution of all the safe harbors.

 

These safe harbors are optional. ALEs may use one or more of these safe harbors and can apply them to any reasonable category of employees, but they must be applied uniformly and consistently to all employees in a category. Reasonable categories can be based on specified job categories, compensation type (hourly or salary), geographic location or other similar bona fide business criteria.

At Setnor Byer Insurance & Risk, we are committed to guiding you through the constantly changing health care landscape. In addition to our other valuable risk management solutions, Setnor Byer Insurance & Risk has an online tool to help clients complete their ACA information reports.

Please contact us if you have any questions or would like to discuss how we can help you comply with health care reform.

Small Group Health Premiums under the Affordable Care Act

Controlling health insurance premiums was a primary goal of health care reform. Before the Affordable Care Act (ACA), small group health insurers could vary premiums for a number of reasons, such as a group’s overall health status, size, age, gender, history or industry. As a result, some small groups had significantly higher premiums than others. Small groups could even face large premium increases based on a new diagnosis for a single employee.

For small group health insurers, these discriminatory premium variations are no longer allowed. Under the ACA, small group health insurers can only consider four factors when varying premium rates.

Individual vs. Family Coverage: Small group health insurers are allowed to vary rates based on who is enrolled in the plan. Different rates can be charged depending on whether the plan covers only an individual or a family.

Rating Area: Rating areas allow insurers to charge more in areas where medical costs are higher. Under the ACA, each state is authorized to establish their own rating areas; otherwise, federally-established default rating areas will be used.

A state’s rating areas must be based on the following geographic boundaries: counties, three-digit zip codes, or metropolitan and non-metropolitan statistical areas. The Centers for Medicare & Medicaid Services may evaluate rating areas to confirm whether they are actuarially justified, not unfairly discriminatory, reflect significant differences in health care costs, lead to stability in rates over time, and apply uniformly to all issuers in a market.

Age: Small group health insurers are allowed to vary premium rates based on age. However, variations cannot exceed a 3:1 ratio for those 21 and older. In other words, premiums for the highest price age groups cannot be more than three times the lowest price age groups.

The ratio is calculated using three uniform age bands:

  • Child (0-20): A single age band with the same actuarially justified premium rate based on a standard population.
  • Adult (21-63): One-year age bands with increasing rates based on an age-rating curve.
  • Older Adult (64+): A single age band with the same premium rate.

Tobacco Use: Small group health insurers can also vary premium rates for tobacco users, though variations cannot exceed a 1.5:1 ratio. (Premiums for tobacco users cannot be more than 1.5 times higher than for non-users.) The regulations define tobacco use as using tobacco an average of four or more times per week within the past 6 months, excluding religious or ceremonial usage, and includes all tobacco products.

At Setnor Byer Insurance & Risk, we are committed to guiding you through the ever-changing health care landscape. Check back with us periodically for informational updates about the Affordable Care Act. In the meantime, if you have specific questions, contact us.

Learn more about our Affordable Care Act Program.

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Affordable Care Act’s Employer Mandate Delayed…Again

On February 10, 2014, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) issued final regulations implementing the employer responsibility provisions under the Affordable Care Act (ACA). Despite being previously delayed, the final regulations provide transition relief to employers with 50 or more employees, which, according to the administration, should ensure a gradual phase-in of the employer mandate.

Since the employer mandate does not apply to employers with fewer than 50 employees, small employers are not required to provide coverage or fill out any forms in 2015, or in any year, under the ACA. For employers with 50 or more full-time employees, the final regulations provide the following transition relief.

Large Employers (100 or more employees): The final regulations reduce the percentage of full-time employees that must be offered health coverage. To avoid paying a penalty, large employers must offer coverage to 70% of their full-time employees in 2015, and 95% in 2016 and beyond. Large employers that do not meet these standards will have to make employer responsibility payments beginning in 2015.

Medium Employers (50 to 99 employees): The employer responsibility provisions will not apply to employers with 50 to 99 full-time employees until 2016. However, to be eligible for this transition relief, employers must certify that they meet the following conditions:

  • Limited Workforce Size. The employer must employ an average of at least 50 but fewer than 100 full-time employees (including full-time equivalents) on business days during 2014. The number of full-time employees (including full-time equivalents) is determined in accordance with the otherwise applicable rules in the final regulations for determining status as an applicable large employer.
  • Maintenance of Workforce and Aggregate Hours of Service. From February 9, 2014 to December 31, 2014, the employer may not reduce the size of its workforce or the overall hours of service of its employees in order to qualify for the transition relief. However, an employer that reduces workforce size or overall hours of service for bona fide business reasons is still eligible for the relief.
  • Maintenance of Previously Offered Health Coverage. From February 9, 2014 to December 31, 2015 (or, for employers with non-calendar-year plans, the last day of the 2015 plan year), the employer does not eliminate or materially reduce the health coverage, if any, it offered as of February 9, 2014. An employer will generally not be treated as eliminating or materially reducing health coverage if: (i) the employer contributes at least 95 percent of the dollar amount or at least the same percentage of the cost of coverage that was offered on February 9, 2014; (ii) any changes in benefits to employee-only coverage continue to provide minimum value; and (iii) the employer does not narrow or reduce the classes of employees (or the employees’ dependents) to whom coverage under was offered on February 9, 2014.

Since the final regulations cover a number of different topics and are highly technical, employers looking to take advantage of the transition relief should consult with a licensed professional.

Though many welcome the transition relief provided in the final regulations, it doesn’t look like 2014 will bring stability and predictability to health care under the Affordable Care Act. At Setnor Byer Insurance & Risk, we are committed to guiding you through the changes coming in 2014. Check back with us periodically for future informational updates about the Affordable Care Act. If you have specific questions about the Act or if you are ready to take action and would like to see how Setnor Byer Insurance & Risk can help, contact us.

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