FSA, HRA & HSA vs. COBRA & HIPAA Basics ECFC 22 nd Annual Administrators Symposium

Transcription

1 FSA, HRA & HSA vs. COBRA & HIPAA Basics ECFC 22 nd Annual Administrators Symposium Session: Thursday, July 30, 2009, 2:30 pm Connie Gilchrest, CFCI Research & Compliance Specialist Infinisource, Inc. Rules of the game to qualify for COBRA What is considered to be a qualifying event Timeframes for each qualifying event Open Enrollment issues that arise Qualified Beneficiary vs Covered Individual Rules of the game for a Health Care FSA Three step test to determine if the FSA is exempt from HIPAA Three step test to determine if an FSA is to be offered under COBRA and the time frame Calculating COBRA premiums Uniform Coverage Rule Grace Period Extension Run out Period The HRA Commandments HRAs can only have employer funds in the accounts HRAs can not be funded through a Cafeteria Plan Carry over of funds, the use or lose rule does not apply COBRA needs to be offered to all qualified beneficiaries for any qualifying event for the full COBRA time frame Bundled/Unbundled Plan for COBRA Calculating COBRA premiums Open Enrollment issues Subject to HIPAA The Bare Bones for an HSA Application of ERISA to HSAs (Safe Harbor Rules to avoid COBRA) The High Deductible Health Plan would need to be offered under COBRA, however if Safe Harbor Test is passed the HSA would be exempt from COBRA and HIPAA Session: Thursday, July 30, 2009, 2:30 pm 1

2 Welcome Connie Gilchrest Constance Gilchrest is the research and compliance specialist for Infinisource, Inc., a provider of COBRA, flexible benefits and other administrative services to more than 15,000 employers nationwide. She has more than 14 years of experience with COBRA and is certified for Flexible Compensation Instruction (CFCI) through the Employers Council of Flexible Compensation. Intent of COBRA COST SHIFTING TO Federal government Expense Private employers Compliance with COBRA Required Employers with 20 or more employees Not Required Church plans [Under IRC 414 (e)] Federal government 1

3 Qualifying Event Qualified Beneficiaries Covered Employee Covered Spouse Covered Dependent Covered Dependent Child born to, or adopted by, covered employee Qualifying Event 2

4 Qualifying Event Bankruptcy of the Employer When the Qualifying Event is bankruptcy, causing a substantial elimination of coverage under the plan, the retired employee, spouse or dependent child must be offered COBRA. Responsibilities 3

5 COBRA Coverage COBRA Coverage Core Core Non- Core Non- Core Separate MEDICAL Coverage Bundled Coverage Options QB Can Elect Separate DENTAL Coverage Separate VISION Coverage Medical only Medical & dental Medical & vision Medical, dental & vision Dental only Dental & vision Vision only Qualified Beneficiaries can elect any of the above combinations FSA and COBRA 4

6 HRA and COBRA The plan must be funded solely by the employer. An HRA is a group health plan and is always subject to COBRA for the full time frame for any qualifying event. HSA Guidance Field Assistance Bulletin (FAB) : Clarifies how to avoid ERISA/COBRA application to HSAs Builds on prior guidance in FAB Employers may not: Receive a discount on another product offered by HSA provider in exchange for HSA participation Fail to promptly transfer participants HSA contributions deducted from paychecks Provide HSA line of credit: participants borrow from or pledge HSA assets to receive a benefit Endorse HSA provider or program HSA Guidance (cont.) Employers may: Open an HSA for employee and deposit employer funds Limit HSA providers who can market HSAs in workplace Provide general information on using an HSA with an HDHP Select an HSA provider that mirrors 401(k) investment options Reap FICA/FUTA savings for Section 125 plan contributions 5

7 HSA Guidance (cont.) Employers may: Pay HSA administrative fees Offer HSA product that employer also offers to public Permit HSA provider to offer incentive to individuals who establish an HSA by depositing cash directly into HSAs Permit HSA funds to reimburse separate line of credit Election Notice Qualifying Event Election Notice To inform Qualified Beneficiaries of their right to elect COBRA Sent with PROPER language, g generally within 44 days (er/pa) Sent by first class mail to employee and spouse (documentation of mailing recommended) Time Frames 6

8 45-day Retroactive Premium Payment Loss of coverage date Date of election All retroactive premiums due March 31 May 29 July 13 Incapacitation Extends the affected period of time until no longer incapacitated or until a legal guardian or executor is appointed Supporting case law: Branch v. G. Bernd Co. Sirkin v. Phillip s Colleges Meadows v. Cagle s, Inc. Lincoln General Hospital v. Blue Cross of Nebraska Actual Event Date Qualified Beneficiaries entitled to 18 months of COBRA coverage from the date the employee quits January 15, 2009 Employee quits Qualifying Event date January 31, 2009 Employee loses coverage as a result of Qualifying Event July 15, 2010 COBRA expires 7

9 Loss of Coverage Date Qualified Beneficiaries entitled to 18 months of COBRA coverage from the loss of coverage date January 15, 2009 Employee quits January 31, 2009 Qualifying Event date and loss of coverage date July 31, 2010 COBRA expires COBRA Terminates At the end of the maximum coverage period 18 months* for 36 months for *29 months with a Social Security disability determination COBRA Terminates 8

10 COBRA Terminates Geissal v. Moore Medical Corp At Issue: Ruling: Status: Supreme Court: Dual coverage should an individual having dual coverage prior to a qualifying event be allowed COBRA coverage after qualifying event? Opposing precedents District i t Court and Appellate Court allowed retroactive ti termination of Geissal s coverage Bonnie Geissal, on behalf of deceased husband, successfully petitioned the U.S. Supreme Court Ruling in favor of Geissal, allowing for other coverage or Medicare (prior to date of election) and COBRA. The Final Regulations reflect Supreme Court Decision. COBRA Terminates 9

11 COBRA Terminates COBRA Terminates COBRA Terminates Failure to make TIMELY payment* *Insignificant premium payment 10

12 Premiums: Underpayments What is an insignificant underpayment? Lesser of $50 or 10% of required amount due Choices if underpayment is insignificant: Accept as payment in full Send notice with 30-day ygrace period Choice if underpayment is significant: Send no notice, terminate coverage, refund payment Applies to monthly payments and initial payment Rolling shortfalls are issue Premiums *If disabled Qualified Beneficiary is part of the extension Premiums 11

13 Premiums: Key Calculation Rules Applicable Premium = cost of plan coverage Includes cost of COBRA QBs and active participants For fully insured plans, applicable premium = plan premium Cannot differentiate applicable premium based on different groups/divisions (Draper case) Can differentiate applicable premium based on: Coverage (e.g., employee only, employee-spouse) Region Differing benefit options Premiums: Key Calculation Rules COBRA premium = 102% of applicable premium (150% during disability period) Multi-tiered tiered premiums (IRS Rev. Ruling 96-8) COBRA Subsidy Subsidy for assistance eligible individuals (AEIs) 65% of premium starting first coverage period after February 17, 2009 AEI pays only 35% of 102% Involuntary termination of employment September 1, 2008, through December 31,

14 COBRA Subsidy Maximum of nine months in duration Coverage not retroactive to termination date Applies only to Qualified Beneficiaries One exception, FSA is exempt Premiums: Calculation Issues (FSAs) Applicable premium is cost to plan for similarly situated beneficiaries Cost = claims paid + administrative expenses Variables in calculation: Elections (amount elected by participants) Employer contributions, if any Forfeitures (amount lost by participants, use-or-lose-rule) Experience losses (amount lost by plan due to overspent accounts upon termination of participation) Administrative costs Rule of thumb: COBRA premium = 102% of election Premiums: Calculation Issues (HRAs) Applicable premium must be same even if balances vary Two approved methods under the Code: Reasonable estimate of cost, based on actuarial factors Anticipated claims exposure Estimated risk Estimated employee population Estimated administrative costs Cost to similarly situated beneficiaries, including COBRA QBs, for same period in prior determination period, adjusted by implicit price deflator (if no significant change in coverage) Major sources of law: IRC 4980B(f)(4) IRS Notice

15 HIPAA HIPAA Challenges HIPAA Overview: Background Key dates: Law enacted on August 21, 1996 Law in effect since July 1, 1997 Portability regulations in effect since July 1, 2005 HIPAA s four primary purposes Improve portability and continuity it of insurance coverage (i.e., eliminate job lock ) Combat waste, fraud and abuse in health insurance Improve access to long-term care services Simplify administration Today s focus is on first purpose HIPAA Overview: Portability Who must comply? Employers with 2+ employees on group health plan Who is exempt? Non-federal governmental self-funded plans may opt out Example: cities, states, counties, municipalities and public schools Federal government 14

16 Pre-existing Condition Exclusions HIPAA s limitations: Medical condition six months prior to enrollment 12-month limit or 18 months for late enrollee Reduced by continuous prior creditable coverage with not more than a 63-day ygap Can prove prior creditable coverage other than by HIPAA Certificate Pre-existing Condition Exclusions (cont.) 63-day gap in coverage Does not need to be 63 days in a row Waiting periods do not count toward gap Gap ceases once covered under the plan Lack of coverage during FMLA is not counted toward the gap Creditable Coverage 15

17 Creditable Coverage Creditable coverage = prior coverage Covered under another group health plan Individual health policy COBRA US governmental plans Examples: Medicaid, Medicare, TRICARE, Indian Health Plan, SCHIP, Peace Corps Foreign country health plan Political subdivision health plan (U.S. territories) Special Enrollment Special Enrollment Eligible groups Individuals who lose other group coverage, including COBRA exhaustion* New dependents through marriage, birth, adoption or placement for adoption Special Enrollee is not considered late enrollee Special Enrollment rights description must be provided to every employee *Excludes loss of coverage for failing to pay premiums 16

18 Special Enrollment (cont.) Effective dates Marriage: no later than first day of next month Birth/adoption: birth date/adoption date Loss of coverage includes Employer s termination of premium contributions Moving out of fhmo service area Exceeding plan s lifetime maximum Exhaustion of COBRA Loss of coverage excludes: Participant s failure to pay premiums Termination for cause (e.g., fraudulent claims) Special Enrollment (cont.) When adding spouse/dependent, six groups may enroll: Current employee Current employee and spouse New dependent of a participant only Current employee and new dependent Current spouse and new dependent Current employee, spouse and new dependent Special Enrollment (cont.) Special Enrollment period is 30 days Proposed rules: Period begins on loss of coverage date, if HIPAA certificate is provided by then If not, period begins first day after the earlier of: Date certificate is provided, or 44 days after coverage ceases 17

19 Special Enrollment (cont.) Children s Health Insurance Program Reauthorization Act of 2009 (CHIPRA) Two new Special Enrollment Rights Termination of Medicaid or CHIP coverage Eligibility for employment assistance under Medicaid or CHIP 60-day enrollment period Questions 18