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More IRS Guidance on W-2 Reporting of Health Coverage
Jan 17, 2012
Among the provisions contained in the 2010 Patient Protection and Affordable Care Act was a requirement that employers report, on each employee's IRS Form W-2, the value of any employer-provided health coverage. This reporting requirement is optional for 2011, but for employers issuing more than 250 W-2’s, it is mandatory for 2012 (that is, for W-2s to be provided in January of 2013). For “small employers”, who issue fewer than 250 W-2’s, the soonest such an employer would be required to report the health coverage value on W-2’s would be January 2014 (on the 2013 W-2). The IRS issued an initial round guidance on this reporting requirement, but that Notice left many questions unanswered. A number of those questions have now been answered.
Please review the attached article for detailed information about these upcoming changes which includes:
- Overview of Reporting Requirement
- Calculating the Cost of Coverage
- Recent Clarifications
For more information, please contact your e3 Financial Client Service Team and they will assist you.
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Year-End Reminder!
Dec 13, 2011
As year-end approaches, here are a few helpful reminders:
- Imputed Income for Group Life over $50k: If you provide employer-paid group Life Insurance in excess of $50,000 for any employee, you must include the value of that insurance on the employees’ W-2 at year end. The value of the excess benefit coverage is subject to Social Security and Medicare taxes. For more information, including the IRS rate table and employer responsibilities, click on the following link and review the Publication 15-B document (pages 11-13): http://apps3.irs.gov/govt/fslg/article/0,,id=110345,00.html
- Domestic Partner Taxation: The amount of premium paid by an employer on behalf of a domestic partner is to be included in the employee’s W-2 as imputed income. Further, premiums paid by the employee via payroll deduction on behalf of their Domestic Partners must be on an after-tax basis. We have included an overview on Domestic Partner taxation for your reference (see attached).
- Increase in 401k & Health Savings Account Limits: The IRS and the Social Security Administration recently announced most of the dollar amounts that employers will need to administer their benefit plans for 2012. Unlike the past two years, many of the amounts will be adjusted upward to account for inflation. Please see the attached reference card for detailed numbers.
- Employer Notice Regarding Children's Health Insurance Program: Employers sponsoring group health plans are required to notify employees of potential opportunities currently available in the State in which employees reside for group health plan premium assistance under Medicaid and the Children's Health Insurance Program (CHIP). In many cases this notice must be provided by Jan. 1, 2011 (as described below). The U.S. Department of Labor has published a model notice which may be used to satisfy this requirement, which can be found at: http://www.dol.gov/ebsa/chipmodelnotice.doc
For more information, please contact your e3 Financial Client Service Team and they will assist you.
Supreme Court Agrees to Hear Challenge to the 2010 Health Care Reform Law
Nov 15, 2011
The U.S. Supreme court has agreed to hear arguments regarding the constitutionality of the 2010 Health Care Reform law. Oral arguments should occur by March with a possible decision to follow in late June, in the midst of the 2012 presidential campaign. The justices will decide whether the mandate to purchase health insurance is constitutional. Many argue that the mandate exceeded Congress’s power by requiring almost all Americans to have health insurance by 2014 or pay a penalty. If the Supreme Court decides that the mandate was unconstitutional, they will also look at how much of the balance of the Patient Protection and Affordable Care Act, must fall along with it.
IRS Announces 2012 Retirement and Inflation-Adjusted Benefit Numbers
Oct 31, 2011
The IRS and the Social Security Administration recently announced most of the dollar amounts that employers will need to administer their benefit plans for 2012. Unlike the past two years, many of the amounts will be adjusted upward to account for inflation. Please see the attached reference card for detailed numbers.
401(k) investors and plan sponsors will enjoy higher contributions limits on their retirement plans. The annual deferral limit will increase from $16,500 to $17,000, the overall limit on annual additions to a participant’s account will increase from $49,000 to $50,000 in 2012, and the annual compensation limit will increase from $245,000 to $250,000. (The catch-up contribution limit, $5,500, will remain unchanged for 2012.)
The annual compensation threshold to identify highly compensated employees (HCEs) will increase (from $110,000 to $115,000.) Employers will not actually use that number until 2013, however, due to the nature of the “look-back” provision in the HCE definition.
There is no increase to any of the limits on contributions to individual retirement accounts.
The maximum contribution to a health savings account will increase from $3,050 to $3,100 for individuals and from $6,150 to $6,250 for family coverage. The HSA catch-up contribution ($1,000) and minimum HSA deductibles ($1,200 and $2,400 for individual and family coverage, respectively) will all remain unchanged.
Recipients of Social Security will see a 3.6% benefit increase in 2012, the first in three years. The Social Security taxable wage base will also increase – from $106,800 to $110,100.
In 2011 the OASDI tax rate was temporarily reduced to 4.2% to help stimulate the economy. In 2012 it is scheduled to reset back to the previous 6.2%, but it is likely that legislative action will take place to keep a tax reduction in place.
If you have any questions on how these new limits affect your benefit plans, please contact our Investment Specialist, Helen Seestadt CFP® at helen@e3financial.com or your e3 Experience Manager.
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Class Act Repealed
Oct 18, 2011
The Obama administration has decided not to proceed with the implementation of the CLASS Act, a proposed national Long Term Care insurance program that was part of the health reform law.
The Secretary for the US Department of Health & Human Services (HHS) announced that there is currently no viable path forward for the implementation of the Community Living Assistance Services and Supports (CLASS) program. Established under the Affordable Care Act, CLASS was intended to be a voluntary, guaranteed issue, Long Term Care insurance program available to workers that would offset long term health care costs. The monthly benefits could be used toward nursing home costs, daily living needs or in-home care for those who cannot care for themselves.
The law required the HHS Secretary to design a benefit plan that would be actuarially sound and financially solvent for at least 75 years. Officials said they discovered they could not make CLASS both affordable and financially solvent while keeping it a voluntary program open to virtually all workers, as the law also required.
The challenge of financing Long Term Care remains an issue. Medicaid, which pays more than 40 percent of these costs, has its own financial troubles. And only about 7 million Americans own private Long Term Care insurance. This may leave many Americans unprepared for the high costs of Long Term Care.
To find out more about Long Term Care insurance, contact your e3 Financial Service Team today.
New Rule Requires Non-Union Employers to Notify Employees of Their Right to Unionize
Sep 13, 2011
The National Labor Relations Board (NLRB) has just issued a final rule obligating the vast majority of private sector employers to notify employees of their rights under the National Labor Relations Act (NLRA). The purpose of the notice is to inform employees of their rights to organize, form, join or assist a union; to bargain collectively with their employer; and to discuss their wages, benefits, and other terms and conditions of employment with their co-workers or a union. The new rule covers not only union workplaces, but also non-union workplaces.
The rule will pose new challenges for non-union employers and make it harder for all employers to defend themselves against allegations of unfair labor practices. For example, an employer’s failure to properly comply with the rule will toll the six-month statute of limitations period for filing a charge against the employer for unfair labor practices. An employer’s knowing violation of the rule can also be used against the employer as evidence of unlawful motive in anti-union discrimination and other unfair labor practice litigation.
Employers should take immediate steps to determine whether they are subject to the rule. Covered employers must be in full compliance by November 14, 2011. Human resource professionals, executives, and supervisors should be trained on how to properly respond to employees’ questions about their NLRA rights, as well as how to properly address union-related activities in the workplace.
The notice of rights that employers must post under the new rule is not yet available, but employers should periodically check the NLRB website for additional details.
Denise Portnoy, Associate
Spencer Fane Britt & Browne, LLP
HHS Announces Proposed Rules for Uniform Benefit Summaries
Aug 18, 2011
On August 17, the Department of Health and Human Services (HHS) released a Notice of Proposed Rulemaking for Uniform Benefit Summaries under the Patient Protection and Affordable Care Act (PPACA). Please note: e3 Financial will automatically incorporate the language into the benefit summaries that we produce for you.
The intent of Uniform Benefit Summaries is to provide individuals with standard information so they can review medical plans, compare insurers and make decisions about which medical plan to choose. The proposed rule provides additional guidance on the information that must be provided to all individuals enrolling in a medical plan on or after March 23, 2012.
This provision applies to individual and employer-sponsored medical plans, regardless of grandfathered status or funding. It does not apply to retiree-only plans or to standalone dental and vision plans.
What Information Must be Included
Insurers and self-insured employers must provide a Summary of Benefits and Coverage (also referred to as an ‘SBC’ in the proposed rule) to individuals who apply for and enroll in medical plans. The Summary of Benefits and Coverage is a required document that must be provided in the standard format.
There are four standard components:
• Medical Scenarios called “Coverage Examples” that are patterned after the Food and Drug Administration food labels. They estimate customer costs based on the specific plan’s benefits for three medical scenarios – Maternity, Breast Cancer Treatment and Managing Diabetes
• A standard glossary of medical and insurance terms
• A phone number and website where individuals can get additional information including documents such as Certificates, Summary Plan Descriptions (SPDs) and policies
HHS asked the National Association of Insurance Commissioners (NAIC) to propose a format for the four components in the Summary of Benefits and Coverage. Here is a link to the documents proposed by NAIC: http://www.naic.org/committees_b_consumer_information.htm
The information on the NAIC website is not a guideline or example. It is the exact wording, format and layout that must be used. Insurers and employers will just insert plan details into the predetermined rows and columns.
The Benefit Summary must be a freestanding document and may not be incorporated into any other document. Supplemental communication materials may be provided with it. Currently produced documents will not satisfy the requirements of the regulation.
The Coverage Examples must include three pre-defined medical scenarios: Maternity, Breast Cancer Treatment and Managing Diabetes. These scenarios are intended to show typical services and cost sharing under the plan. The numbers would be based on client-specific plans and costs. The estimates are based on national average costs and in-network benefit levels.
Who is Responsible for Providing the Information
For fully insured plans and HMOs, the insurer is responsible for producing and distributing the summaries. For self-insured plans, the responsibility lies with the employer.
What is the Required Timing
Summaries must be provided when an employer or individual requests information about a plan, applies for coverage or enrolls in a plan. They must also receive a summary if there are plan changes or if the individual has a HIPAA special enrollment event that prompts a new enrollment opportunity.
People enrolled in a health plan must be notified of any significant changes to the terms of coverage reflected in the Summary of Benefits and Coverage at least 60 days prior to the effective date of the change. This timing applies only to changes that become effective during the plan or policy year but not to changes at renewal (the start of the new plan or policy year).
How Benefit Summaries will be Delivered
Summaries are required both before and after enrollment and may be delivered in paper and/or electronic format. There are specific requirements for group vs. individual plans.
Penalty for Non-Compliance
The penalty for ‘willful’ non-compliance is up to $1,000 per enrollee for each failure to comply.
Next Steps
Comments on this proposed rule – including the specific request for expatriate plans – are due 60 days from the publish date.
Health Care Reform Update: HHS Releases Guidelines on Women’s Preventive Health Services to be Received at No Cost
Aug 04, 2011
The U.S. Department of Health and Human Services (HHS) has announced new guidelines that will ensure women receive preventive health services at no additional cost (http://www.hrsa.gov/womensguidelines/). Developed by the independent Institute of Medicine and delivered to HHS last Wednesday, the new guidelines are in addition to the rules released last summer by HHS requiring all new private health plans to cover several evidence-based preventive services like mammograms, colonoscopies, blood pressure checks, and childhood immunizations without charging a copayment, deductible or coinsurance.
The new guidelines include:
• well-woman visits;
• screening for gestational diabetes;
• human papillomavirus (HPV) DNA testing for women 30 years and older;
• sexually-transmitted infection counseling;
• human immunodeficiency virus (HIV) screening and counseling;
• FDA-approved contraception methods and contraceptive counseling;
• breastfeeding support, supplies, and counseling; and
• domestic violence screening and counseling.
New health plans will need to include these services without cost sharing for insurance policies with plan years beginning on or after Aug. 1, 2012. The rules governing coverage of preventive services which allow plans to use reasonable medical management to help define the nature of the covered service apply to women's preventive services. Plans will retain the flexibility to control costs and promote efficient delivery of care by, for example, continuing to charge cost-sharing for branded drugs if a generic version is available and is just as effective and safe for the patient to use.
For more information on the HHS guidelines for expanding women's preventive services, please visit: http://www.healthcare.gov/news/factsheets/womensprevention08012011a.html.
Health Exchange Risk Programs Would Protect Insurers and Consumers
Jul 15, 2011
Health and Human Services Department officials have coupled the health exchange regulation released on Monday with another proposed rule designed to minimize the impact of covering sick, expensive patients on insurance companies. The federal government proposed to give insurers higher payments for patients whose claims cost more than average so insurers don't have an incentive to avoid covering high-cost patients.
The 103-page regulation includes three components that would encourage insurers to cover high-risk policy holders just as they would those who are healthy:
- A permanent risk adjustment formula that would pay insurers higher rates for sicker patients, such as those with chronic conditions. The adjustment would apply to those in the individual and small group markets inside and outside of the exchanges.
- A three-year reinsurance program that would establish a nonprofit entity to handle temporary payments for insurers that cover patients with high medical claims in the individual market.
- A three-year risk corridor program that would give insurers inside the exchanges more certainty by limiting losses and gains. Insurers whose claims are at least 3 percent higher than projected would get more federal funding, while those whose costs are at least 3 percent less than projected would get fewer federal dollars.
The first component, the risk adjustment program, is the only one of the three components that is permanent. Payments will essentially transfer money from plans that cover mostly low-cost individuals to those whose enrollees have higher costs. The federal government or the states would calculate the payment formulas.
The reinsurance and risk corridor programs were made temporary because lawmakers felt that over time, more people would enter the new exchange program, insurers would have a better understanding of the risks of covering enrollees, and the market would mature.
The law requires that each state establish a reinsurance program to "help stabilize premiums for coverage in the individual market during the first three years of exchange operation," which are 2014-16. The money will come from all insurance plans and third-party administrators of self-insured group plans which will contribute funds to a nonprofit that will dole out additional money to insurers who have higher claims. Any insurance company in a state's individual market that was not grandfathered under the law -- including plans outside of the exchange -- could be eligible for the higher reimbursements. The law calls for states to collectively assess and disperse a total of $10 billion in 2014, $6 billion in 2015 and $4 billion in 2016 for reinsurance in addition to collecting other funds from insurers such as $2 billion in 2014-15 and $1 billion in 2016 for the general treasury.
The risk corridor program, which will be administered by the federal government instead of the states, would apply to insurers in the exchange's individual and small group markets during the first three years that the exchange is operating.
The three mechanisms are intended to help smooth the transition and provide more stability in the marketplace for insurers who end up with more sick people, or sicker people, than other insurers as well as for insurers who might not be able to predict their risk in the first couple of years. Risk corridors also could cap the profits of some insurers.
States could choose to change the details of reinsurance or risk adjustment from those set out by the federal standards. Any state that decides to make changes would need to publish a notice at least one year before the benefit year begins, and by March in the calendar year before the effective date.
The public has been given 75 days to comment on the proposal.
Blue Shield of CA Giving Back $180 Million to Customers
Jun 13, 2011
As you may have heard, Blue Shield of CA released a statement last week announcing their pledge to limit net income to 2% of revenue. As a result, they will be giving back $180 million to Blue Shield customers and the community.
Here is how the $180 million will be distributed:
- PREMIUM CREDITS - Blue Shield's individual and fully insured group customers will each get a 30 percent credit against one month of premium. Customers with whom Blue Shield shares risk will each get a 10 percent credit against one month of premium. In total, the company will credit $167 million back to its individual and business customers.
- INVESTMENTS IN ACCOUNTABLE CARE - Blue Shield will also provide $10 million in funding to California hospitals and physician groups to help them participate more effectively in accountable care organizations.
- AID TO LOCAL NONPROFITS - The company will give the remainder, about $3 million, to the Blue Shield of California Foundation, which provides grants to local nonprofit organizations that provide health care to low-income Californians.
How this translates into actual dollars for policyholders:
Customers with fully insured coverage in May 2011 (other than government programs whose contracts do not permit such credits) will receive a credit in the bill for their October 2011 premiums. The average credit will vary depending on the monthly premiums:
- The average individual customer will be credited approximately $80 and an average family of four will be credited approximately $250. The range is roughly $25 - $160 for individuals and $130 - $415 for a family of four.
- For all group customers, the average credit to the group will be $110 - $130 per employee. Employers who pay part of the premium must decide whether and how to apportion it.
- For small groups (2-50 employees), the averages are $125 for one employee and approximately $340 for a family of four.
***To read the entire news release, please Click Here.
If you have any further questions, please contact your e3 Financial Client Service Team and they will assist you.
e3 Financial
June 30 Deadline for FSA Amendments
Jun 01, 2011
Last year's Affordable Care Act (ACA) restricted the ability of employer health plans, including flexible spending arrangements (FSAs) and health reimbursement arrangements (HRAs), to reimburse expenses incurred for over-the-counter (OTC) medications. With the exception of insulin, expenses for OTC medications may now be reimbursed only if the medications are prescribed by a physician. Sponsors of FSAs face a June 30 deadline for amending their plans to comply with this ACA restriction.
This restriction actually became effective as of January 1, 2011. Ordinarily, the IRS requires that FSA amendments be adopted before they take effect. Moreover, proposed IRS regulations state that any failure to satisfy this requirement results in all employee contributions to the FSA becoming taxable. Perhaps recognizing the severity of this result, the IRS in Notice 2010-59 granted FSA sponsors an additional six months to adopt amendments designed to comply with this restriction. That six-month extension expires on June 30, 2011.
A similar restriction applies to the reimbursement of expenses for OTC medications under health savings accounts (HSAs) and Archer Medical Savings Accounts (MSAs). However, the consequences of non-compliance under such arrangements differ from those that apply under FSAs or HRAs. Distributions from an individual's HSA or MSA for OTC medications that are not prescribed by a physician are treated as "nonqualified" distributions. They are therefore includible in the individual's taxable income, and also subject to a 20% penalty tax. In any event, because most HSAs and MSAs are maintained on documents provided by financial institutions, employers will generally rely on those institutions to adopt timely amendments complying with this ACA restriction.
In drafting amendments to their FSAs or HRAs, employers will want to keep in mind several key points. First, such an amendment should be retroactively effective as of January 1, 2011. This date applies regardless of an arrangement's plan year, and even if an FSA has been amended to take advantage of the 2 ½ - month "grace period" allowed by the IRS. However, any expenses for OTC medications that were incurred before January 1, 2011, may still be reimbursed after that date, even without a prescription.
Another point to be addressed in any FSA or HRA amendment involves the treatment of OTC items other than medications. Notice 2010-59 made clear that expenses for equipment (such as crutches), supplies (such as bandages), and diagnostic devices (such as blood sugar test kits) may still be reimbursed under an FSA or HRA, even without a prescription. In other words, the prescription requirement applies only to OTC medications. (As under longstanding law, however, expenses for items that are merely beneficial to the general health of an individual - such as toiletries - may not be reimbursed from these arrangements.)
Finally, any amendment to an FSA or HRA that allows participants to use debit cards to purchase OTC medications should take into account additional IRS guidance. For instance, Notice 2010-59 granted such arrangements an additional fifteen days (through January 15, 2011) to comply with the requirement of a physician's prescription for an OTC medication. IRS Notice 2011-5 then outlined specific procedures that must be followed if debit cards will continue to be an option for the purchase of OTC medications after January 15, 2011. In general, these procedures are designed to ensure that these cards can be used to purchase OTC medications only after a prescription has been obtained.
If you have any questions regarding this deadline, please contact your e3 Client Service team.
2012 Health Savings Account Limits Released by IRS
May 17, 2011
Annual Contribution Limitation
For calendar year 2012, the annual limitation on deductions under § 223(b)(2)(A) for an individual with self-only coverage under a high deductible health plan is $3,100. The limitation for an individual with family coverage under a high deductible health plan is $6,250.
High Deductible Health Plan
For calendar year 2012, a "high deductible health plan" is defined under § 223(c)(2)(A) as a health plan with an annual deductible that is not less than $1,200 (no change from calendar year 2011) for self-only coverage or $2,400 (no change from calendar year 2011) for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $6,050 for self-only coverage or $12,100 for family coverage.
If you have any questions on how these new limits affect your benefit plans, please your e3 Client Service team.
Adult Dependent Taxation in California Update
Apr 14, 2011
AB 36 Eliminating the Tax Has Been Signed Into Law By Governor Brown
California employers can breathe a collective sigh of relief. Governor Brown has signed AB36, thereby eliminating the imputed income tax applied to healthcare coverage and payments for adult dependents. This law conforms California tax rules to Federal tax rules implemented in connection with Health Care Reform. The law takes effect immediately, and retroactively to the 2010 implementation of Health Care Reform.
IRS Delays Smaller-Employer Deadline to Report Insurance Costs on W-2s
Mar 31, 2011
Under the reform law, employers were required to provide health care cost information on 2011 W-2 statements that are distributed to employees in 2012. But last year, the IRS waived that requirement for 2011 and said the health care cost reporting requirement would apply to 2012 W-2s, which are issued in 2013. On Tuesday, the IRS said in Notice 2011-28, that employers that issue fewer than 250 W-2s in 2011 "will not be required to report the cost of health coverage on W-2s prior to January 2014. This transition relief will continue until the issuance of further guidance."
In addition, the IRS made clear that employers will not have to issue W-2s to retirees who receive health care coverage but no longer receive wages or salary. "An employer is not required to issue Form W-2 including the aggregate reportable cost to an individual to whom the employer is not otherwise required to issue a Form W-2," the IRS said.
Using a question-and-answer format, Notice 2011-28 also provides guidance for employers that are subject to this requirement for the 2012 Forms W-2 and those that choose to voluntarily comply with it for either 2011 or 2012. The notice includes information on how to report, what coverage to include and how to determine the cost of the coverage.
DOL Releases Report on Self-Insured Health Plans
The U.S. Department of Labor has transmitted to Congress the first annual report on self-insured employee health benefit plans. The report, which was mandated by the Patient Protection and Affordable Care Act, contains general information on self-insured employee health benefit plans covering private-sector employees that file a Form 5500 (they cover 100 or more participants or hold assets in trust) and financial information on the employers that sponsor them.
This report presents data on such plans for 2008, the latest year for which complete data are available. The report includes information on 12,000 self-insured and 5,000 mixed (self-insurance with insurance) health benefit plans, covering 22 million and 25 million participants respectively. The report does not include self-funded plans that are not required to file a Form 5500.
According to the report, just more than 82 percent of private-sector employers with at least 500 employees self-insure at least one of their health care plans, compared with nearly 26 percent for employers with 100 to 499 employees and 13.5 percent for employers with less than 100 employees. "It is unlikely that a large number of small businesses will opt to self-insure" once the reform law "takes full effect, unless comprehensive stop-loss coverage becomes widely available at prices that compete with fully-insured products," according to the report.
The full report and its appendices are linked below.
http://www.dol.gov/ebsa/pdf/ACAReportToCongress032811.pdf
http://www.dol.gov/ebsa/pdf/ACA-ARC2011.pdf
http://www.dol.gov/ebsa/pdf/ACASelfFundedHealthPlansReport032811.pdf
Taxation of Dependent Coverage After Health Care Reform
Feb 23, 2011
By now, most people involved in the administration of group health plans are familiar with the requirement that plans offering dependent coverage make that coverage available to adult children until they attain age 26. This new requirement applies to both insured and self-insured plans (regardless of the plan‘s status as a grandfathered plan), and is effective for plans years beginning on or after September 23, 2010 (January 1, 2011, for calendar-year plans). Many of us, however, are not as familiar with the corresponding change to the Tax Code that allows these benefits to be provided on a tax-free basis.
For periods after March 30, 2010, a covered employee‘s child who is under age 27 as of the end of the taxable year may receive employer-paid health coverage on a tax-free basis (and the employee may pay for some or all of such coverage with pre-tax dollars under a cafeteria plan), even if the child does not qualify as the covered employee‘s Tax Code dependent (i.e., even if the child is not a qualifying child or qualifying relative under Code Section 152, and therefore cannot be claimed as a dependent on the employee‘s federal income tax return). In other words, even though plans are only required to offer dependent coverage until the child‘s 26th birthday, the covered employee‘s child may receive tax-free coverage (or tax-free reimbursements) through the end of the calendar year in which the child turns age 26.
This tax change also applies to the reimbursement of qualifying medical expenses under health reimbursement arrangements (HRAs) and health flexible spending accounts (FSAs) – though not to health savings accounts (HSAs).
Accordingly, plan sponsors that have not already done so, may wish to amend their Section 125 cafeteria plans to allow for the payment of health care premiums and/or FSA reimbursements on behalf of adult children who will not attain age 27 by the last day of the year. Plan sponsors may also want to amend their HRAs for the same reason. For purposes of this change in the tax treatment of dependent coverage, a child is an individual who is the employee‘s son, daughter, stepson or stepdaughter, and includes both a legally adopted individual and an individual lawfully placed with the employee for adoption. The term child also includes an eligible foster child—defined as a child placed with the employee by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction. As a result of this tax change, traditional dependency requirements involving age limits, residency, support and other tests that would otherwise need to be satisfied for an individual to qualify as a tax dependent do not apply for purposes of the tax-favored treatment of health reimbursements and coverage for adult children who are younger than 27 for the entire tax year.
This tax change significantly eases the burden associated with analyzing the taxability of dependent coverage for a covered employee‘s adult children. Now, under Code Section 105(b), a covered employee may be reimbursed (without tax consequences) for amounts expended for medical care of the employee‘s children who are under age 27 as of the end of the employee‘s taxable year (generally, the calendar year). It is important to note that not every state follows the federal taxation scheme, and thus some benefits that are not taxable for federal income tax purposes may be taxable for state income tax purposes.
If, however, a covered employee‘s adult child receives coverage or benefits after the end of the year in which the child turns age 26, the value of the coverage or reimbursements will be taxable to the covered employee unless the child is a qualifying child or qualifying relative under Code Section 152. This situation could arise in a plan that voluntarily provides extended dependent coverage, or in an insured plan that is required (by a state insurance law) to provide coverage beyond age 26.
Who is a Qualifying Child? Under Code Section 152, a qualifying child is an individual who (1) bears a specified relationship to the employee; (2) has the same principal place of abode as the employee for more than half of the year; (3) meets certain age requirements; (4) has not provided more than half of his or her own support for the year; and (5) has not filed a joint tax return with his or her spouse for the year. The qualifying child relationship requirement is satisfied if the individual‘s relationship to the covered employee falls within any of the categories described above under the definition of child, or if the individual is a descendant of an employee‘s child (e.g., grandchild). Additionally, the relationship requirement may be met if the individual is the employee‘s sibling, half-sibling, step-sibling, or a descendant of any such individual (e.g., a nephew or niece). A qualifying child must be younger than the employee and under age 19 (or under age 24 if a full-time student) as of the close of the calendar year in which the employee‘s taxable year begins.
Who is a Qualifying Relative? Under Code Section 152, a qualifying relative is an individual (1) who bears a specified relationship to the employee; (2) whose gross income is less than the exemption amount in Code Section 151(d); (3) with respect to whom the employee provides over half of the individual‘s support; and (4) who is not anyone‘s qualifying child. The qualifying relative relationship requirement is quite broad. It is satisfied if the individual‘s relationship to the covered employee falls within any of the categories described above under the qualifying child relationship requirement. The relationship requirement may also be satisfied if the individual is the employee‘s parent, grandparent, aunt, uncle, in-law, or other individual (other than a spouse) if the relationship does not violate local law. The Code Section 151(d) income limitation does not apply for health coverage purposes.
In summary, status as a qualifying child or qualifying relative remains relevant for determining the tax treatment of health coverage and reimbursements for individuals who do not qualify as the employee‘s spouse or child. Fortunately, such status is relevant only for purposes of determining the taxability of coverage or reimbursements for an employee‘s adult child when the child receives coverage after the end of the year in which he or she turns age 26. Thus, for the majority of group health plans, the new coverage mandate and corresponding tax change should simplify the process of determining when health benefits for dependents create taxable income for employees, and should provide much needed relief to plan sponsors.
Chadron J. Patton, Associate
Spencer Fane Britt & Browne LLP
Flexible Spending Account and Children's Health Insurance Program Updates
Jan 03, 2011
IRS Backs Off Flex Account Debit Card Ban for Over-The-Counter Drugs
On Dec. 23, the IRS backed off an earlier rule for next year that prohibited FSA and HRA account holders from using debit cards to pay for over-the-counter drugs.
While patients who use FSA and HRAs still need to get a prescription to purchase everything from Tylenol to cold medicine with FSA or HRA accounts, the IRS stated that debit cards can be used if the prescription is in hand.
However, anybody who tries to use their pre-tax accounts without a proper prescription would have to use post-tax income and be charged an additional 20 percent tax.
Employer Notice Regarding Children's Health Insurance Program
Employers sponsoring group health plans are required to notify employees of potential opportunities currently available in the State in which employees reside for group health plan premium assistance under Medicaid and the Children's Health Insurance Program (CHIP). In many cases this notice must be provided by Jan. 1, 2011 (as described below). The U.S. Department of Labor has published a model notice which may be used to satisfy this requirement, which can be found at:
http://www.dol.gov/ebsa/chipmodelnotice.doc.
This notice requirement only applies to employers providing benefits for medical care (whether insured or self-insured) to employees living in a State that provides premium assistance for the purchase of group health plan coverage through medical assistance under a State Medicaid plan or child health assistance under a State child health plan (regardless of the employer's location or principal place of business). Currently, New York, New Jersey, California and Pennsylvania are among the States that offer programs that meet the standard above. The DOL model notice lists the States that provide premium assistance as of Jan. 22, 2010.
An employer must provide the notice to each employee living in a State that provides the premium assistance described above, regardless of whether the employee is enrolled in the group health plan. If it is administratively easier than determining which employees reside in States that provide premium assistance, the employer may send the notice to all of its employees.
Employers subject to this requirement must provide this notice by the date that is the later of (a) the first day of the first plan year after Feb. 4, 2010, or (b) May 1, 2010, and annually thereafter. Therefore, employers operating group health plans on a calendar year basis must provide this notice by Jan. 1, 2011. The notice may be provided by first-class mail or may be distributed electronically (provided the electronic distribution satisfies the DOL's rules for electronic notice distribution). It may be provided concurrently with other plan materials (such as enrollment packets or the summary plan description) in advance of the upcoming plan year, or if not included in this materials, may be separately provided. The DOL may impose penalties if the notice is not provided.
Year-End Reminder!
Dec 15, 2010
As year-end approaches, here are a few helpful reminders:
- Flexible Spending Accounts: For 2011, Over the Counter medications will no longer be allowed. Please be sure to remind your eligible employees of this fact prior to making their elections.
- Imputed Income for Group Life over $50k: If you provide employer-paid group Life Insurance in excess of $50,000 for any employee, you must include the value of that insurance on the employees’ W-2 at year end. For more information, including the IRS rate table and employer responsibilities, click on the following link http://apps3.irs.gov/govt/fslg/article/0,,id=110345,00.html and review the Publication 15-B document (pages 11-13).
- Domestic Partner Taxation: The amount of premium paid by an employer on behalf of a domestic partner is to be included in the employee’s W-2 as imputed income. Further, premiums paid by the employee via payroll deduction on behalf of their Domestic Partners must be on an after-tax basis. We have included an overview on Domestic Partner taxation for your reference (see attached).
Health Care Reform Update: Grandfathered Rules Amended
Nov 18, 2010
The U.S. Internal Revenue Service (IRS), Department of Labor's Employee Benefits Security Administration (EBSA) and the Office of Consumer Information and Insurance Oversight (OCIIO), Health and Human Services, jointly released an amendment relating to grandfathered health plan status under the Patient Protection and Affordable Care Act (PPACA). The amendment permits certain changes in group health plans and other health insurance policies, certificates or contracts without loss of grandfathered status.
Under the amended rules, a group health plan is allowed to change health insurance coverage without ceasing to be a grandfathered health plan, provided the plan continues to comply fully with the standards set forth in the original rule. If insured coverage is provided in the individual market, a change in issuer would still be a change in health insurance coverage and the new individual policy, certificate, or contract of insurance would not be a grandfathered health plan.
The amendment to the interim final rules is effective Nov. 15, 2010. Comments are due on or before Dec. 17, 2010.
For the HHS Fact Sheet regarding this amendment, go to http://www.hhs.gov/ociio/regulations/grandfather/factsheet.html. For the full amendment, go to http://edocket.access.gpo.gov/2010/pdf/2010-28861.pdf.
IRS Delays W-2 Health Cost Reporting Requirement
Oct 14, 2010
The Internal Revenue Service announced Tuesday that it will waive for one year a health care reform law requirement that employers report the cost of coverage on employees' W-2 wage and income statements. Under the relief, health care cost information will have to be reported on the 2012 W-2s, which are issued in 2013.
The IRS also confirmed that the W-2 reporting requirement is only for informational purposes and the amounts that are reported will not be taxable.
http://www.irs.gov/pub/irs-drop/n-2010-69.pdf
Changes to Flexible Spending Accounts Effective 1/1/11
Oct 12, 2010
As you may be aware, Health Care Reform legislation included changes to how over-the-counter (OTC) medications will be handled under FSA, HSA and HRA accounts. As of January 1, 2011, OTC medications may no longer be reimbursed or purchased using FSA, HSA or HRA funds. Purchases may be made up through December 31, 2010 but as of January 1, 2011 they are no longer eligible. Details are outlined in the attached sample communication that may be used to communicate this change to your employees in advance of FSA open enrollment and so they are aware of the changes coming January 1st.
Please contact your e3 Financial service team if you have any further questions.
Andrew Torelli Mike Rankin
President Principal
Read more (pdf)...
New Procedures and Notices for Claims and Appeals and External Reviews under the Affordable Care Act
Sep 14, 2010
The U.S. Departments of Labor (DOL), Treasury and Health and Human Services (HHS) have released interim procedures and related Model Notices for claims, appeals and reviews under the Affordable Care Act. The Affordable Care Act sets standards for plans and issuers regarding both internal claims and appeals and external review. Plans and issuers in States without an applicable external review process are required to implement an effective external review process that meets certain minimum standards. An interim safe harbor provided by Technical Release 2010-01 applies to non-grandfathered, self-insured group health plans not subject to a state external review process. The standards include a number of notice requirements for internal appeals and external reviews.
Model notices that can be used to satisfy the disclosure requirements of the interim final regulations are being posted on the Department of Labor's website at http://www.dol.gov/ebsa and the Department of HHS/Office of Consumer Information and Insurance Oversight website at http://www.hhs.gov/ociio/. They include:
• Model Notice of Adverse Benefit Determination
• Model Notice of Final Internal Adverse Benefit Determination
• Model Notice of Final External Review Decision
For more on new claims, appeals, and review process requirements under the Affordable Care Act, please view a Fact Sheet by clicking here. You can also view the technical release from the U.S. Department of Labor and notice from the Departments of Labor, Treasury and Health and Human Services. For more on the Affordable Care Act, you can visit the HR & Benefits Essentials Health Care Reform Section, or visit the DOL's Employee Benefits Security Administration (EBSA) website by clicking here.
Health Reform: List of Preventive Services without Cost-Sharing Released
Aug 03, 2010
The Departments of Health and Human Services (HHS), Labor, and Treasury issued interim final regulations requiring new plans and issuers to cover certain preventive services without any cost-sharing requirements when delivered by network providers. Cost-sharing includes out-of-pocket costs like deductibles, co-payments and co-insurance. Employers should note that these required preventive services do not apply to grandfathered plans.
Under the new rules, services recommended by the U.S. Preventive Services Task Force (USPSTF) will generally be required to be provided without cost-sharing when delivered by an in-network provider in the plan years that begin on or after September 23, 2010 (except grandfathered plans). For recommendations that have been in effect for less than one year, plans and issuers will have one year from the effective date to comply. Thus, recommendations and guidelines issued prior to September 23, 2009 must be provided for plan years beginning on or after September 23, 2010.
Recommendations of the USPSTF appear in a released chart, which can be accessed by clicking here.
Preventive Services to Be Covered without Cost-Sharing
HHS reports that under the new rules, depending on age and plan type, individuals may have easier access to the following preventive services:
• Blood pressure, diabetes, and cholesterol tests
• Cancer screenings, including mammograms and colonoscopies
• Flu and pneumonia shots
• Routine vaccines ranging from routine childhood immunizations to periodic tetanus shots for adults, including diseases such as measles, polio, or meningitis
• Counseling from health care providers on such topics as quitting smoking, losing weight, eating better, treating depression, and reducing alcohol use
• Counseling, screening and vaccines for healthy pregnancies
• Regular well-baby and well-child visits, from birth to age 21
The interim final regulations also make clear that a plan or issuer is not required to provide coverage or waive cost-sharing requirements for any item or service that has ceased to be a recommended preventive service. For example, if a recommendation of the USPSTF is downgraded from a rating of A or B to a rating of C or D, or if a recommendation or guideline no longer includes a particular item or service, the service is not required to be provided without cost-sharing.
For more on preventive services under the Affordable Care Act, please click here, or view the chart of covered services by clicking here. You can also view a list of covered services for adults, women (including pregnancy) and children by clicking here. To view the interim final regulations, please click here. To learn more about changes to group health plans under the Affordable Care Act, including grandfathered plans, please visit the HR & Benefits Essentials Health Care Reform Section by clicking here.
Agencies Clarify "Grandfathering" Under Health Care Reform
Jun 18, 2010
The Affordable Care Act imposed a number of benefit mandates on employer health plans, most of which will take effect with the first plan year beginning after September 23, 2010. However, certain plans that were in existence on March 23, 2010 (the Act's enactment date) enjoy limited "grandfather" protection. Some of the benefit mandates do not apply at all to these grandfathered plans, while others apply only at a later date. Unfortunately, the Act did little to define the scope of this grandfather protection. The three agencies charged with administering the Act have now issued interim final regulations providing useful guidance on this topic.
Advantages of Grandfathered Status
Even grandfathered plans must comply with many of the Act's benefit mandates. Such plans are exempt, however, from the following mandates:
- Required coverage for emergency services at in-network levels;
- Required first-dollar coverage for certain preventive services (immunizations and screenings), subject to no deductible;
- A prohibition on restricting the designation of primary care providers or requiring referrals for OB/GYN services;
- Required coverage of routine expenses for participation in clinical trials;
- Enhanced claim appeal procedures, including implementation of an external appeals process; and
- A prohibition on discriminating in favor of highly compensated individuals (i.e., applying the same nondiscrimination rules to both insured and self-funded plans).
General Requirements for Grandfathered Status
In addition to being in effect on May 23, 2010, a grandfathered plan must avoid taking any action that would undermine its grandfathered status. The types of actions that would cause a plan to lose its grandfathered status are described in the next section of this Alert. However, the regulations also condition grandfathered status on the sponsor taking the following affirmative steps:
- Including "in any plan materials provided to a participant or beneficiary that describes the benefits provided under the plan" (such as a summary plan description) a statement that the plan believes it is a grandfathered health plan within the meaning of Section 1251 of the Act. This statement must also provide contact information for questions and complaints. The regulations include model language that may be used to satisfy this disclosure requirement.
- Maintaining records that document the terms of the plan as in effect on March 23, 2010, along with any other documents necessary to verify, explain, or clarify the plan's status as a grandfathered health plan. Those records must then be made available for examination upon request by a participant, beneficiary, or government agency.
The regulations are particularly helpful in listing the steps a plan may -- or may not -- take without losing its grandfathered status. For instance, grandfathered plans have substantial flexibility to add or remove covered individuals. Employees may be allowed to add their dependents, the plan may enroll new hires, and (clarifying a question left unanswered by the statutory language) the plan may enroll existing employees who had simply declined to enroll in the past. Moreover, subject to certain "anti-abuse rules," employees may be transferred between plans (or plans may be merged) without thereby undermining the plans' grandfathered status.
A self-funded plan may also substitute a new third-party administrator for the TPA that was in place on March 23, 2010. By contrast, an insured plan will generally lose its grandfathered status if it enters into a new policy, certificate, or contract of insurance. Presumably, simply renewing a policy with an existing carrier will not cause a loss of grandfathered status.
The regulations also allow for changes in a plan's benefit structure, so long as none of those changes is described in the following list:
- Eliminating all or substantially all benefits to diagnose or treat a particular condition;
- Increasing a coinsurance or other percentage-based cost-sharing requirement above the level in effect on March 23, 2010;
- Increasing a fixed-dollar cost-sharing requirement (other than a copayment), such as an annual deductible or out-of-pocket limit, by a total percentage - measured from March 23, 2010 -- that exceeds the sum of the medical inflation rate plus 15 percentage points;
- Increasing a copayment by an amount that exceeds the greater of (1) the amount just described for other fixed-amount cost-sharing requirements, or (2) $5 increased by the medical inflation rate since March 23, 2010;
- Decreasing the rate of employer contributions to the plan (for any tier of coverage, such as employee-only or family) by more than five percentage points below the rate that was in effect on March 23, 2010; or
- Adopting or decreasing an annual benefit limit, with the specific rules depending on whether the plan had already imposed an annual or lifetime limit as of March 23, 2010.
The regulations provide that the grandfathering rules apply separately to each "benefit package" made available under a health plan. Thus, a plan offering both an HMO and a PPO option might choose to modify the PPO's deductible or copayment in a way that would cause the PPO to lose its grandfathered status, without thereby forfeiting the HMO's grandfathered status.
Collectively Bargained Plans
The Act contains special grandfathering provisions for plans maintained pursuant to a collective bargaining agreement. Because these statutory provisions concerning collectively bargained plans were inartfully drafted, they are subject to differing interpretations. The regulations provide needed clarification in this area - though sometimes in rather surprising ways.
For example, the drafters of the regulations take literally the Act's reference to "health insurance coverage" maintained pursuant to a collective bargaining agreement. The regulations therefore limit the special grandfathering rules for collectively bargained plans to those that are fully insured. Although self-funded collectively bargained plans may be grandfathered under the rules described above, they do not enjoy any additional protection under these collectively bargained rules.
Accordingly, if a self-funded collectively bargained plan is modified in any way that would cause a non-bargained plan to lose its grandfathered status, the collectively bargained plan will do so as well. Even granting that this approach tracks the statutory language, one has to question the policy basis for favoring insured over self-funded plans in this fashion.
Moreover, some practitioners had read the Act's provisions concerning collectively bargained plans as providing a type of "super-grandfathering." That is, the language could be read to provide that none of the benefit mandates would apply to a collectively bargained plan -- even those that would otherwise apply to a grandfathered plan -- until the expiration of the last of the relevant collective bargaining agreements (i.e., those in effect on March 23, 2010). The regulations clearly reject this interpretation. A collectively bargained grandfathered plan (even an insured one) will be subject to the Act's benefit mandates at the same time as other grandfathered plans. Thus, for example, as of the first plan year beginning after September 23, 2010, even a collectively bargained plan must eliminate all pre-existing condition limitations for dependents under age 19, remove any lifetime limits on "essential benefits," and make coverage available until a child's 26th birthday (unless the child has access to other employer coverage).
On the other hand, a fully insured plan that enjoys this special grandfather protection for collectively bargained plans may be amended in ways that would otherwise violate the restrictions summarized above without immediately losing its grandfathered status. Instead, it would remain grandfathered until the expiration of the last of the relevant bargaining agreements.
The regulations clarify one other point concerning collectively bargained plans. Some had read the statute to say that such a plan would automatically lose its grandfathered status upon the expiration of the last bargaining agreement that was in effect on March 23, 2010. Again, the regulations reject this approach. Instead, such a plan's status will be determined by comparing the terms of the plan in effect at that point to the terms in effect on March 23, 2010 -- and then applying the analysis set forth above. That is, did any benefit changes exceed the levels described above? If so, the plan will no longer be grandfathered. Otherwise, the grandfather protection will remain in place until such a change is adopted.
Oddly, the regulations also note that a collectively bargained plan may change insurance carriers prior to the expiration of the last of the relevant bargaining agreements without causing a loss of its grandfathered status once that bargaining agreement expires. No policy basis is provided for this exception to the general rule noted above.
Limited Transition Relief
Recognizing that plan sponsors may have been attempting to stay within the Act's grandfather provision even in the absence of regulatory guidance, these regulations provide limited transition relief. In particular:
- Plan changes adopted after March 23, 2010, will be treated as in effect on that date if they were made pursuant to either a legally binding contract or state insurance department filing that was made prior to that date.
- Plans that adopted changes after March 23, 2010, will now have a "grace period" during which they may revoke those changes and thereby retain their grandfathered status. This grace period will end on the first day of the first plan year beginning after September 23, 2010.
- For the period before these regulations were released, the agencies "will take into account good-faith efforts to comply with a reasonable interpretation of the statutory requirements and may disregard changes ... that only modestly exceed" the types of changes allowed by grandfathered plans.
Armed with this regulatory guidance, sponsors of health plans that wish to retain their grandfathered status should immediately review any changes adopted since March 23, 2010. Some of those changes may need to be revoked during the grace period described above.
Sponsors should also take this guidance into account when determining whether to make further changes to the plan. In doing so, they should consider whether the cost savings associated with plan modifications might more than offset the costs of complying with the benefit mandates associated with the loss of grandfathered status.
Given some of the surprises contained in these regulations, collectively bargained plans may need to entirely rethink their proposed approach to the Act. Those that are self-funded should understand that they enjoy no special protection as a result of their collectively bargained status. And even insured plans that are collectively bargained should be prepared to comply with all of the benefit mandates to which other grandfathered plans are subject -- generally, by the first day of the plan year beginning after September 23, 2010.
Finally, sponsors who want to retain their plan's grandfathered status should not overlook the notification and document retention requirements. For instance, before the first plan year beginning after September 23, 2010, they will want to supplement the plan's summary plan description to include either the IRS model language or similar language tailored to the plan's particular situation.
Spencer Fane Britt & Browne LLP
HSA Contribution Limits and Minimum Deductibles Remain Same as 2010
Jun 17, 2010
The IRS has released the 2011 contribution limits and minimum deductible amounts for Health Savings Accounts (HSAs), based on the Internal Revenue Code's cost-of-living adjustment rules. For calendar year 2011, the annual limit on HSA deductions for an individual with self-only coverage under a high deductible health plan remains $3,050. For calendar year 2011, the annual limit on deductions for an individual with family coverage under a high deductible health plan remains $6,150.
For calendar year 2011, a “high deductible health plan” remains defined as a health plan with an annual deductible that is not less than $1,200 for self-only coverage or $2,400 for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $5,950 for self-only coverage or $11,900 for family coverage.
The amounts for 2011 are unchanged from 2010. To view Revenue Procedure 2010-22, please click here.
IRS Releases Revised Form 941 for HIRE Act
Jun 01, 2010
The IRS has issued the newly revised payroll tax Form 941 which most eligible employers can use to claim the special payroll tax exemption that applies to many new workers hired during 2010.
Designed to encourage employers to hire and retain new workers, the payroll tax exemption and the related new hire retention credit were created by the Hiring Incentives to Restore Employment (HIRE) Act signed by President Obama on March 18, 2010.
The payroll tax exemption is an exemption from the employer's 6.2 percent share of social security tax on all wages paid to qualified employees from March 19, 2010 (the day after the date of enactment of the HIRE Act) through December 31, 2010. The employee's 6.2 percent share of social security tax and the employer and employee’s shares of Medicare tax still apply to all wages.
In addition, for each qualified employee retained for at least a year whose wages did not significantly decrease in the second half of the year, businesses may claim a new hire retention credit of up to $1,000 per worker on their income tax return. Further details on both the tax credit and the payroll tax exemption can be found in a recently-expanded list of answers to frequently-asked questions about the new law now.
How to Claim the Payroll Tax Exemption
Form 941, Employer's QUARTERLY Federal Tax Return, revised for use beginning with the second calendar quarter of 2010, can be filed by most employers claiming the payroll tax exemption for wages paid to qualified employees. The HIRE Act does not allow employers to claim the exemption for wages paid in the first quarter but provides for a credit in the second quarter. The instructions for the new Form 941 explain how this credit for wages paid from March 19 through March 31 can be claimed on the second quarter return.
New Dependent Coverage Law - DOL Releases Fact Sheet and FAQs
May 12, 2010
The U.S. Department of Labor has released a Fact Sheet and set of Frequently Asked Questions regarding dependent coverage under the Affordable Care Act. Under the Act, for plan years starting on or after September 23, 2010, group and individual health plans that cover dependents must continue to make dependent coverage available until age 26. The Fact Sheet and FAQs cover topics that include enrollment, new tax benefits, grandfathered plans, and a list of companies that have agreed to implement the program before the September 23, 2010 deadline.
The Young Adults and the Affordable Care Act Fact Sheet and FAQs were released around the same time as regulations from the U.S. Treasury, Labor, and Health and Human Services Departments implementing the dependent care requirements under the Affordable Care Act.
To view the Fact Sheet, please click here. To see the FAQs, click here. To visit the e3 Compliance Navigator “Dependent Coverage to Age 26” Section, please click here to login. More information can be found under the Employee Benefits section, within the Health Insurance Sub-folder entitled “2010 Health Care Reform”.
IRS Releases Information on Small Business Health Care Tax Credit
Apr 14, 2010
Certain small businesses and tax-exempt organizations that provide health insurance coverage to their employees may qualify for a special tax credit, according to the Internal Revenue Service. Included in the recently enacted health care reform legislation, the Patient Protection and Affordable Care Act, is a tax credit designed to encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have. The following are eligibility rules and the amount of credit as explained by the IRS.
Eligibility Rules
• Providing health care coverage. A qualifying employer must cover at least 50 percent of the cost of health care coverage for some of its workers based on the single rate.
• Firm size. A qualifying employer must have less than the equivalent of 25 full-time workers (for example, an employer with fewer than 50 half-time workers may be eligible).
• Average annual wage. A qualifying employer must pay average annual wages below $50,000.
• Both taxable (for profit) and tax-exempt firms qualify.
Amount of Credit
• Maximum Amount. The credit is worth up to 35 percent of a small business' premium costs in 2010. On Jan. 1, 2014, this rate increases to 50 percent (35 percent for tax-exempt employers).
• Phase-out. The credit phases out gradually for firms with average wages between $25,000 and $50,000 and for firms with the equivalent of between 10 and 25 full-time workers.
Three Simple Steps for Employers to Qualify
If you are a small employer (business or tax-exempt) that provides health insurance coverage to your employees, determine if you may qualify for the Small Business Health Care Tax Credit by following the three simple steps featured here.
For more information about the credit, please see different tax credit scenarios and answers to frequently asked questions. Or, please visit the IRS site here.
Health Care Reform Passes!
Mar 22, 2010
As you may already know, the U.S. House of Representatives passed new health care legislation last night. As such, Congress is preparing to send the package to President Obama for signature.
The bill touches upon nearly every component of Health Care financing and delivery in the United States. The major components of the bill will be phased in over time (2010, 2011, 2013 and 2014), subject to the writing of regulations. Over the next several weeks, we will send you additional reporting that will outline the impact, timelines and key elements of the new legislation.
Some of the brief highlights are:
- Market Reforms: The plan introduces a number of market reforms, some of which will take place within 6 months of the enactment of the bill. Some of these reforms include the removal of Pre-Existing conditions, allowing dependent children to stay on the plan until age 26, disbanding “rescission” practices, and the introduction of guarantee issue coverage.
- Exchange Portals: Creation of State-based insurance exchanges for small employers and individuals by 2014. These exchanges would consist of multiple insurance companies offering a wide range of plans. A small employer is defined as 100 or fewer employees, but states may reduce that number down to 50 employees.
- Employer Mandate: Employers do not have to offer coverage, but employers of 50 or more must provide a baseline of “essential” coverage, or pay a fine of $2,000 per uncovered employee (first 30 uncovered employees are exempt).
- Individual Mandate: Beginning 2014, all American citizens and legal residents must purchase qualified health insurance. The bill exempts those below Federal tax thresholds, and applies a penalty to those who do not purchase the coverage.
- Automatic Enrollment: Employers of 200 or more are required to automatically enroll all new employees into employer-sponsored plans. Employees are able to waive if they have another source of coverage.
- FSA limitations: FSA contributions to be limited to $2,500, starting in 2013, and over-the-counter drugs would be considered ineligible expenses at that time.
- MultiState Plans: Allows for creation of interstate and national plans. Creates multistate plans to be offered via state exchanges, provided by private insurers and administered by the Federal Office of Personnel Management.
- Financing: The financing of the increased benefits will come from several sources. Increased Medicare taxes, Employer fines for not covering employees, and new Insurance and Pharmaceutical industry taxes are among the primary funding vehicles.
- Medicare: The bill closes the “donut hole” in Medicare Part D (prescription drugs), by providing a $250 rebate to those who hit the Rx deductible. It reduces payments to Medicare Advantage by freezing the benchmark payment in 2011, and reducing those payments going forward. Proposed “savings” is $200 billion.
- Medicaid: The bill expands coverage under Medicaid for people up to 144% of the Federal Poverty level in 2014.
Please look for additional information from e3 Financial, as we will have specific Compliance Alerts and Webinars on this topic in the near future. In the meantime, if you have any questions, do not hesitate to call.
COBRA Subsidy Extended
Mar 05, 2010
President Obama has signed legislation that extends the deadline for terminated employees to qualify for the COBRA premium subsidy. Under the law, as amended, workers now terminated between September 1, 2008, and March 31, 2010 may be eligible for a 65% subsidy of their COBRA premiums for up to 15 months.
The legislation also redefines a qualifying event to include the involuntary termination of employment on or after March 2, 2010, of any qualified beneficiary who did not make (or who made and discontinued) an election of coverage on the basis of a reduction of hours of employment.
For more information on this temporary extension, individuals are encouraged to call the Employee Benefits Security Administration toll-free at 1-866-444-3272. To view the legislation, H.R. 4691, please click here.
Model Employer Children's Health Insurance Program Notice
Feb 15, 2010
On February 4, 2009, President Obama signed the Children's Health Insurance Program Reauthorization Act (CHIPRA) of 2009. CHIPRA includes a requirement that the Departments of Labor and Health and Human Services develop a model notice for employers to use to inform employees of potential opportunities currently available in the State in which the employee resides for group health plan premium assistance under Medicaid and the Children's Health Insurance Program (CHIP). The Department of Labor was required to provide the model notice to employers within one year of CHIPRA's enactment.
Through a notice in the February 4, 2010 FEDERAL REGISTER, the Department's Employee Benefits Security Administration (EBSA) announces the availability of the Model Employer CHIP Notice. The notice provides the "form and content of notice" as well as the "timing and delivery of the notice" while outlining the requirements for addition of state-specific information.
The model Employer CHIP Notice is now available in this electronic format.
ARRA COBRA Subsidy Extension Action Items for January 2010
Jan 08, 2010
COBRA Subsidy Update
Dec 29, 2009
As we previously announced, Congress enacted new legislation related to the COBRA continuation coverage subsidy. We thought it would be helpful to summarize the key changes for your review.
The new provisions do the following:
• Change the end date of eligibility for the COBRA ARRA subsidy from December 31, 2009 to February 28, 2010 (a two-month extension);
• Expand the ARRA premium subsidy to 15 months (an increase from the nine-month period under the original provisions);
• Allow for a 60-day period for the retroactive payment of premiums for assistance eligible individuals ("AEIs") (i.e., individuals who were entitled to the subsidy) whose subsidy period expired on November 30th and who failed to pay their premium for December coverage. The period will commence the day the provision is signed into law by the president, or, if later, 30 days after provision of the special notice (described below). The same refund/credit rules under the original bill will apply to any assistance eligible individual ("AEI") whose subsidy expired in November and who has since paid the full COBRA premium;
• Require a special notice describing the new subsidy provisions to all AEIs who are on COBRA on or after November 1, 2009 or whose qualifying event is an "involuntary termination" of employment occurring on or after November 1, 2009;
• Conditions eligibility for the COBRA subsidy on only one factor: a qualifying event that is an "involuntary termination" of employment occurring on or before the new February 28, 2010 sunset date. The previous version of the subsidy also took into account when the COBRA coverage period actually began. This means that employees who are involuntarily terminated before February 28, 2010 but still receive coverage subsidized by employers that defers the COBRA start date to a date later than February 28, 2010 will still be able to receive the subsidy.
We hope you find this information useful. As always, we will keep you posted with future developments.
IRS Announces 2010 Retirement and Inflation-Adjusted Benefit Numbers
Dec 10, 2009
The IRS has announced the 2010 cost-of-living adjustments applicable to dollar limitation for retirement plans and inflation adjusted limits for other benefits.
Read more (pdf)...
Congress Expands Military Family Leave Coverage
Nov 20, 2009
In the 2010 National Defense Authorization Act (NDAA), which was signed by President Obama on October 28, 2009, Congress expanded the military-related family and medical leave that it created in the 2008 NDAA. The expansion became effective upon the President's signature. This new legislation means the Family Medical Leave Act regulations that became effective earlier this year are already outdated with respect to military-related FMLA leave.
Caregiver Leave Expansion
The FMLA permits up to 26 weeks of leave for an eligible employee who is the spouse, son or daughter, parent or next of kin of a service member in the Regular Armed Forces, National Guard or Reserves to care for such a service member who has incurred a serious injury or illness in the line of duty while on active duty. Prior to the most recent amendments, this generally meant that treatment for, recuperation from, or therapy for the serious injury or illness had to commence while the service member was still a member of the military (or on the temporary disability retired list) in order for the family member to take FMLA leave to care for the service member. In other words, if an injury or illness did not manifest itself until after the individual was discharged from the military (e.g., post-traumatic stress disorder), a family member would not have been able to take FMLA caregiver leave to care for the individual.
The above limitation has now been modified. Under the new rules, the serious injury or illness still needs to be incurred while the service member is in the military, but treatment, recuperation and/or therapy for it can now begin as late as five years after the service member's discharge from the military. For example, if a service member is discharged from the military on November 1, 2009 (after serving in Iraq), and begins treatment for service-related PTSD two years later, a covered family member will be able to take FMLA leave at that time to care for the service member. Moreover, the definition of "serious injury or illness" is also expanded to cover not only an injury or illness incurred by the service member in the line of duty on active duty, but also an injury or illness that existed before the beginning of the service member's active duty that was aggravated by service in the line of duty on active duty. The eligible employee is still limited to a total of 26 weeks of leave related to the service member within a single 12 month period beginning with the first use of the leave.
Qualifying Exigency Leave Expansion
Under the original version of the FMLA military leave provisions, as implemented through the FMLA regulations earlier this year, eligible employees may take leave for a "qualifying exigency" arising from a spouse's, child's or parent's active duty or call to active duty as a member of the Reserves or National Guard in support of a "contingency operation" declared by the Secretary of Defense, the President, or Congress. This leave entitlement is up to 12 work weeks of unpaid leave in the employer's normally designated 12 month period (when combined with all other FMLA leave except FMLA caregiver leave).
The original provisions did not provide "exigency" leave related to active duty members of the Armed Forces on a theory that such active duty members and their families are always to be prepared for an assignment overseas. The 2010 NDAA discards this theory and extends coverage to eligible family members of: (1) any member of the Regular Armed Forces who is deployed to a foreign country (regardless of the nature of the service performed in that foreign country and regardless of whether it is in support of a contingency operation); and (2) any member of the Reserves or National Guard who is on federal active duty in a foreign country or is called to federal active duty in a foreign country, provided that such active duty is in support of a contingency operation.
The "qualifying exigencies" have not changed and include: short notice deployment, military events, arranging for child care, arranging financial or legal matters, attending counseling, assisting with the military member's rest and recuperation, post-deployment activities, and similar activities as agreed upon by the employer and employee.
Practice Tips
The expansion of caregiver leave and exigency leave clearly will increase the potential number of employees who may be entitled to take such leave. Employers should consider several steps to comply with the recent changes in the law.
• Update FMLA policies with respect to military leave.
• Monitor the Department of Labor for the anticipated poster revisions, notice revisions, form revisions, and regulatory revisions. In the meantime, consider posting a notice next to the current DOL poster briefly explaining the changes.
• Train personnel responsible for leaves and attendance concerning the changes.
• Educate supervisors of the basics of the changes to enable them to identify situations that should be brought to the attention of personnel responsible for leave administration.
Spencer Fane Britt & Browne LLP
November 30th Deadline for Determining How to Handle 2009 Required Minimum Distributions
Nov 19, 2009
Under recent IRS guidance, sponsors of 401(k) and other defined contribution plans must decide, by November 30, 2009, how to handle required minimum distributions (RMDs) for the 2009 calendar year. Moreover, participants who have already received 2009 distributions that consisted of (or included) a 2009 RMD have until this same date to decide whether to roll that RMD into an IRA or eligible retirement plan in a tax-free rollover.
Late last year, Congress passed the Worker, Retiree and Employer Recovery Act of 2008 (WRERA), which waived the 2009 RMD that must otherwise be paid to participants who have both retired and attained age 70. The expressed goal was to allow participants to avoid having to liquidate a portion of their account balance while the bottom had fallen out of the market. This one-year waiver of the RMD applies only to 401(k) and other qualified defined contribution plans, Section 403(b) plans, and governmental Section 457(b) plans.
On September 24, 2009, the IRS released Notice 2009-82, which provides transition relief for both plan sponsors and plan participants. This transition relief applies to RMDs made between January 1, 2009, and November 30, 2009. According to Notice 2009-82, the IRS will not consider a plan to be disqualified – even if it was not operated in accordance with its written terms during that period – because:
1. It did or did not distribute 2009 RMDs;
2. It did not give participants the option of receiving or not receiving 2009 RMDs; or
3. It did or did not offer direct rollovers of 2009 RMDs.
Under the transition relief, participants who have received a 2009 RMD have until the later of November 30, 2009, or 60 days after receipt of the distribution to roll the RMD into an IRA or eligible retirement plan. This extended deadline applies to both single-sum RMD payments (i.e., a distribution that is limited to the 2009 RMD) and distributions (such as installments or annuity payments) where only a portion of the distribution is the 2009 RMD.
This transition relief is a boon for plan sponsors because they (and their service providers) have taken a variety of approaches to this waiver – some of them inconsistent with each other. However, the transition relief ends on November 30, 2009. All distributions made after that date must be made in accordance with the terms of the plan. Even though WRERA gives plan sponsors until the end of the 2011 plan year to adopt any amendments needed to comply with the RMD waiver, those amendments must reflect the actual operation of the plan for periods after November 30, 2009.
Plan sponsors must therefore decide – between now and November 30, 2009 – how to handle distributions of 2009 RMDs (and distributions that may include 2009 RMDs) for the remainder of the 2009 plan year. The permissible options include:
1. Allowing participants to choose whether to receive any distribution that includes the 2009 RMD (with the default being no distribution if the participant fails to elect); or
2. Allowing participants to choose whether to receive any distribution that includes the 2009 RMD (with the default being to make the distribution); or
3. Automatically making all distributions required under the terms of the plan (i.e., as if there were no waiver of 2009 RMDs); or
4. Automatically stopping any distribution that consists solely of the 2009 RMD; or
5. Some combination of the above.
The IRS guidance anticipates that most plans will adopt one of the first two options (i.e., they will allow participants to choose whether to take, or not take, any distribution that includes the 2009 RMD). Notice 2009-82 even includes “model” amendments that plan sponsors may adopt for these two alternatives. Note that automatically “stopping” all distributions that include the 2009 RMD (without giving the participant any choice) may constitute an impermissible “cutback” of a protected distribution option, and is therefore not a recommended option.
Plan sponsors must also decide whether to give participants receiving 2009 RMDs the option of making a direct rollover of these amounts into an IRA or eligible retirement plan. WRERA does not require plan sponsors to offer a direct rollover option for 2009 RMDs (i.e., they can force participants to receive the distribution and then roll it over within 60 days). However, plan sponsors may allow participants to elect a direct rollover of either (i) any amount that is (or includes) a 2009 RMD, or (ii) only those amounts that would otherwise be “eligible rollover distributions” (such as lump sums or payments over a period of less than 10 years).
Plan sponsors should consult with their investment provider to make sure that the provider can operationally support the plan’s decision on how to administer RMDs after November 30, 2009. Sponsors should also consult with their plan document provider to make sure that the provider will be able provide a plan amendment that is consistent with the plan’s actual administration of RMDs after November 30, 2009.
Spencer Fane Britt & Browne LLP
CMS/ Medicare Disclosure Deadline (Nov 15th)
Oct 29, 2009
You may recall that Medicare Part D includes requirements for employers offering group prescription drug coverage, as you do under your group medical plan(s). To assist you in complying with those requirements, we offer these friendly reminders:
You must send a Notice of Creditable (or Non-Creditable) Coverage to ALL Medicare Part D eligible individuals currently covered under your group medical plan by November 15th of each year.
• The Notice of Creditable Coverage is appropriate for anyone enrolled in an HMO, POS or traditional PPO plan. The Notice of Non-Creditable Coverage is appropriate for anyone enrolled in an HSA-compatible high deductible PPO plan.
• Because Part D eligible individuals may include dependents and COBRA participants, we advise you to send the Notice via regular mail to ALL participants covered under your group medical plan. If dependents reside at the same address as the employee, the envelope may be addressed to "(Employee Name) and All Covered Dependents".
• Please contact us for model notices provided by the Center of Medicare & Medicaid Services (CMS), which we have modified to make them more user-friendly. For example, we've replaced the term "Entity" with "Name of Employer's Group Health Plan". (If you wish to review the original model notices, please visit: https://www.cms.hhs.gov/CreditableCoverage/).
You also must provide a disclosure of creditable coverage status to CMS by completing the online Disclosure to CMS Form. This should be done within 60 days after the end of your group medical plan year. If that deadline has passed, complete the Disclosure as soon as possible.
• Completing the online Disclosure to CMS Form requires only three steps and should take no more than five minutes:
o Step 1 -Enter the Disclosure Information
o Step 2 -Verify and Submit Disclosure Information
o Step 3 -Receive Submission Confirmation
• Step 1 will ask you to provide an estimate - and only an estimate! - of the number of Part D eligible individuals covered under your group medical plan as of the beginning of your plan year. You must also state the latest date on which you sent the Notice of Creditable (or Non-Creditable) Coverage to Part D eligible individuals.
• Here is the link to the required Disclosure to CMS Form:
https://www.cms.hhs.gov/CreditableCoverage/45_CCDisclosureForm.asp
• Once you have answered all of the questions, print a copy of your group's disclosure information and submission confirmation for your records.
If you have not already done so, we encourage you to complete the above items as soon as possible. If you need any assistance, please contact your Experience Manager or Client Advocate at 949-724-1964.
New Genetic Information Nondiscrimination Act (GINA) Guidance: Health Risk Assessment
Oct 14, 2009
On Oct.1, three federal agencies issued a lengthy package of regulations under the Genetic Information Nondiscrimination Act of 2008 (GINA). Though it will take some time to digest this entire package, one point is abundantly clear: Health plan sponsors and their insurers should think twice - if not three or four times - before including questions concerning an individual's family medical history in any health risk assessment (HRA).
Among other things, GINA bars a group health plan or insurer from discriminating on the basis of genetic information. This prohibition extends to collecting genetic information if that information will be used for underwriting purposes. GINA's statutory language made clear that family medical history falls within the definition of genetic information. Accordingly, GINA makes it impermissible to ask for family medical history before enrolling an individual in a health plan.
What many found surprising in the recent regulations, however, is a flat-out prohibition on asking for family medical history in even post-enrollment HRAs if employees will be rewarded for completing the assessment (or penalized for not doing so). Here is the rationale put forth by the government agencies for adopting this more stringent approach:
Under GINA, the definition of underwriting is broader than merely activities relating to rating and pricing a group policy. These interim final regulations clarify that underwriting purposes includes changing deductibles or other cost-sharing mechanisms, or providing discounts, rebates, payments in kind, or other premium differential mechanisms in return for activities such as completing a health risk assessment (HRA) or participating in a wellness program.
So what does this all mean? At a minimum, it means that HRAs may not ask for family medical history in either of the following two circumstances:
1. Before an individual is enrolled in a plan (or even before reenrollment, if the information may affect that reenrollment), or
2. At any time, if a reward will be given for providing this information (including a penalty for not doing so).
These prohibitions apply to plan years beginning after Dec. 7, 2009 - or as of Jan. 1, 2010, for calendar-year plans.
Now that many employers are beginning their annual enrollment season, employers, insurers and wellness vendors may need to respond immediately in order to delete from their HRAs any questions concerning family medical history. It may also be necessary to add language to open-ended questions stating that, in answering those questions, individuals should not provide any genetic information (including family medical history). The regulations impose this requirement in order to take advantage of an "incidental collection exception."
Fortunately, the regulations contain a number of examples that help to illustrate what may or may not be done in this regard. Those examples make clear that the following practices will pass muster under GINA (though they may still run afoul of other laws - including more stringent state laws):
1. Offering a financial incentive to complete an HRA, but excluding from that HRA any questions concerning family medical history.
2. Including questions concerning family medical history, but offering no financial incentive to complete the HRA (and deferring the HRA until after enrollment).
3. Offering a financial incentive to complete an HRA that requests no family medical history, and then including an addendum that requests such history - clearly stating that employees who leave the addendum blank will still receive the financial incentive for completing the rest of the HRA.
Keep in mind, though, that to effectively omit questions concerning family medical history, an HRA must plainly state that such history should not be provided in response to open-ended questions.
Kenneth A. Mason, Partner
Spencer Fane Britt & Browne LLP
HHS Issues Interim Final Rule Issued on HIPAA Breach Notification
Oct 06, 2009
As reported in a March 2009 Alert, the Health Information Technology for Economic and Clinical Health (HITECH) Act created a new notification requirement in the event of a breach involving protected health information (PHI). The Department of Health and Human Services (HHS) recently published interim final regulations clarifying when and how such breach notices must be provided.
Perhaps the most interesting aspect of this new guidance is its clarification of the term “breach.” The regulations define a breach as the acquisition, use or disclosure of PHI that compromises the security or privacy of PHI. The security or privacy of PHI is compromised only if the breach “poses a significant risk of financial, reputational, or other harm to the individual.”
This standard will require a covered entity to conduct a risk assessment and document its analysis with respect to whether a breach has occurred. For example, the inadvertent disclosure of an individual’s admission to the hospital may not be considered a breach for purposes of requiring notification, but the inadvertent disclosure of an individual’s admission to the hospital for substance abuse treatment might be considered a breach.
According to the regulations, this notice requirement applies only to “unsecured” PHI. Unsecured PHI is defined as PHI that is “not rendered unusable, unreadable, or indecipherable to unauthorized individuals through the use of a technology or methodology specified by the Department of Health and Human Services in published guidance.” HHS issued such guidance in April of this year, indicating that the only two approved methods of securing PHI are encryption (for both electronic data “at rest” and data “in motion”) and destruction (by shredding or purging). From a practical perspective, this appears to mean that any PHI that is maintained in a paper format would be considered unsecured for purposes of the breach notification rule, since it cannot be rendered secured until it has been destroyed.
As noted in our earlier article, the HITECH Act also extended this breach notification requirement to business associates of covered entities. Once they become subject to this requirement (by no later than Feb. 17, 2010), business associates whose actions result in a breach of unsecured PHI will be required to notify the covered entity of that breach without unreasonable delay, but in any event within 60 days of the discovery of the breach. They will also have to provide the names of the individuals whose PHI was the subject of the breach.
The new breach notification rules became effective as to covered entities on Sept. 23, 2009, but HHS has stated that it will use its enforcement discretion not to impose sanctions for failure to provide the required notifications for breaches discovered before Feb. 22, 2010. Nonetheless, given the complexities inherent in this area, covered entities (and their business associates) should not rely on this non-enforcement policy as an excuse to delay implementing the breach notification rules.
Julia M. Vander Weele, Partner
Spencer Fane Britt & Browne LLP
COBRA Subsidy Recipients and Notifying Former Employers to Avoid Penalties
Sep 09, 2009
Individuals who have qualified and received the 65 percent subsidy for COBRA health insurance, due to involuntary termination from a prior job, should notify their former employer if they become eligible for other group health coverage.
The American Recovery and Reinvestment Act of 2009 provides a subsidy of 65 percent of the COBRA health insurance premium for employees who are involuntarily terminated from September 30, 2008, to December 31, 2009. The subsidy requires only 35 percent of the premium to be paid for COBRA coverage for individuals, and their families, who have involuntarily lost their job and do not have coverage available elsewhere. The IRS announced the subsidy in a February 26, 2009, information release, IR-2009-15.
If an individual becomes eligible for other group health coverage, they should notify their plan in writing that they are no longer eligible for the COBRA subsidy. The notice that the United States Department of Labor sent to the individual advising them of their right to subsidized COBRA continuation payments includes the form individuals should use to notify the plan that they are eligible for other group health plan coverage or Medicare.
If an individual continues to receive the subsidy after they are eligible for other group health coverage, such as coverage from a new job or Medicare eligibility, the individual may be subject to the new IRC § 6720C penalty of 110 percent of the subsidy provided after they became eligible for the new coverage.
Taxpayers who fail to notify their plan that they are no longer eligible for the COBRA subsidy may wish to self-report that they are subject to the penalty by calling the IRS toll-free at 800-829-1040. In addition, taxpayers will need to notify their plan that they are no longer eligible for the COBRA premium subsidy.
Anyone who suspects that someone may be receiving the subsidy after they become eligible for group coverage or Medicare may report this to the IRS by completing Form 3949-A, Information Referral (PDF).
References/Related Topics
COBRA Health Insurance Continuation Premium Subsidy
Mental Health Parity Act & Group Health Plans
Aug 13, 2009
On October 3, 2008, the President signed the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA). Key changes made by MHPAEA, which is generally effective for plan years beginning after October 3, 2009, include the following:
• If a group health plan includes medical/surgical benefits and mental health benefits, the financial requirements (e.g., deductibles and co-payments) and treatment limitations (e.g., number of visits or days of coverage) that apply to mental health benefits must be no more restrictive than the predominant financial requirements or treatment limitations that apply to substantially all medical/surgical benefits;
• If a group health plan includes medical/surgical benefits and substance use disorder benefits, the financial requirements and treatment limitations that apply to substance use disorder benefits must be no more restrictive than the predominant financial requirements or treatment limitations that apply to substantially all medical/surgical benefits;
• Mental health benefits and substance use disorder benefits may not be subject to any separate cost sharing requirements or treatment limitations that only apply to such benefits;
• If a group health plan includes medical/surgical benefits and mental health benefits, and the plan provides for out of network medical/surgical benefits, it must provide for out of network mental health benefits;
• If a group health plan includes medical/surgical benefits and substance use disorder benefits, and the plan provides for out of network medical/surgical benefits, it must provide for out of network substance use disorder benefits;
• Standards for medical necessity determinations and reasons for any denial of benefits relating to mental health benefits and substance use disorder benefits must be made available upon request to plan participants;
• The parity requirements for the existing law (regarding annual and lifetime dollar limits) will continue and will be extended to substance use disorder benefits.
Federal and State law – Generally, large employers with a group health plan must comply with the Federal parity requirements as well as state laws, whereas small employers (2-50 employees) with a group health plan will only be potentially subject to state laws. A state law that requires more favorable treatment of mental health benefits under health insurance coverage offered by issuers (generally, health insurance companies) would not be preempted by the provisions of MHPA and the interim rules. The combined effect of Federal and State rules will vary from state to state.
Please note the following can opt out of the Mental Health Parity Act.
A nonfederal government employer that provides self-funded group health plan coverage to its employees (coverage that is not provided through an insurer) may elect to exempt its plan (opt-out) from the requirements of MHPA and MHPAEA by issuing a notice of opt-out to enrollees at the time of enrollment and on an annual basis thereafter. The employer must also file the opt-out notification with CMS.
For more information on your state, contact the Department of Insurance (DOI) for the state in which you reside. Ask DOI about mental health parity and state laws mandating that mental health benefits be included in the plan. You may also go to www.ncsl.org/programs/health/Mentalben.htm for additional State specific information.
For more information on the MHPA go to the following Websites:
• CMS - links to the MHPA statute. Click on “The Mental Health Parity Act” in the left column and scroll down to the statute.
• For more information on the MHPA statute, regulation, fact sheet and other publications, please click here and scroll down to the MHPA.
Universal Health Care Legislation Advanced by Committee
Jul 16, 2009
The Senate committee on health care has advanced a milestone measure for Obama’s plan.
President Barack Obama’s key priority of providing universal healthcare to the public was voted on by the Senate health committee Wednesday. As reported by the Associated Press (AP), the vote by the committee advanced a $600 billion measure that would require Americans to obtain health insurance, and employers to help supply the rate. The bill also calls for government financial help with premiums for those who will have trouble with the costs. However, the complete plan is still under development.
Senator Chris Dodd of Connecticut is quoted in the report as stating of the bill, “This time we’ve produced legislation that by and large I think the American people want.”
As noted by the AP, House Democratic leaders pledged to meet President Obama’s health care legislation goal by August earlier this week. Leaders are reportedly offering a $1.5 trillion plan, which would make healthcare both a first time right and responsibility for citizens of the United States.
WiredPRNews.com - The latest in U.S. Presidential News
New HSA Limits Announced
Mar 15, 2009
The IRS recently released the new HSA Limits for 2010.
Dust Off Your HIPAA Hats: Major Changes to HIPAA Privacy and Security Rules Are On The Way
Mar 11, 2009
Significant changes are coming up for HIPAA! Read more (pdf)...
ARRA Bill Changes COBRA Regulations
Feb 17, 2009
As you are aware, the American Recovery and Reinvestment Act of 2009 (ARRA) was signed into law by President Obama on February 17th, 2009, and provides a 65-percent subsidy on federal COBRA and COBRA-comparable state continuation premiums for certain assistance eligible individuals (AEIs) for up to nine months.
The Department of Labor has set a deadline of April 18th, 2009 for all ARRA COBRA notices to be mailed out to any employee terminated involuntarily after September 1st, 2008.
Any small group employer that currently offers Cal-COBRA (20 or less employees) should be aware that it is the carrier's responsibility to administer Cal-COBRA, but should also be advised that there is a penalty on the employer if a notice is not sent out to all involuntarily terminated employees after September 1st, 2008.
Please click on the link below to review the model notices made available by the Department of Labor:
http://www.dol.gov/ebsa/cobramodelnotice.html
We have two suggestions for all small group employers that offer Cal-COBRA:
1) Contact your current medical carrier to find out how the ARRA subsidy is being handled.
2) As a precaution, mail out a COBRA ARRA notice to all employees involuntarily terminated after 9/1/08 before the deadline of 4/18/09.
