The Affordable Care Act and Its Impact on Multiemployer Plans Selected Coverage Issues

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1 The Affordable Care Act and Its Impact on Multiemployer Plans Selected Coverage Issues 2014 NCCMP Annual Conference September 23, 2014 Hollywood, Florida Carolyn E. Smith Alston & Bird LLP

2 Issues to be Covered Supplemental Coverage Options Proposed wrap plan rule New Coverage Reporting Requirements Obligations of plans and obligations of employers Coverage Gaps and Churning Issues COBRA, Exchange coverage, premium tax credit, individual mandate 1

3 Options for Supplemental Coverage Proposed Wrap Plan Rule Key economic drivers under the ACA Premium subsides Employer penalties These factors are likely to push more workers into Exchanges, particularly -- Part-time workers Workers in low wage industries Workers in industries dominated by small employers Retirees How can multiemployer plans supplement Exchange coverage while preserving access to premium tax credits? The answer is in the eligibility rules relating to the tax credit 2

4 Options for Supplemental Coverage Proposed Wrap Plan Rule Premium subsidies are generally not available if an individual is offered MEC coverage under an employer sponsored health coverage (this includes multiemployer plan coverage), even if the individual is not enrolled in the coverage Exceptions the offer of coverage does not disqualify an individual for a credit if the coverage does not provide minimum value (MV) or does not meet affordability standards Retirees not considered eligible unless enrolled (proposed rule but can be relied upon for now) Excepted benefit coverage is NOT considered MEC Thus, employees may be offered (and enrolled in), excepted benefit coverage, e.g., standalone vision/dental, specified disease (e.g., cancer), accident/disability, hospital or other fixed indemnity coverage 3

5 Options for Supplemental Coverage Proposed Wrap Plan Rule A proposed rule (Dec. 2013) would define a new type of excepted benefit for wrap coverage Wrap coverage would supplement individual health coverage, including Exchange coverage As an excepted benefit, the wrap coverage would not disqualify the worker from receiving a premium subsidy However, As proposed, the rule contains a variety of restrictions that are impractical and make the rule unusable NCCMP and other members of the multiemployer community provided numerous comments on the proposed rule and how it should be modified to make it workable 4

6 Options for Supplemental Coverage Proposed Wrap Plan Rule First Issue -- Gateway to providing wrap coverage The plan sponsor with respect to the wrap coverage must sponsor a primary plan The primary plan Must provide minimum value (MV) Must be affordable for a majority of the employees eligible for the plan Only individuals eligible for the primary plan may be eligible for the wraparound coverage 5

7 Options for Supplemental Coverage Proposed Wrap Plan Rule Comments filed by NCCMP and others stressed that the gateway makes the rule unusable For example, in low wage industries, it s not possible to meet the majority affordability standard Not workable in the bargaining context to have two classes of employees in the same plan, some for whom the plan is affordable and some for whom the plan is not Suggested alternative eliminate the gateway test Modifications suggested in the event the test is retained Overall focus of the comments the wrap plan should be available in as many situations as possible 6

8 Options for Supplemental Coverage Proposed Wrap Plan Rule Second Issue -- Benefits that may be provided by the wrap plan The wrap coverage Must provide coverage of benefits that are not essential health benefits (EHB), or reimburse the cost of health care providers that are considered out-of-network under the individual coverage, or both. The wrap coverage may also fill in cost sharing. Must not provide benefits only under a coordination-of-benefits provision Cannot have a total cost that exceeds 15% of the cost of the primary coverage, determined in the same manner as COBRA premiums are calculated NCCMP and others also commented on this aspect of the rule 7

9 Options for Supplemental Coverage Proposed Wrap Plan Rule Other commentators had different concerns about the rule Chamber of Commerce and AHIP recommended that the proposed wrap plan rule be withdrawn and that discussions with stakeholders on the issue should proceed on a separate track to resolve issues AHIP also had a number of suggestions to the rule E.g., define majority to align with pay or play penalties (70% in 2015, 95% thereafter) Eliminate the 15% limit on the value of the wrap coverage The proposed rule also addressed Stand-alone vision and dental plans, eliminating the requirement that a separate premium be paid Circumstances under which EAPs are excepted benefits A final rule was submitted to OMB for review on Sept. 16,

10 Reporting Requirements January 1, 2015 Employer and health plan reporting requirements effective for coverage periods starting 1/1/2015 IRC 6055 Reporting of Minimum Essential Coverage (MEC) Used to enforce the individual mandate Applies to sponsors of self-funded plans providing MEC, including multiemployer plans IRC 6056 Reporting for Applicable Large Employers (ALEs) subject to pay or play penalties Used to enforce the employer pay or play penalties 9

11 Reporting Requirements First reports due February 1, 2016 (because January 31, 2016 is a Sunday) statement provided to individuals March 1, 2016 (because February 28, 2016 is a Sunday) filing with the IRS for paper filers March 31, 2016 filing with the IRS for electronic filers Electronic filing is required if employer files 250 or more returns 10

12 Reporting Requirements Final regulations on both reporting requirements were published on March 10, MEC, 79 Fed Reg (March 10, 2014) Pay or Play Penalties, 79 Fed Reg (March 10, 2014) The IRS has provided draft forms and instructions detailing the reporting requirements 11

13 Reporting Requirements - Obligations of the Plan Multiemployer plans will file the B series forms -- Form 1095-B Form 1094-B (transmittal) Instructions These forms will also be used by Insurers to report fully insured coverage Small employers that are not subject to the employer penalties and provide self-funded coverage 12

14 Reporting Requirements Obligations of the Plan Specific Information Plans Will Provide On Form 1095-B Part I Responsible Individual Information Responsible individual is generally the employee (or retiree) Name, address, SSN DOB may be used if SSN not available and the plan has made reasonable efforts to obtain the SSN If the plan does not already have the SSN, an initial solicitation is required, plus two additional annual solicitations if earlier solicitations are not effective The preamble to the final regulations has additional discussion Line 8: Letter Identifying Origin of the Policy Plans will enter letter E for multiemployer coverage 13

15 Reporting Requirements Obligations of the Plan Specific Information Plans Will Provide On Form 1095-B Part II Employer Sponsored Coverage Multiemployer plans do not complete this part. This part is completed by health insurance issuers providing insured coverage to an employer, including through a SHOP Part III Issuer or Other Coverage Provider The plan, as the sponsor of the coverage, will complete this part with information regarding the plan sponsor 14

16 Reporting Requirements Obligations of the Plan Specific Information Plans Will Provide On Form 1095-B Part IV Covered Individuals Plans complete this part with information for the responsible individual and each related covered individual. Example: The employee (responsible individual), and the spouse or any dependents of the employee who are covered by the plan Name, address, SSN (or DOB) Same rules as described above apply with respect to reasonable efforts to obtain the SSN of covered individuals other than the responsible individual Coverage information If covered all 12 months of the year, check box (d) Otherwise, coverage must be reported separately for each month in the calendar year A person is considered covered for a month if they are covered on at least one day of the month 15

17 Reporting Requirements Obligations of Employers Applicable large employers (ALEs) that are subject to the pay or play penalties file Form 1095-C for both 6055 (MEC) and 6056 (pay or play penalties) reporting Part II is used to report offers of coverage (for penalty purposes) Part III is used to report individuals covered by a self-insured plan of the employer Employers will NOT report multiemployer plan coverage here, the plan will do that as described above Form 1094-C is used to transmit this information to the IRS Instructions Multiemployer plans do not use Form 1095-C, unless the plan itself has enough employees so the plan is an ALE 16

18 Reporting Requirements Obligations of Employers Special Multiemployer Plan Rule for Penalty Purposes An ALE will not be subject to a penalty for a full-time employee with respect to whom the employer is required by a CBA to contribute to a multiemployer plan that meets affordability standards and provides MV Also applies with respect to persons covered by the plan pursuant to a participation agreement ALEs report use of the multiemployer plan rule for an employee on Form 1095-C, Part II, line 16, by entering Code 2E for each month the rule applies Employers will generally look to the plan to provide information as to whether the plan provides MV and meets affordability standards Although described as interim relief the multiemployer plan rule will remain in effect unless/until modified by Treasury Any rule that restricts relief will be given prospective effect only 17

19 Churning Issues -- Individual Mandate What is the individual mandate penalty? For 2014, the annual penalty is The family flat dollar amount, which is $95 per adult; $47.50 per dependent child under age 18, up to a maximum of $285 per family, or 1% of family income if greater But capped at the cost of the national average premium for a bronze level health plan available through the Exchange in For 2014, the annual national average premium for a bronze level health plan available through the Marketplace is $2,448 per individual ($204 per month per individual), but $12,240 for a family with five or more members ($1,020 per month for a family with five or more members) Note, these are annual amounts, penalty determined on a monthly basis (1/12 th of annual amount) 18

20 Churning Issues -- Individual Mandate What is the individual mandate penalty? For 2015 $325 per adult; $ per dependent child under age 18, capped at $975 per family or 2% of family income, if greater But capped at the sum of the national average bronze plan premiums for the shared responsibility family For 2016 $695 per adult; $ per dependent child under age 18, capped at $2,085 per family or 2% of family income, if greater But capped at the sum of the national average bronze plan premiums for the shared responsibility family 19

21 Churning Issues -- Individual Mandate Are there any exceptions to the individual mandate for short coverage gaps in during a year? The individual mandate is waived for one (and only one) continuous coverage gap during the year of less than three full months A person is considered covered for a month if they are covered for at least one day in the month Exception applies to the first coverage gap during the year; exception does not apply if the coverage gap is three full months or greater Special rules apply in determining the length of the gap if it spans more than one calendar year (e.g., December, Jan., Feb) 20

22 Churning Issues Individual Mandate Examples of how the coverage gap exception works -- Multiple Coverage Gaps: Employee is covered under a multiemployer plan in January and February, is not covered in March, is covered again in May, June and July, is not covered in August, and is covered in September through the rest of the year. The individual mandate does not apply for March, but will apply for August (even though the total of the coverage gaps is less than three full months). Gap of three full months or more: Employee is covered under a multiemployer plan for the entire year except for March, April, and May. Because the coverage gap is not less than three full months, the individual mandate applies for all three months It is possible that another exception to the mandate may apply in particular circumstances, e.g. a hardship exception. 21

23 Churning Issues - COBRA and Premium Subsidies How does availability of COBRA coverage affect an individual s eligibility for the premium tax credit? Final regulations (May 2012) provide that continuation coverage required under Federal law does not disqualify an individual from receiving a premium tax credit unless the individual is enrolled in the continuation coverage Proposed regulations (May 2013) would apply this rule ONLY for retirees Thus, under the proposed rule, an active worker eligible for COBRA would not be entitled to a premium tax credit unless the COBRA coverage is not affordable or does not provide MV Note, under the proposed rule, retirees are not considered eligible for any employer sponsored coverage unless they are enrolled. Although the rule is only proposed, it can be relied upon for

24 Churning Issues COBRA and Enrollment in Exchange Coverage If COBRA is elected, can the individual drop COBRA and enroll in an Exchange plan at any time? (Generally, no) Enrollment in Exchange is limited to an annual open enrollment period and certain special enrollment periods Next annual open enrollment period is Nov. 15, 2014 to Feb. 15, 2015 for coverage effective in A special enrollment period is available for someone who loses MEC due to termination of employment or a reduction in hours. A special enrollment period is also available when COBRA coverage is exhausted (i.e., the continuation period ends) Dropping coverage (or failing to a premium) does not qualify for a special enrollment period. Someone who wishes to drop COBRA before the continuation period ends generally must wait for the next open enrollment period to enroll in Exchange coverage The special enrollment period for loss of other coverage is 60 days before and after the loss of coverage 23

25 Questions? 24

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