Posted by: groupsplus | October 12, 2014

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Posted by: groupsplus | December 20, 2013

Young adults to pay more for health insurance in 2014

Beginning in 2014, older Americans can’t be charged more than three times what young adults pay for health insurance.  In 42 states the current age band ratio is 5 to 1.  Up to now, it would be common that insurers would charge older Americans more for insurance because they have more health problems; it makes actuarial sense.  Under the Affordable Care Act (ACA) the age band ratio is reduced to 3 to 1.  That means younger adults will have to pay more for health insurance in the individual market than they otherwise would have.  They’ll basically be subsidizing the older generation.

How much more?  As reported by the Minneapolis/St. Paul Business Journal last week, “two actuaries in the Milwaukee office of management consulting firm Oliver Wyman estimate the adults in the 21-29 percent age bracket will pay 42 percent more for insurance than they would have without health care reform.  Adults in the 30-39 age bracket will pay 31 percent more.  These estimates take into account the premium subsidies that will be provided by the federal government to lower-income Americans.

The question remains… will the “young invincibles” decide to play for the more expensive coverage or pay the penalty for not having health insurance?  The penalty starts at $95 or 1 percent of modified adjusted gross income (whichever is greater) in 2014.  Then it rises to $325 or 2 percent of modified adjusted gross income in 2015, and $695 or 2.5 percent in 2016.  If a lot of them decide not to get insurance, the unintended consequence will be that the risk pools will be older and less healthy and will lead to higher insurance costs for those who are in the pool.

Something to watch for in the next two years!

Posted by: groupsplus | December 20, 2013

Comparing Premium Tax Credits to Cost-Sharing Reductions

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The Affordable Care Act (ACA) provides two mechanisms by   which consumers who qualify may receive financial assistance. One reduces the   cost of private health care insurance through advance premium tax credits   (APTC). The second reduces the out-of-pocket costs associated with receiving   health care services for low-income households through cost-sharing   reductions (CSR).

  Advance Premium Tax   Credits (APTC) Cost-Sharing   Reductions (CSR)
What is it? The APTC is a tax credit or subsidy that reduces the cost   of health insurance premiums. A cost-sharing reduction (CSR) is a subsidy that reduces   out-of-pocket costs for health insurance, including copayments, coinsurance   and deductibles.
How does it work? The APTC is paid directly to the covered individual’s   health insurance carrier each month by the federal government, beginning when   the individual’s enrollment begins. With this payment method, the individual   does not need to wait until his or her taxes are filed in order to receive   the subsidy, and does not need to pay the full cost of premiums each month.   It is an option to receive the APTC this way.

Covered individuals also have the option of forgoing   advance payment of the tax credit to their health insurance carrier. In this   case the individual would pay the full cost of monthly premiums and instead   receive the tax credit in a lump sum when filing his or her federal income   taxes.

The CSR is paid directly to the covered individual’s   health insurance carrier by the federal government. There is no option for an   individual to file for cost-sharing reductions on a year-end tax return.
Where is it   available? The APTC is only available to people applying for coverage   through a health insurance marketplace such as MNsure. The CSR is only available to people applying for a silver   plan through a health insurance marketplace such as MNsure.
Who qualifies? People with family incomes between 100 and 400 percent of   the federal poverty level who are not eligible for Medicaid or other public   health care programs and who do not have access to affordable   employer-sponsored coverage. Eligibility is based on the previous year’s   income tax returns. People with family incomes between 100 percent and 250   percent of the federal poverty level who are not eligible for Medicaid or   other public health care programs and who do not have access to affordable   employer-sponsored coverage. Therefore, it is possible for an applicant to   receive both the advance premium tax credit and cost-sharing reductions.
How much is it? The subsidy amount will vary based on the person’s income.   Each person applying for the APTC will be required to pay between 2 and 9.5   percent of their family income in premiums. The APTC makes up the difference   between the amount the person is required to pay and the monthly premium of   the benchmark plan, which is the second-lowest-cost silver plan available on   the person’s state health insurance marketplace. The cost-sharing reduction amount will vary based on the   person’s income. The lower a person’s income, the more he or she will benefit   from cost-sharing reductions.
Is it flexible? Yes. The amount of the APTC is determined based on the   cost of the benchmark plan (the second-lowest-cost silver plan in the   marketplace), but can be applied to any plan in the health insurance exchange   or marketplace, except catastrophic plans. In this way, a person could “buy   up” to a gold plan, but still apply the APTC toward the premium. The amount   of the APTC can meet, but not exceed, the premium cost of the person’s health   plan. No. The cost-sharing reductions are only available to   people who enroll in a silver plan through a health insurance marketplace. A   person may not apply the cost-sharing reduction amount to any other plan   available inside or outside the marketplace.
Posted by: groupsplus | July 8, 2013

Administering the ACA’s Waiting Period Limit

ImageAdministering the ACA’s Waiting Period Limit

Under the Patient Protection and Affordable Care Act (ACA), a health insurer or group health plan may not apply any waiting period that exceeds 90 calendar days after the individual employee first becomes eligible to enroll by meeting the eligibility conditions of the plan.

The Internal Revenue Service and U.S. Departments of Labor and Health and Human Services issued proposed regulations on Mar. 18, 2013, regarding the waiting period limit. The proposed regulations will remain in effect at least through the end of 2014. Employers that follow the proposed regulations will be deemed compliant through the end of 2014. Plan sponsors must comply with the 90-day rule for plan years beginning on or after Jan. 1, 2014.

Guidance to employers

Carriers will continue to rely on the employer to determine eligibility and effective dates; however, they will not administer any effective date of greater than 90 calendar days. We ask all of our group customers to review their current waiting period and eligibility conditions as soon as possible to determine if any changes need to be made to comply with the ACA requirements. Please contact Groups Plus if you have any questions about the information below or need assistance.

Counting days

All calendar days must be included when counting to 90 days after an employee has satisfied the eligibility conditions. It is not permissible to delay coverage until the first day of the month following the completion of the 90-day waiting period. Employers that wish to use a first day of the month or first day of the pay period enrollment date will need to apply shorter waiting periods in order to ensure that coverage would become effective before the 90-day waiting period limit is reached.

While the waiting period must not exceed 90 calendar days, it may be shorter than 90 calendar days. Therefore, if the 91st day falls on a weekend or holiday, the employer may make coverage effective before the 91st day. If the employer starts coverage at the beginning, middle or end of the month or by pay periods for administrative simplicity, the coverage may begin before the 91st day.

Waiting periods in effect on Jan. 1, 2014

If an employee is in a waiting period when the ACA waiting period requirement goes into effect on Jan. 1, 2014, the total waiting period cannot extend beyond 90 calendar days. For example, if the employer had a six-month waiting period and a full-time employee was hired on Oct. 1, 2014, the employee’s coverage must begin no later than Jan. 1, 2014. This is 93 days after the waiting period began but is effective as of the applicability date of the ACA requirement.

A note about eligibility conditions

While the ACA does not impose specific eligibility requirements, beginning in 2015 it does impose a penalty for employers with 50 or more full-time employees that do not offer coverage to all full-time employees and their dependents. Therefore, full-time status will become a condition of eligibility beginning in 2015. At that time, coverage must be offered to all full-time employees no later than 90 calendar days after the employee’s full-time status began, per the rules described above. The ACA defines a full-time employee as one who works an average of 30 hours or more per week.

The ACA permits group health plans to impose eligibility conditions based on other factors, such as achieving a license or other qualification required to perform the job, as long as these eligibility conditions are not designed to avoid compliance with the 90-day waiting period limit. Group health plans also may use cumulative hours of service as an eligibility condition, as long as the eligibility threshold is no more than 1,200 hours.

Posted by: groupsplus | July 8, 2013

Small Business Health Care Tax Credit

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Small Business Health Care Tax Credit

The Patient Protection and Affordable Care Act (ACA) provides a tax credit to eligible small businesses that provide health insurance coverage to employees.

The law provides for a 35% credit to businesses that meet certain requirements (listed below) for the 2010, 2011, 2012 and 2013 tax years. Small tax-exempt employers, such as charities, that also meet the requirements are currently eligible for a credit of 25%. However, as a result of the federal sequestration that went into effect in the spring of 2013, the amount of the refundable credit has been reduced by 8.7 percent through the end of September 2013. The federal Treasury Department may further reduce this tax credit beginning in October 2013.

For some small businesses and tax-exempt organizations, an enhanced version of the credit will be effective January 1, 2014. At that time, the credit will only be available for small group health plans purchased through an online health insurance marketplace or exchange such as MNsure. Final guidance has not been issued on the enhanced credit, but it may be as high as 50% for eligible taxable small businesses and 35% for eligible tax-exempt organizations.

Small businesses and tax-exempt organizations use IRS Form 8941, Credit for Small Employer Health Insurance Premiums, to calculate the credit.

To be eligible for the small business health care tax credit, small groups must purchase a qualified health plan inside or outside of a health insurance exchange and:

  • Have fewer than 25 full-time equivalent employees;
  • Pay an average wage of less than $50,000 per year; and
  • Pay at least half of employee health insurance premiums.
Posted by: groupsplus | July 8, 2013

ACA Taxes and Fees

Image         ACA TAXES AND FEES

A number of new taxes and assessments related to the implementation of the Affordable Care Act (ACA) will be implemented at the state and federal levels. The table below provides an overview of selected taxes and assessments, and which parties are responsible for paying them:

Tax/Fee Purpose Applies to Responsible Amount
Patient-Centered Outcomes Research Institute Trust Fund fee (PCORI) Funds comparative clinical effectiveness research. Payable for each policy and plan year that ends on or after Oct. 1, 2012 and before Oct. 1, 2019. Self-funded group plans are responsible for paying their fee. Medica bundles the PCORI fee into premiums and makes the fee payment on behalf of fully insured groups. Employers that offer a fully insured medical plan with a health reimbursement account (HRA) must pay the PCORI fee in relation to the HRA. $1 for each covered life the first year and $2 per covered live for the second year. Thereafter, the fee will be adjusted annually by the U.S. Dept of Health and Human Services (HHS).
Annual Fee on Health Insurance Providers Helps to fund premium subsidies and cost-sharing reductions for individuals who purchase health insurance on an exchange or marketplace The annual fee will be assessed on health plans and allocated by marketshare. It will begin to be assessed in January 2014 and is permanent. Health insurance issuers will pay this fee. The ACA permits insurers to pass the cost of the fee on to purchasers in the form of higher premiums. Medica’s preliminary calculation is that the fee will add 2-4% to its premiums.
Risk Adjustment Program Fee Helps to reduce or eliminate premium differences among plans in the individual and small group markets based solely on favorable or unfavorable risk selection. Fully-insured plans in the individual and small group markets. The fee does NOT apply to fully-insured or self-insured large group plans. It also does not apply to grandfathered plans. It will begin to be assessed in January 2014 and is permanent. Health insurance issuers will pay this fee. Payments will be transferred from health insurance issuers with relatively low-risk populations to issuers with relatively high-risk populations.  The federal government will charge an annual administrative fee of $0.96 to insurers for each individual and small group enrollee.
Transitional Reinsurance Program Fee Helps to premiums in each state’s individual market due to many high-cost individuals entering the individual insurance market for the first time. The fee applies to individual plans, as well as fully-insured and self-funded group plans, including grandfathered plans. Health reimbursement accounts, health savings accounts and flexible spending accounts are exempt from reinsurance contributions.The transitional reinsurance program will exist and be funded for calendar years 2014, 2015 and 2016. Health insurance issuers, self-funded groups and third-party administrators will be responsible for paying this fee. HHS has proposed that the annual assessment will cost $63 per individual enrolled in a policy during 2014. Payments will be collected quarterly beginning in January 2015 and phased out at the end of calendar year 2016.
Health Insurance Marketplace User Fees The ACA requires health insurance marketplaces (exchanges) to be financially self-sustaining by 2015. The ACA permits marketplaces to collect a user fee to fund marketplace operations. State-based marketplaces such as MNsure in Minnesota and Federally Facilitated Marketplaces (Wisconsin and North Dakota in Medica’s service area) will charge the fee. Health insurance issuers who offer qualified health plans in the marketplaces will be responsible for paying this fee.  The ACA permits issuers to include the cost of this fee in premiums, but stipulates that the costs must be spread the across the individual and small group risk pools both inside and outside health insurance exchanges so premiums for equivalent plans available inside and outside the exchanges will also be equivalent. In late 2012, HHS proposed health insurance issuers pay a monthly user fee of 3.5 percent of the monthly premium collected for each active policy sold through an FFM.  In 2014, MNsure will charge a 1.5 percent fee, and up to 3.5 percent in 2015 and beyond.

Employer Shared Responsibility (Pay or Play Penalty)

PPACA - ER Play or Pay Penalties_1

Large employers are required to offer health coverage that is affordable and provides minimum value or pay penalties.  This does not apply to employer groups with fewer than 50 full-time and full-time equivalent employees.

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What determines whether you are a large employer?

You are a large employer if you employ an average of 50 or more full-time equivalent employees in the preceding calendar year (6 consecutive months for 2013).

Count 2013 employees for determining “large” status for 2014.  This would represent total aggregate employees of common owned companies.  It also applies to for-profit, non-profit and government employees.

Generally, this is the 12 month average of:

  • The total number of full-time employees working (30 hours or more per week) per month plus
  • Full-time equivalent of part-time and seasonal employees’ hours per month
  • Total part-time and seasonal employees’ hours divided by 120 hours per month equals full-time equivalent (i.e. 20 part-time employees working 15 hours/week = 10 full-time employees)
  • Possible seasonal employee exception

Example:

An employer has 38 employees working 40 hours per week and 20 employees each working 80 hours a month for the first 6 months of the year and 10 employees each working 80 hours a month for the last 6 months.

Monthly calculation for the first six months in year:
Number of full-time employees per month                 38             
Number of full-time equivalents per month    (20*80) / 120 = 13.3
 Total per month for the first six months                 51.3 FTE       

Monthly calculation for the second six months in year:
Number of full-time employees per month                 38              
Number of full-time equivalents per month    (20*80) / 120 = 6.7  
 Total per month for the first six months                 44.7 FTE       

Total for the year:                                  ((51.3*6) + (44.7*6)) / 12 = 48 FTE

Determination:  This employer is NOT a large employer for purposes of the penalty.

More to come!!

Posted by: groupsplus | April 12, 2013

Affordable Care Act (ACA) Taxes and Assessments

Great Seal of the US

As we watch and analyze how health care reform implementation evolves, we will share information with you regularly to help you understand and plan for the changes.

Today, we share information relating to taxes and assessments. We’re still monitoring details, but as part of the Affordable Care Act (ACA), taxes and fees were established for employers and health plan sponsors.

Required taxes and fees vary based on the employer group. For your reference, here is an at-a-glance view of how they will apply. We also will use this chart in other tools to come.

Employer Group

Comparative Effective Fee (PCORI)

Transitional Reinsurance Program fee

ACA Premium Tax

Risk Adjustment fee

Fully insured large employers

X

X

X

Fully insured small employers

X

X

X

X

Self-insured employers

X

X

The specifics of health care reform are evolving daily, and we’re watching and analyzing the implications carefully. As your partner, we would like to share what we learn with you. We hope you find it useful as you plan strategies to succeed in the new reform environment.

In recent days, we’ve heard questions about taxes and assessments related to reform. As part of the Affordable Care Act (ACA), taxes and fees were established for employers and health plan sponsors, although not all details have yet been finalized.

For fully insured small employers, there are four taxes that will apply in the future:

  • Comparative Effectiveness Fee (PCORI): funds research on the clinical effectiveness of medical treatments. The fee is effective in 2012 with the first payment due July 31, 2013. The initial cost is $1 per average number of covered lives for plan years ending on or after October 1, 2012 and before October 1, 2013. The plans ending on or after October 1, 2013 to October 1, 2014, the fee will be $2 and is indexed thereafter. This fee has been included in the quoted premiums.
  • Transitional Reinsurance Program fee: funds a program to offset the high-cost individuals moving into insurance plans and is effective for plan years January 2014-2016. The proposed fee for this program is currently estimated at $5.25 per covered life per month for 2014. The estimated fee for this program is $3.62 in 2015 and $1.79 in 2016. This fee will be calculated as a separate line item within the renewal calculation.
  • ACA Premium Tax: a tax on premiums to help support exchanges via premium subsidies and tax credits. It is estimated at 1 percent to 2 percent of premium in 2014 and will be itemized on renewals. This fee will be calculated as a separate line item within the renewal calculation.
  • Risk Adjustment fee: this proposed fee for the ACA risk adjustment program which transfers funds from plans with lowest risk individuals to plans with the highest risk individuals. If the Department of Health and Human Services operates the program, the fee is estimated at $1.00 per enrollee per year. This fee begins in 2014 and will not be itemized in renewals.
Posted by: groupsplus | April 3, 2013

Health Care Reform Blog

Guidance Arrives on Safe-Harbor Methods to Determine Full-Time Employee Status and on 90-Day Waiting Period Limit

New regulatory guidance has been published interpreting some key employer provisions of the Patient Protection and Affordable Care Act (PPACA). The new guidance (i) affects how employers will determine who are “full time” employees under the PPACA’s employer shared responsibility provisions (i.e., play-or-pay mandate), (ii) interprets the maximum 90-day eligibility waiting period limit for employer group health plans and (iii) confirms the employer affordability safe harbor based on employee W-2 income rather than household income. The new guidance provides safe harbors that will be available to employers at least through 2014 while regulators prepare formal regulations.

The guidance consists of three pieces. Internal Revenue Service (IRS) Notice 2012-58 describes the safe-harbor methods employers may use to determine which employees are to be treated as full time for the purpose of the employer play-or-pay mandate. The notice includes safe-harbor methods specifically for certain newly hired “variable hour” and “seasonal” employees. IRS Notice 2012-59 and Department of Labor (DOL) Technical Release 2012-02 describe safe-harbor guidance on the 90-day eligibility waiting period limit in Public Health Service Act (PHSA) Section 2708. IRS Notice 2012-59 is virtually identical to DOL Technical Release 2012-02. Links to these three documents are at the end of this blog.

The plans affected by this guidance will include employer group health plans, whether insured or self-insured, and regardless of whether the plan is grandfathered. The guidance applies to the PPACA requirements that take effect January 1, 2014.

Background

Under Internal Revenue Code (IRC) Section 4980H, an “applicable large employer” is subject to a penalty if either (1) the employer fails to offer its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan, and any full-time employee is certified to receive a federal premium tax credit or cost-sharing reduction, or (2) the employer offers its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage, and one or more full-time employees is certified to receive a federal premium tax credit or cost-sharing reduction (generally because the employer’s coverage either is not “affordable” or does not provide “minimum value”).

Coverage under an employer-sponsored plan is deemed “affordable” to a particular employee if the employee’s required contribution to the lowest-cost plan for self-only coverage does not exceed 9.5% of the employee’s household income for the taxable year. A full-time employee with respect to any month is an employee who is employed, on average, at least 30 hours per week. Consequently, it will be crucial for employers to determine which employees are “full time” for these purposes and precisely when an individual (such as employees with variable hours and seasonal employees) may become a “full-time employee.”

The IRS previously issued several Notices describing how it planned to address these issues in regulations, including IRS Notice 2011-36, IRS Notice 2011-73 and IRS Notice 2012-17. While the IRS is not issuing formal regulations at this time, it has issued new safe-harbor guidance for 2014, described below, which builds on and in some cases modifies the guidance provided to date.

In particular, the IRS is revising the approach outlined in Notice 2012-17 for new variable-hour employees. The IRS is also providing a similar safe harbor for certain seasonal employees and is modifying the rule for “ongoing employees” to allow for the use of an “administrative period,” described below, between the measurement and stability periods. A description of the new safe-harbor guidance follows.

Safe Harbor for Determining Ongoing Employees’ Full-Time Status

For ongoing employees, employers may generally use the safe-harbor method based upon a measurement and stability period that were described in Notices 2011-36 and 2012-17. The measurement period that an employer chooses to apply to ongoing employees is referred to in the guidance as the “standard measurement period.”   An “ongoing employee” is generally an employee who has been employed by the employer for at least one complete standard measurement period.

Under the safe-harbor method for ongoing employees, an employer determines each ongoing employee’s full-time status by looking back at the standard measurement period (a defined time period of not less than three but not more than 12 consecutive calendar months, as chosen by the employer).

The employer may determine the months in which the standard measurement period starts and ends, provided that the determination must be made on a uniform and consistent basis for all employees in the same category. Employers may use measurement periods and stability periods that differ either in length or in their starting and ending dates for the following categories of employees: (1) collectively bargained employees and non-collectively bargained employees, (2) salaried employees and hourly employees, (3) employees of different entities and (4) employees located in different states. However, certain rules govern the relationship between the length of the measurement period and the stability period.

According to the guidance, if an employer chooses a standard measurement period of 12 months, the employer could choose to make it the calendar year, a non-calendar plan year or a different 12-month period (such as one that ends shortly before the start of the plan’s annual enrollment season).

If an employer determines that an employee averaged at least 30 hours per week during the standard measurement period, then the employer must treat the employee as a full-time employee during a subsequent “stability period,” regardless of the employee’s number of hours of service during the stability period, so long as the individual remains an employee. The stability period for such an employee would be a period of at least six consecutive calendar months that is no shorter in duration than the standard measurement period and that begins after the standard measurement period (and after any applicable “administrative period” described below).

If an employer determines that an employee did not work full time during the standard measurement period, the employer may treat the employee as not a full-time employee during the stability period that follows, but is not longer than, the standard measurement period. Different rules may apply to employees who move into full-time status during the year. When formal regulations are issued, they will include additional rules on the treatment of employees who experience a change in employment status during a standard measurement period.

Ongoing Employees — Option to Use an Administrative Period Under the Safe Harbor

The new guidance recognizes that an employer will need time between the standard measurement period and the associated stability period to determine, for example, which ongoing employees are eligible for coverage, and to notify and enroll employees. Thus, an employer may make time for these administrative steps by having its standard measurement period end before the associated stability period begins.

However, any administrative period between the standard measurement period and the stability period may not reduce or lengthen the measurement period or the stability period. Under the new guidance, the administrative period following a standard measurement period may last up to 90 days.

To prevent an administrative period from creating any gaps in coverage, the administrative period will overlap with the prior stability period. Thus, during any administrative period that applies to ongoing employees following a standard measurement period, ongoing employees who are eligible for coverage because of their status as full-time employees based on a prior measurement period would continue to be offered coverage.

New Employees Who Are Reasonably Expected to Work Full Time

If an employee is reasonably expected as of his/her start date to work full time, an employer that offers coverage to the employee at or before the conclusion of the employee’s initial three calendar months of employment will not be subject to the employer play-or-pay penalty under Section 4980H for failing to offer coverage to the employee for up to the initial three calendar months of employment. Rules on compliance with the 90-day waiting period limit are in the new IRS Notice 2012-59 and DOL Technical Release 2012-02, described below.

New Employees: Safe Harbor for Variable-Hour and Seasonal Employees

Variable-Hour Employees. Under the new guidance, a new employee is a variable-hour employee if, based on the facts and circumstances at his/her start date, it cannot be determined that the employee is reasonably expected to work, on average, at least 30 hours per week. A new employee who is expected to work initially at least 30 hours per week may be a variable-hour employee if, based on the facts and circumstances at the start date, the period of employment at more than 30 hours per week is reasonably expected to be of limited duration and it cannot be determined that the employee is reasonably expected to work, on average, at least 30 hours per week over the initial measurement period.

To illustrate, the guidance describes a variable-hour employee to include a retail worker hired at more than 30 hours per week for the holiday season who is reasonably expected to continue working after the holiday season but is not reasonably expected to work at least 30 hours per week for the portion of the initial measurement period remaining after the holiday season, so that it cannot be determined at the start date that the employee is reasonably expected to average at least 30 hours per week during the initial measurement period.

Seasonal Employees. The PPACA uses the term “seasonal worker” only in the context of whether an employer meets the definition of an applicable large employer. The law generally provides that if an employer’s workforce exceeds 50 full-time employees for 120 days or fewer during a calendar year, and the employees in excess of that 50 who were employed during that period of no more than 120 days were seasonal employees, the employer would not be an applicable large employer. For this purpose, “seasonal worker” means a worker who performs labor or services on a seasonal basis, as defined by the Secretary of Labor, including (but not limited to) workers covered by 29 CFR 500.20(s)(1) and retail workers employed exclusively during holiday seasons. The PPACA does not address how the term “seasonal employee” might be defined for any other purpose, such as whether a new employee of an applicable large employer is reasonably expected to work full time for purposes of any penalty under the employer play-or-pay mandate. Despite this, the new guidance provides that “through at least 2014, employers are permitted to use a reasonable good-faith interpretation of the term ‘seasonal employee’ for purposes of this notice.”

If an employer’s group health plan offers coverage only to full-time employees, the employer may use both a measurement period of between three and 12 months (the same as allowed for ongoing employees) and an administrative period of up to 90 days for variable-hour and seasonal employees. However, the measurement period and the administrative period combined may not extend beyond the last day of the first calendar month beginning on or after the one-year anniversary of the employee’s start date (totaling, at most, 13 months and a fraction of a month). These periods are described in greater detail below.

Initial Measurement Period and Associated Stability Period (Variable-Hour and Seasonal Employees)

For variable-hour and seasonal employees, the guidance permits employers to determine full-time status using an “initial measurement period” of between three and 12 months (as selected by the employer).

An employer would measure the hours of service completed by the new employee during the initial measurement period and determine whether the employee completed an average of 30 hours of service per week or more during this period. The stability period for such employees must be the same length as the stability period for ongoing employees. As in the case of a standard measurement period, if an employee is determined to be a full-time employee during the initial measurement period, the stability period must be a period of at least six consecutive calendar months that is no shorter in duration than the initial measurement period and that begins after the initial measurement period (and any associated administrative period).

If a new variable-hour or seasonal employee is determined not to be a full-time employee during the initial measurement period, the employer may treat the employee as not a full-time employee during the stability period that follows the initial measurement period. The stability period for such employees must not be more than one month longer than the initial measurement period and must not exceed the remainder of the standard measurement period (plus any associated administrative period) in which the initial measurement period ends. According to the guidance, allowing a stability period to exceed the initial measurement period by one month in these circumstances gives additional flexibility to employers that wish to use a 12-month stability period for new variable-hour and seasonal employees and an administrative period that exceeds one month. Such an employer could use an 11-month initial measurement period (in lieu of the 12-month initial measurement period that would otherwise be required) and still comply with the general rule that the initial measurement period and administrative period combined may not extend beyond the last day of the first calendar month beginning on or after the one-year anniversary of the employee’s start date.

An employee or related individual is not considered eligible for minimum essential coverage under the plan (and therefore may be eligible for a premium tax credit or cost-sharing reduction through an exchange) during any period when coverage is not offered, including any measurement period or administrative period prior to when coverage takes effect.

Transition from New Employee Rules to Ongoing Employee Rules (Variable-Hour and Seasonal Employees)

Once a new employee (who has been employed for an initial measurement period) has been employed for an entire standard measurement period, the employee must be tested for full-time status, beginning with that standard measurement period, at the same time and under the same conditions as other “ongoing employees.” Thus, an employer, for example, with a calendar-year standard measurement period that also uses a one-year initial measurement period beginning on the employee’s start date would test a new variable-hour employee whose start date is February 12 for full-time status first based on the initial measurement period (February 12 through February 11 of the following year) and again based on the calendar-year standard measurement period (if the employee continues in employment for that entire standard measurement period) beginning on January 1 of the year after the start date.

An employee determined to be a full-time employee during an initial measurement period or standard measurement period must be treated as a full-time employee for the entire associated stability period. This is the case even if the employee is determined to be a full-time employee during the initial measurement period but determined not to be a full-time employee during the overlapping or immediately following standard measurement period. In that case, the employer may treat the employee as not a full-time employee only after the end of the stability period associated with the initial measurement period. Thereafter, the employee’s full-time status would be determined in the same manner as that of the employer’s other ongoing employees.

In contrast, if the employee is determined not to be a full-time employee during the initial measurement period, but is determined to be a full-time employee during the overlapping or immediately following standard measurement period, the employee must be treated as a full-time employee for the entire stability period that corresponds to that standard measurement period (even if that stability period begins before the end of the stability period associated with the initial measurement period). Thereafter, the employee’s full-time status would be determined in the same manner as that of the employer’s other ongoing employees.

Optional Administrative Period for New Employees (Variable-Hour and Seasonal Employees)

In addition to the initial measurement period, the employer is permitted to apply an administrative period before the start of the stability period. This administrative period must not exceed 90 days in total. For this purpose, the administrative period includes all periods between the start date of a new variable-hour or seasonal employee and the date the employee is first offered coverage under the employer’s group health plan, other than the initial measurement period.

Thus, for example, if the employer begins the initial measurement period on the first day of the first month following a new variable-hour or seasonal employee’s start date, the period between the employee’s start date and the first day of the next month must be taken into account in applying the 90-day limit on the administrative period. Similarly, if there is a period between the end of the initial measurement period and the date the employee is first offered coverage under the plan, that period must be taken into account in applying the 90-day limit on the administrative period.

In addition to the specific limits on the initial measurement period (which must not exceed 12 months) and the administrative period (which must not exceed 90 days), there is a limit on the combined length of the initial measurement period and the administrative period applicable for a new variable-hour or seasonal employee. Specifically, the initial measurement period and administrative period together cannot extend beyond the last day of the first calendar month beginning on or after the first anniversary of the employee’s start date. To illustrate, the guidance provides that if, for example, an employer uses a 12-month initial measurement period for a new variable-hour employee, and begins that initial measurement period on the first day of the first calendar month following the employee’s start date, the period between the end of the initial measurement period and the offer of coverage to a new variable-hour employee who works full time during the initial measurement period must not exceed one month.

IRS Notice 2012-58 includes 11 examples illustrating various scenarios on variable-hour and seasonal employees.

90-Day Waiting Period Limit Under Public Health Service Act Section 2708

The PPACA, through the addition of Section 2708 to the PHSA, generally prevents an otherwise eligible employee (or dependent) from having to wait more than 90 days before coverage becomes effective under a group health plan.

The Departments of Labor, Health and Human Services (HHS), and the Treasury (the Departments), are developing coordinated regulations and other guidance to implement this provision of the PPACA. New guidance (issued in substantially identical form by the Departments in IRS Notice 2012-59 and DOL Technical Release 2012-02), provides temporary guidance regarding the 90-day waiting period limit. The guidance will remain in effect at least through the end of 2014. The Departments indicate that formal regulations or other guidance on these issues applicable for periods after 2014 will provide adequate time to comply with any additional or modified requirements.

Under the PPACA, as confirmed by the new guidance, a group health plan and a health insurance issuer offering group coverage may not use a waiting period that exceeds 90 days. A waiting period is the period of time that must pass before coverage for an employee or dependent who is otherwise eligible to enroll under the terms of the plan can become effective. For this purpose, being eligible for coverage means having met the plan’s substantive eligibility conditions (such as being in an eligible job classification or achieving job-related licensure requirements specified in the plan’s terms).

Eligibility conditions that are based solely on the lapse of a time period are permissible for no more than 90 days. Other conditions for eligibility under the terms of a group health plan are generally permissible, unless the condition is designed to avoid compliance with the 90-day waiting period limitation.

If, under the terms of a plan, an employee may elect coverage that would begin on a date that does not exceed the 90-day waiting period limitation, the 90-day waiting period limitation is considered satisfied. Consequently, a plan or issuer will not be considered to have violated the 90-day limit merely because employees take additional time to elect coverage.

If a group health plan conditions eligibility on an employee regularly working a specified number of hours per period (or working full time), and it cannot be determined that a newly hired employee is reasonably expected to regularly work that number of hours per period (or work full time), the plan may take a reasonable period of time to determine whether the employee meets the plan’s eligibility condition, which may include a “measurement period” that is consistent with the time frame permitted for such determinations (as described above, where IRS Notice 2012-58 provides a safe-harbor method under which an applicable large employer may use a measurement period of up to 12 months to determine whether certain types of new employees are full-time employees, without being subject to a play-or-pay penalty under Section 4980H).

An employer may use a measurement period that is consistent with Section 4980H, whether or not it is an applicable large employer that is subject to the employer play-or-pay mandate. Except where a waiting period that exceeds 90 days is imposed after a measurement period, the time period for determining whether such an employee meets the plan’s eligibility condition will not be considered to be designed to avoid compliance with the 90-day waiting period limitation if coverage is made effective no later than 13 months from the employee’s start date, plus the time remaining until the first day of the next calendar month, if the employee’s start date is not the first day of a calendar month. The new guidance illustrates these points with four examples.

Conclusion

Employers have been urgently awaiting this guidance, particularly employers with significant turnover and those with material groups of part-time and seasonal employees. Employers with low turnover and few part-time or seasonal employees will still be affected by how the rules apply to ongoing employees. The new guidance should allow all employers to begin strategic and operational planning for how full-time employees will be identified. Employers need to understand and begin applying this new guidance now in order to be prepared to determine employee status during the approach of the 2014 compliance date.

References: IRS Notice 2012-58; IRS Notice 2012-59; DOL Technical Release 2012-02

Article from Towers Watson Health Care Reform Bulletin

Posted by: groupsplus | January 25, 2013

Patient Centered Outcomes Research Fees

CER or Comparative Effectiveness Research is the comparison of existing health care interventions to determine which works best for which patients and which pose the greatest benefits and or risks.  The purpose of the CER is to compare the benefits and risks of alternative methods to prevent, diagnose, treat and monitor a clinical condition or to improve the care and to assist consumers, clinicians, purchasers and policymakers to make informed decisions that will improve health care at both the individual and population levels.

So now where do the fees come in?  Since the Affordable Care Act (ACA) imposed the new Patient Centered Outcomes Research Institute, someone needs to pay for it.  Insurers pay for the insured plans and plan sponsors pay the fee for self-funded plans (including Health Reimbursement Arrangements (HRA)).  For plans that end on or after 10/1/12 the fee is $1 per covered life per year.  The fee goes up to $2 per covered life for plan years on or ending 10/1/13.  For policy years ending in any fiscal year beginning on or after 10/1/14, the fee will be the prior year’s amount plus an adjustment for medical inflation.  Self-funded plans are responsible for paying the fee which is treated like an excise tax by the IRS.  The federal excise tax return Form 720 reporting liability for the fee must be filed by July 31 of the calendar year immediately following the last day of the plan year.

To determine the number of lives there are options as to how to calculate this, that vary based on fully insured or self-funded plans.

For Fully Insured Plans the IRS proposed 4 methods for determining the average number of covered lives.  They must use the same method consistently fo the duration of any year and the same method for all policies.

  • Actual Count – count the total number of covered lives for each day of the policy year and divide by the number of days in the year
  • Snapshot Method – count the number of employees on a single day in each quarter and divide the total by the number of dates on which a count was made.  The date used for each quarter must be the same (first day of the month – last day of the month)
  • 5500 Method – the number of lives reported on the form 5500
  • State Form Method – for plans not required to file a form 5500, determine the number of covered lives using a form that is filed with the particular state if the form reports the number of lives in the same manner as the 5500.

For Self-Funded Plans

  • Actual Count – same as above
  • Snapshot – same as above, however, if the case of self only coverage determine the sum of (1) the number of participants with self only coverage, and (2) the number of participants with other than self only coverage multiplied by 2.35

How does this fee apply to the HRA?

If a plan sponsor maintains a health reimbursement arrangement, then the plan sponsor may treat each participant’s account as covering a single life.  (The plan sponsor is not required to count spouses or dependents.)

If the HRA is sponsored by a plan sponsor that also has an applicable self-funded plan the two plans will be treated as one plan and only one fee is applied.  Stand-alone HRA’s, even those integrated with an insured plan, will pay a separate fee.

The PCOR fee for the HRA is an Employer fee that is separate from the Administration fee charged by your HRA vendor.  The Employer is required to submit the PCOR fee on IRS Form 720 for plans that end on or after 10/1/2012.  Your HRA vendor should provide the total participant count with plan closing information, but then it will be up to the Employer to calculate and submit the fee.

Note:  Most health FSAs that are otherwise an excepted benefit under HIPAA (employee salary reduction only), will not be subject to the PCOR fees.

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