Individual Medical Coverage, HRAs, and Private Exchanges: Avoiding Regulatory Pitfalls in the Post-ACA World

Transcription

1 Individual Medical Coverage, HRAs, and Private Exchanges: Avoiding Regulatory Pitfalls in the Post-ACA World John Hickman, Esq. Ashley Gillihan, Esq. Atlanta Office One Atlantic Center 1201 West Peachtree Street Atlanta, Georgia All Rights Reserved Alston & Bird, 2014

2 Agenda Background: Once you ve seen one private exchange, you ve seen one private exchange Buzzword applied to defined contribution health plan arrangement HRAs and the Affordable Care Act prohibition on Annual Limits Agency FAQs XI and IRS Notice Defined Contribution Arrangements in a Post-FAQ World 2

3 Provide employees a fixed defined contribution amount and let them make coverage selections from an array of coverage options: Like a marketplace with a set amount of spend on your gift card May be single carrier or multiple carrier or even self funded If multiple carrier premium submission, billing administration required Adverse selection issues with slice arrangements Base contribution should be set at level sufficient to avoid pay/play affordability requirement What is a Private Exchange? Pricing options Impact of utilization of bare bones coverage Impact of state law/ehb mandates on bare-bones approach Cash out feature may impact affordability analysis

4 HIPAA regulatory guidance allows exception for Retiree only HRA HRAs and ACA/HIPAA Issues with rehires Accrual during employment should not affect retiree only status Vision/dental only HRA (note technical glitch) HIPAA FSA Exception HRA with annual benefit of $500 or less o.k. IF... Major medical coverage from same employer is also available All other HRAs are subject to ACA/HIPAA Provisions As discussed below, some regulatory exceptions to annual cap prohibition may apply

5 Employer arrangement that is a GHP must satisfy ACA mandates... Including: ACA Mandates of Interest No annual/lifetime cap (more later) First dollar preventive care coverage (n/a GF) Cost sharing requirements OOP limitation applies HRA can only survive if integrated with an employer GHP (see later slides) Pay or play impact HRA limited to expenses for cost sharing newly available amounts count toward MV HRA that can be used for premiums newly available amounts count toward affordability

6 HRAs and ACA Annual Cap Limitation Lifetime and annual dollar limits on essential benefits Lifetime limits are prohibited Annual limits are prohibited starting PY 2014 Possible lifetime/annual cap exceptions for HRAs : HRA integrated with a larger group health plan may not need to eliminate cap if plan complies as a whole HRA rules preclude salary reduction option Can HRAs be integrated with individual policies? Notice says no. Retiree only HRA

7 Possible lifetime/annual cap exceptions for certain HRAs Limited purpose HRA (dental, vision) Technical reading of regulatory exception troublesome Comments filed with respect to 2013 proposed regulation IRC 106 health FSA exception? IRS Notice limits to Health FSAs offered through cafeteria plan Exchange arrangements where coverage offered is employer sponsored, defined benefit, group coverage HRAs and ACA Annual Cap Limitation If funds can be used for employer coverage that can also be pre-taxed, no carryover allowed

8 Agency FAQ guidance (Part XI) Extinguishes Stand-alone HRAs The Agencies concluded that a stand-alone HRA open for any 213 expense (an "open" HRA) is impermissible due to annual/lifetime cap prohibition. Only integrated HRAs allowed Agencies clarified that an open HRA used to purchase individual policy benefits does not satisfy the no annual cap prohibition because not integrated. The Agencies have further clarified what it takes for an HRA to be integrated FAQs Part XI Group coverage Identity of participation

9 Impact... Guidance forecloses the ability of employers to make pre-tax payments of premiums for policies (including through a cafeteria plan or premium reimbursement arrangement) issued in the individual market (IM) for active employees. Read Q/A-1 and definition of employer payment plan together. Guidance also impacts after-tax funded arrangements that do not fit ERISA safe harbor IRS Notice In addition, stand-alone HRAs, stand-alone MERPs, and limited dollar HRAs (e.g. wellness HRAs) are also effectively eliminated (subject to certain transition rules) unless such arrangements qualify as excepted benefits. Failure to timely terminate such arrangements could result in a potential excise tax of $100 per employee participant per day, as well as potential actions under ERISA

10 May 2014 Agency FAQ Guidance Q1. What are the consequences to the employer if the employer does not establish a health insurance plan for its own employees, but reimburses those employees for premiums they pay for health insurance (either through a qualified health plan in the Marketplace or outside the Marketplace)? Under IRS Notice , such arrangements are described as employer payment plans. An employer payment plan, as the term is used in this notice, generally does not include an arrangement under which an employee may have an after-tax amount applied toward health coverage or take that amount in cash compensation. As explained in Notice , these employer payment plans are considered to be group health plans subject to the market reforms, including the prohibition on annual limits for essential health benefits and the requirement to provide certain preventive care without cost sharing....

11 What s Left After Notice HRAs that are integrated with group plans. Important clarification provides that integrated plans need not share same plan sponsor, same plan document or governing instruments, or even file single Form Different integration rules apply based on whether the HRA provides reimbursement only of deductibles, copayments and non-ehbs, (in which case the other GHP need not provide MV) or whether the HRA is open-ended for any medical expense (in which case the other GHP must provide MV). Individuals must be offered opportunity to opt out in order to give the opportunity to seek a premium subsidy If plan meets MV and is affordable, they cannot qualify for subsidy

12 What s Left After Notice Defined contribution arrangements that provide benefits exclusively to retirees and/or other former employees (e.g. disabled individuals). Such arrangements would qualify as minimum essential coverage causing covered retirees to avoid the individual excise tax but also disqualifies for the individual premium subsidy. Retirees must be offered opportunity to opt out in order to give the retiree the opportunity to seek a premium subsidy. Arrangements that provide exclusively excepted benefit coverage. Thus, for example, employer pre-tax funding can occur for vision, dental, cancer, hospital indemnity, accident, disability, and other excepted benefit coverage. Note: If arrangement is HRA, only dental/ vision are options After-tax funded individual medical arrangements that satisfy the DOL. voluntary benefit safe harbor.

13 What s Left After Notice Voluntary Plan Safe harbor: No employer contributions Participation is totally voluntary Employer receives no consideration Employer s involvement is limited to collecting premiums and forwarding them to carrier ( aka the endorsement prohibition)

14 What s Left After Notice Prohibited "Private Exchange" where arrangement reimburses premiums for individual medical insurance purchased by active employee Traditional Stand-alone HRA/MERP for active employees Any Excludable Coverage Arrangement Under IRC 106 That Pays for or Reimburses Individual Medical Premiums for Actives (except retiree and integrated with group) Premium Reimbursement Arrangements Direct Employer Payment of Health Coverage Permitted HRAs that are excepted benefits under HIPAA Integrated HRA where integrated with group coverage Retiree only HRA

15 Additional Individual Policy "Exchange" Compliance Issues Pay or Play Requirement Will individual coverage count as coverage through an employer sponsored plan? NO!!!!! Will HRA accrual count toward affordability? If coverage limited to premiums or cost share. Will HRA accrual count towards minimum value? If benefits limited to expenses covered by health plan. State Small Group requirements HIPAA nondiscrimination Smoker rate differential concerns ERISA Compliance COBRA Compliance Employment Nondiscrimination (Including ADEA) Maternity exclusion and rider issues

16 What About Group Coverage Exchanges? Lose Traditional ERISA preemption advantages Avoid state law mandates Avoid state premium tax, commission load, ACA sector tax Is pooling risk advantageous for your company Don t Avoid Traditional compliance requirements Fiduciary oversight responsibility COBRA, ADEA age based limitations Pay/play ERISA 5500, plan asset requirements Notices Medicare Part D, ACA notices Potential Cadillac Tax Impact Tax ostensibly imposed on carrier

17 Additional compliance issues when insured GHP EHBs and State Benefit Mandates State Eligibility Mandates Children up to... Post divorce up to... Waiting periods (CA???) Federal tax issues Exchange Compliance Issues Imputed income related to eligibility extensions

18 Insured Exchange Service Provider Issues Impact of State TPA Laws on Exchange Service Providers Handling premium funds Adjusting claims Impact of Exchange Funding on ERISA Trust Requirement HIPAA Issues and Concerns

19 Certain ACA exempt HRAs can continue Retiree only HIPAA exceptions Exchange Wrap Up Evaluate individual policy arrangements very carefully Some would say stick a fork in it Group policy arrangements will fill a niche for some employers

20 Question & Answer

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