Affordable Care Act Key Issues For Plans, Trustees and Employers. The National Labor & Management Conference

Transcription

1 Affordable Care Act Key Issues For Plans, Trustees and Employers The National Labor & Management Conference February 17, 2014 Frank C. Morris, Jr. Epstein, Becker & Green, PC (202) _1.pptx

2 This presentation has been provided for informational purposes only and is not intended and should not be construed to constitute legal advice. Please consult your attorneys in connection with any fact-specific situation under federal, state, and/or local laws that may impose additional obligations on you and your company. 2

3 HEALTH REFORM: A-MAZE-ING CHANGE 3

4 Affordable Care Act Regulation 4

5 Breaking News: Final Shared Responsibility Regs -Select Major Changes On February 10, 2014, IRS issued highly anticipated final regs implementing ACA Employer Shared Responsibility provisions Largely mirror December 2012 proposed regs with some key changes and transitional relief An employer with 50 to 99 full-time employees does not have to comply until 2016 provided that it to gain this transition relief. Such employers must also maintain any health coverage offered as of February 9, Employers with 100 or more full-time employees will have to comply starting in Employers that are subject to the employer mandate in 2015 need to offer coverage to 70 percent of full-time employees. This increases to 95 percent for 2016 and beyond. For 2015 and any calendar months of 2016 that fall within the employer s 2015 plan year, if an employer with 100 or more full-time employees is subject to a 4980H(a) penalty, then the penalty calculation will be made after subtracting the employer s allocable share of 80 full-time employees instead of 30. The final regulations provide a bright-line definition for seasonal employee, clarifying that seasonal employees are those who work six months or less annually. Therefore, employees who work six months or less in a year generally will not be considered full-time employees. 5

6 Breaking News: Final Shared Responsibility Regs -Select Major Changes For 2015 only, employers do not need to offer coverage to dependents of full-time employees, defined as children up to the age of 26. This requirement applies in 2016 and beyond. The final regulations amend the definition of dependent to exclude foster children and stepchildren. The final regulations create a weekly rule, under which full-time employee status for certain calendar months is based on hours of service over four-week periods and for certain other calendar months on hours of service over five-week periods. The final regulations clarify application of the look-back measurement method and the monthly method of determining full-time status. For 2015, employers may determine whether they had 100 full-time employees (or full-time equivalents) in the previous year by referencing any consecutive six-month period in Employers with plan years that do not begin on January 1 will be able to begin complying with the employer mandate at the start of their plan years in 2015 instead of January 1, In 2014 (preparing for 2015), plans may use a measurement period of six months. However, the measurement period must begin no later than July 1, 2014, and end no earlier than 90 days before the first day of the plan year beginning on or after January 1, Solely for January 2015, a large employer may offer coverage on the first day of the first payroll period that begins in January 2015 (as opposed to the first day of the calendar month). 6

7 Employer Mandate Delay & Health Legislation Administration administratively stays Employer Mandate to and additionally to for employers with employees HR 2575 and S 1188 would change ACA full time employee definition from 30 to 40 hours Some possibility of F/T employee threshold change Administration briefly delayed individual mandate due to healthcare.gov glitches 7

8 Affordable Care Act on Pause Delays in Employer Mandate mean no shared responsibility penalty under Section 4980H of IRS Code for 2014 nor in 2015 for employers with employees No reporting under IRC 6056 which is linked to employer mandate 6055 reporting requirements that apply to selfinsuring employers, insurers and certain other providers of minimum essential coverage also stayed 6055 reporting to determine compliance with individual mandate and eligibility for premium tax credits where no minimum essential coverage Info to both IRS and individuals usually by separate return for each F/T employee 8

9 IRS 6055 Reporting to IRS Content For Employer Provided Coverage Must Include: Employer name, address, and EIN Report on enrollment through Small Business Health Options Program The name of each individual enrolled in Minimum Essential Coverage The name and address of the primary insured or other related person who submits the application for coverage Name, address and taxpayer ID# and months of coverage for each individual actually covered The reporting may be made on Form 1095-B 9

10 IRC 6055 Reporting to IRS A Reporting Entity Must Furnish Statements to Covered Individuals Which Include: Policy number Name, address, and a contact number for the reporting entity; and Information required to be reported to the IRS (discussed above) The proposed rule allows electronic delivery of statements to individuals, but only if the recipient consents 10 10

11 All employers subject to FLSA must provide a notice of coverage options to all employees, regardless of whether they are enrolled in health plan or whether F/T Excludes dependents Existing employees were to receive the notice by October 1, 2013, but no 2014 penalty New hires must receive the notice within 14 days of their start date New Model COBRA Notice with Exchange Information Remember - 60 Day Election Period Exchange/ COBRA Notices 11

12 Employee Exchange Subsidy Eligibility Verification Employees eligible for employer sponsored health plan are eligible for Exchange subsidy only if employer s plan is either not affordable or does not meet Minimum Value (MV) standard Exchange Will Look At Is employee eligible for (or enrolled in) employer s health plan? Does employer plan meet MV standard? Is plan affordable for employee? (Look at lowest cost plan available to employee) BUT 12 12

13 Other Delays State Run Marketplaces Exchanges Federal Government Exchange Electronic Notices Seventeen will not have to verify consumers claim that they do not receive health insurance from their employers Will scale back oversight of what applicants say they earn applies to all 50 states Relevant to whether get tax subsidy and amount 2014, feds will audit only sample of people with large income disparities Delayed to 2015 Employees may bring more questions to plans and employer benefits and HR staff 13 13

14 ACA Judicial Challenges Unanimous 4 th Circuit upholds validity of ACA employer mandate Liberty Univ. v. Lew, 2013 WL (4 th Cir. July 11, 2013), cert. denied Tax credits and premium subsidies for federal exchanges questioned Pruitt v. Sebelius (E.D. Okla. 2013) Government s Motion to Dismiss (MTD) denied Halbig v. Sebelius Civ. No. 130CV-623(D.D.C.) Government s MTD granted, Jan. 15, 2014, app. pending King v. Sebelius (ED VA No. 13cv630) MTD granted Feb. 18, 2014, Chevron deference no showing IRS/HHS interpretation of ACA 36B unreasonable 70+ cases challenge ACA rule that health plans cover contraceptives at no cost argument- violation of Religious Freedom Restoration Act and 1 st Amendment Free Exercise Clause Supreme Ct. argument March 25, 2014 of Hobby Lobby and Conestoga Hobby Lobby v Sebelius, 2013 WL (10th Cir., June 27, 2013) secular companies also have right to free exercise Contra, Conestoga Wood Specialties Corp. v Sebelius, 2013 WL (3 rd Cir., July 26, 2013); Autocam Corp. v. Sebelius, (6 th Cir., Sept. 17, 2013) Little Sisters of the Poor Home for the Aged v. Sebelius, Jan. 24, 2014, Sup. Ct. temporarily enjoined government from enforcing ACA contraceptive coverage requirements and penalties as to various religious organizations Constitutional Origination Clause (Article 1, Sec. 7) (bills raising revenue must start in House) challenge rejected Sissel v. HHS (D.D.C. 2013), appeal pending (D.C. Cir. No ) 14 14

15 Employer Shared Responsibility Issues / FULL TIME EMPLOYEES Which Employees Must be Offered Coverage? Full-Time Employee means, with respect to any month, an employee who is employed on average at least 30 hours of service per week Determining full-time status on a monthly basis (penalty provisions monthly) would cause practical difficulties Hours of Service includes: Paid for performance of services, or entitled to payment even when no work is performed e.g., call in pay Paid on account of time during which no duties are performed vacation, sick, holiday, etc. Special rules for FMLA, USSERA, and Jury Duty Special rules re: seasonal employees Final Rule - seasonal employees working 6 months or less generally not FTEs Break-in-Service under Final Rules generally applies after break of 13 weeks (Interim rule used 26 weeks) 15 15

16 Word of Caution / Calculating Hours Hourly Employers must calculate actual hours of service from records of hours worked and hours for which payment is made or due vs. Non-Hourly Actual hours or Daily equivalency: 8 hour days OR Weekly equivalency: 40 hour weeks 16 16

17 Look Back Period Employers may select a period between 3 months and one year as a measurement period. If employer determines an employee was employed on average at least 30 hours of service per week during the measurement period, then the employer must treat the employee as a full-time employee during a corresponding stability period, regardless of the number of hours of service the individual works over that time period Usually same Look Back Period for all employees but can differ for certain categories If new employee is reasonably expected to work 30 hours on average, an employer must offer coverage within three months Is new employee replacing F/T employee? Was job advertised as requiring 30 or more hours/week? If at the time of hire, a determination cannot be made: An initial measurement period of between 3 and 12 months and an administrative period of up to 90 days may be used. However, the initial measurement period inclusive of any administrative period may not extend beyond the last day of the first calendar month beginning on or after the one-year anniversary of the employee s start date 17 17

18 Minimum Value (MV) The Final Rule means a plan s share of total allowed costs of benefits provided is no less than 60 percent MV Methodologies MV Calculator available at: Any safe harbor established by HHS and IRS; Certification by an actuary -- only available if the plan contains nonstandard features that are not suitable for the MV calculator or safe harbor checklists. If this option used, determination must be by a member of the American Academy of Actuaries; or Any plan in the small group market that meets any of the metal levels of coverage based on the MV Calculator 18 18

19 Wellness Incentives and Calculations AFFORDABILITY AND MINIMUM VALUE IRS proposed rule prohibits employers from using the incentives offered through most wellness programs for purposes of calculating affordability or minimum value Exception for tobacco cessation programs Transitional rule until

20 New Litigation ERISA Section 510 claims ERISA rights interference Whistleblower claims - ACA 1558 Unlawful to retaliate against whistleblower who participates in proceeding or applies for cost sharing/subsidy 20

21 ACA s Whistleblower Provisions 1558 prohibits adverse action or retaliation against an employee or applicant who Provided information that the employee reasonably believed concerned a violation of ACA Title I to the employer, the federal government or any state attorney general Testified, assisted or participated in a proceeding concerning a Title I violation Objects or refuses to participate in any activity the employee/applicant reasonably believes to violate Title I For receiving a credit under 36B of IRC or a cost sharing reduction under ACA

22 Creating Sustainable Benefits Post 2014 Plans and employers providing benefits consistent with the ACA should immediately begin the process of bending the cost curve. Otherwise, prepare to be run over by

23 Cadillac Tax Effective January 1, 2018, a 40% non-deductible excise tax ("Cadillac Tax") on insurance companies and plan administrators of self-insured plans If combined employer/employee premiums exceed threshold of $10,200 for single coverage and $27,500 family coverage Tax on amount by which cost exceeds threshold Multiemployer special rule family threshold applies 60% of large employers likely affected in year one Union-Employer Alliances? /08/05/a-lot-of-unions-are-going-to-end-up-hatingobamacare/ Adjustments high risk professions, retirees, age/gender, indexing post

24 Tax will grow each year Thresholds indexed to CPI-U and not medical inflation. Health care costs rise much faster than CPI-U. No benefits to employees or employers if Cadillac Tax is triggered Employees: No additional benefit from additional expenditure Plans and Employers: No tax advantage (No excise tax for multi-employer plans) Cost Shifting limited by ACA and Minimum Value requirements 24 24

25 Some Options Wellness Programs Value-Based Purchasing Aggregation Exchanges Recent regulations allow employers to offer incentives up to 30% of premium and 50% for tobacco cessation - Disease management Paying for quality, not volume - Quality based networks MEWAs, PEOs, Private Exchanges, etc... Assuming large employers allowed to purchase post 2017 On-Site Clinics If Practical 25 25

26 Wellness and the Affordable Care Act

27 Employer Wellness Programs Employer wellness programs are heavily promoted under the ACA to improve the health of Americans and control health care spending by plans and employers. But, recent government regulations present significant hurdles to implementation of wellness programs

28 Wellness Programs/Employment Law Issues Various features of Wellness Programs can raise ADA issues Health Risk Assessment (HRAs) How to qualify for rewards Do incentives/penalties make plan not voluntary under ADA EEOC held hearing likely regulations at some point ADA Safe Harbor, Seff v Broward County (11 th Cir.) GINA Issues Potential disclosure of genetic information GINA bars incentivizing disclosure of genetic information 28 28

29 Wellness Regulations June 3, 2013 Final Rule largely follows Proposed Rule and retains HIPAA Non- Discrimination Structure Highlights: (1) Increased maximum permissible reward under a health-contingent wellness program offered in connection with a group health plan from 20% to 30 percent of the cost of coverage; (2) set maximum permissible reward for wellness programs designed to prevent or reduce tobacco use at 50 percent of the cost of coverage; (3) clarifies the reasonable design of health-contingent wellness programs and reasonable alternatives that must be offered to avoid discrimination; and (4) further categorizes health-contingent wellness programs into activity-only and outcome-based wellness programs. Takeaway: The regulation of wellness is becoming more complicated. Health contingent programs especially should be reviewed for compliance Agencies reserved right to add additional consumer protections 29 29

30 Participatory Wellness Incentive Does not require an employee to satisfy a standard based on a healthrelated factor 4 Wellness Incentives 2 2. Available to all similarly situated employees 3 3. Examples, smoking cessation program not dependent on outcome, participating in biometric screening 4. Does not include walking programs

31 Health-Contingent Wellness Incentive Activity-only program (e.g., walking, dieting, exercising programs) Outcome-based program (e.g., rewards for nonsmokers, satisfying biometric standards, such as BMI) Both types of programs must meet a 5-part test 31 31

32 Health-Contingent Wellness Incentive Five-Part Test for Health-Contingent Wellness Amount of reward must be limited Individuals must qualify at least once a year Reasonably designed to promote health or prevent disease Program is universally available and reasonable alternative standards are available for individuals with disabilities Disclosure requirements for documentation 32 32

33 Wellness Incentives: Affordability and Minimum Value On April 30, 2013, the IRS issued a proposed rule that prohibits employers from using the incentives offered through most wellness program for purposes of calculating the affordability or minimum value Exception for tobacco cessation programs Transitional rule until 2015 Various trustee and employer groups believe that the inclusion of wellness incentives in these calculations would promote more widespread adoption of these programs, which, in turn, lowers the cost of plans and improves the health of employees 33 33

34 Wellness Take Aways Final Rule allows employers to operate wellness programs with key elements of the prior regulatory structure Final Rule provides a framework by which plans and employers may increase the sophistication of their incentives and increase the value of WPs in terms of cost savings While WPs can improve employee health and increase productivity, there is an associated litigation risk which must be managed Moving target: additional regulation expected WPs under attack? Increased complexity Limited utility under mandate Cost of Coverage vs. ROI Hostility of various groups to WPs 34 34

35 Fiduciary Responsibilities Identifying and Educating Fiduciaries Selecting and Monitoring Service Providers Ensuring Compliance for Receipt and payment of employee contributions Establishing Reasonable Claims Procedures Maintaining Plan Records Preparing Plan Flings (Form 5500s and Schedules) Monitoring Potential for Prohibited Transactions Reporting and Disclosure to Participants, such as SPDs, SMMs, etc

36 Trustees and Employers Sponsoring Group Health Plan Programs Should Assure Ongoing Record Keeping and Plan Documentation Self Audit ACA Compliance Likely Through Counsel to Enhance Privilege Arguments Assure Plan Administrators Have Necessary Knowledge and Expertise Reporting obligations Disclosure obligations DOL is beginning audits modified audit letter inquiry regarding what plans and employers are doing to comply with ACA Consider designating health plan fiduciaries separate and distinct from those making health plan business decisions Consider if compliance efforts would be aided by outside counsel or other service providers 36 36

37 DOMA On June 26, 2013 the Supreme Court in U.S. v. Windsor found Section 3 of DOMA unconstitutional August 29, IRS and Treasury released Revenue Ruling (the Ruling ) and accompanying FAQs addressing some of the issues State of Celebration: if a couple is married in a jurisdiction that recognizes same-sex marriage, then the marriage will be recognized for Federal tax purposes, no matter where the couple lives or works Only marriages -- not domestic partnership or civil union The Repeal of DOMA is Retroactive Both employer and employee may be able to file corrected returns Invalidation of DOMA affects 1,000 + federal laws Recent DOJ initiative to harmonize federal laws 37 37

38 DOMA Benefit-Related Issues to Review Health and Welfare Plans Health insurance coverage generally Tax-equalization agreements Consolidated Omnibus Budget Reconciliation Act ( COBRA ) Health Flexible Spending Account ( FSA ) Health Insurance Portability and Accountability Act ( HIPAA ) 38

39 Unanswered Questions Retroactive effect? Prior elections Tax matters Prior distributions Forms Plans and employers need to consider the current terms of their plans; definitions of spouse, required provisions vs. voluntary, spousal and domestic partner benefits, coordination of jurisdictions Awaiting various guidance which is high on the Administration s agenda 39 39

40 Presenter Frank C. Morris, Jr. Director, Labor and Employment Group Washington, DC Office Epstein Becker & Green, PC