Gonna Fly Now?

GOP still likely a long way away from achieving seven year campaign pledge

On May 4, 2017, Republicans completed the first step in the long journey to repeal and replace portions of the ACA with the passage of the American Health Care Act (AHCA) – temporarily salvaging their mission to overhaul the nation’s health system. Previously stalled due to objections, the bill mustered just enough votes in the House (217-213)* after the addition of amendments that would allow states to waive the ACA’s essential health benefits package and insurance requirements for individuals with pre-existing conditions.

There are a number of provisions contained within the final version of the bill that may be of importance to TASC Providers/Clients. Here’s a brief description…

Age 26: Retains the requirement that family policies cover grown children.

Cadillac Tax: Currently set to become effective in 2020, the effective date of the excise tax on high cost health plans will be pushed back until 2026.

Employer/Individual Mandates: Ends tax penalties on individuals who don’t purchase health insurance and on large employers who don’t offer coverage to their workers; allows insurers to apply a 30% surcharge to customers who’ve been uninsured for more than 60 days.

FSA Cap: The cap on employee contributions to a health FSA imposed under the ACA is eliminated for tax years after December 31, 2016.

HSA Catch-Up Contributions: The AHCA will permit both spouses to make additional catch-up contributions to a single HSA; effective for tax years after December 31, 2017.

HSA Contribution Limit: Under the AHCA, the maximum contribution to an HSA will be equal to the sum of the annual deductible and the out-of-pocket expense maximum for single or family coverage; effective for tax years after December 31, 2017.

HSA Distribution Tax:  The ACA increased the excise tax on distributions not used for qualified medical expenses from 10% to 20%. Under the AHCA, that additional tax will revert back to 10% for distributions made after December 31, 2016.

HSA Establishment:  Under current law/regulations, only medical expenses incurred after the establishment of an HSA are considered eligible for reimbursement. In an effort to addresses the administrative problems connected with this requirement, the AHCA provides that as long as the HSA is established within 60 days of the date of health coverage, any medical expenses will be considered eligible regardless of whether they were incurred prior to the establishment of the HSA. This provision will be effective with respect to coverage after December 31, 2017.

Over-the Counter Medicines:  The ACA provided that the only prescribed drugs/medicines or insulin would be considered qualified medical expenses eligible for reimbursement from a FSA, HRA or HSA.  This provision would be eliminated for amounts paid or expenses incurred after December 31, 2016.

The nonpartisan Congressional Budget Office (CBO) was unable to complete an updated analysis detailing the effects of the latest changes in time for last week’s vote…meaning GOP lawmakers acted on the bill without updated figures on how many people would lose coverage or how much it would cost.

The measure is expected to undergo a major overhaul in the Senate, as that body’s politics are expected to prove far dicier than those in the House (i.e. much smaller and quite diverse Republican majority). Plus, the upper chamber operates on procedural rules that may block numerous parts of the AHCA. Senate Majority Leader Mitch McConnell has established a working group of 13 Senators to develop the Senate’s bill.  The content and timing of the Senate’s version is not clear yet.

It’s important to remember that this legislation is still pending, and has not been signed into law. At this time, the ACA (including all associated regulations and penalties) is still the law of the land; compliance is still required. TASC will continue to update you as this legislation moves through the political process to ensure our Providers/Clients compliance with the law.

* The bill was passed under budget reconciliation authority, so many provisions of the ACA could not be addressed or completely repealed by this bill. 

House passes Small Business Health Fairness Act

Legislation aims to boost health insurance by expanding coverage and lowering costs for working families

In a bid to improve the health insurance purchasing clout of small businesses, House Republicans recently dusted off a piece of legislation more than a decade old as part of their on-going effort to repeal and replace the Affordable Care Act (ACA).*

The bill would allow the establishment of nationwide “association health plans” (AHPs) that could be offered by professional or trade groups, chambers of commerce, etc. Small businesses could buy coverage through these associations, theoretically gaining strength in numbers to enhance their bargaining leverage with insurers…leading to cheaper, better coverage and lower administrative costs for employers that face limited resources.**

Although the idea of association health plans is not a new concept, they often escaped close supervision because neither states nor the federal government had clear regulatory authority over them. So, Congress amended federal law to allow states to regulate these plans. With the passage of the ACA in 2010, the Obama administration required association health plans to meet a new set of small-group standards (i.e. the essential health benefits package).

This proposal has the potential to change/reverse that direction; it would eliminate most state regulation and put oversight – along with certification – in the hands of the Department of Labor. While certain requirements like the prohibition on lifetime and annual coverage limits would still apply, plans could offer stripped-down coverage and would have more latitude in setting premiums. What’s more, they could operate in multiple states and generally avoid state-mandated benefits and other state insurance rules.

H.R. 1101 now heads to the Senate, where its fate is uncertain.

* The earlier bill passed the House in 2003 but didn’t advance.

**Due to their size and economies of scale, large businesses have the ability to negotiate on behalf of employees for high-quality health care at more affordable costs. By offering a qualified group health plan under ERISA, these large employers are also exempt from a myriad of state rules and regulations.

Repeal & Replace: ACA remains law of the land

Floor loss may go a long way in dictating the GOP’s ambitious Capitol Hill agenda

As you probably know, Congress decided not to proceed with a planned vote on the American Health Care Act (AHCA) last week, which would have repealed and replaced important elements of the Affordable Care Act (ACA).

The proposed legislation would have expanded HSA eligibility, increased HSA contribution amounts, and reversed some of the ACA provisions that were detrimental to consumer-directed health plans…such as the cap on employee contributions to FSAs and the prohibition on reimbursements for over-the-counter medications. The bill also delayed the effective date of the excise tax on high-cost health plans (commonly referred to as the “Cadillac Tax”).

Now what?

Plenty could still change regarding the ACA; legislative action was only part of the GOP’s plan. Another component – making changes to regulations and how the ACA is administered – doesn’t require Congress’ help.

For example, the Trump administration can’t do away with the mandate requiring individuals to have health insurance on its own, but it can greatly weaken it through the IRS. Both the individual and employer mandates are about tax incentives (i.e. get insurance or pay a fine), so the executive branch could simply decide not to enforce that penalty.* In fact, the President has already signed an executive order directing government agencies to begin unraveling portions of the healthcare law. The order encouraged department heads to “waive, defer, grant exemptions from or delay the implementation” of provisions aimed at imposing fiscal burdens on states, companies or individuals.

A looming push to overhaul the U.S. tax code could also include the repeal of ACA levies left intact by the collapse of the Republican measure. Tax Reform will be an important priority for those in the employee benefits space, as discussions are once again likely to include many of the same elements contained in the AHCA (see above)…along with potential changes to dependent care, transit and parking, or even the exclusion of employer provided health insurance.

Regardless of your political views, portions of the AHCA highlighted/recognized the importance of consumer-directed health accounts and TASC will continue to advocate for policies which support and expand these plans.

To be continued…

* The IRS has said it will not reject “silent returns” — tax returns on which a person declines to say whether they have insurance.

ALERT – IRS extends the timeframe for QSEHRA employee notice

Notice 2017-20 provides transition relief for new Small Business HRAs

 With the understanding that some employers may find it difficult to comply with the notice requirement absent additional guidance, the agency has decided to provide businesses with additional time to furnish this initial document to eligible employees. Therefore, those offering a Qualified Small Employer HRA (QSEHRA) are not required to distribute such communication/notification until after further guidance has been issued by Treasury.

Note: Employers that supply the QSEHRA notice to their employees in the interim, may rely upon a reasonable good faith interpretation of the statute without penalty.

See https://www.irs.gov/pub/irs-drop/n-17-20.pdf

Cures Act brings relief to employers without Group insurance

Small Business HRA provision signed into law

ISSUE

IRS Notice 2013-54 issued in September 2013 limited the ability of small business owners to utilize standalone HRAs. Prior to this guidance, many had used HRAs to reimburse their employees for certain medical expenses using pre-tax dollars. As a result of IRS Notice 2013-54, a company with more than one eligible employee could no longer receive a tax advantage through an HRA unless it sponsored Group insurance – an expense that’s beyond many small companies’ reach – or offered a Limited Purpose HRA. This new legislation overturns a portion of the guidance issued in IRS Notice 2013-54 and once again allows small employers to utilize HRAs as a pre-tax health & welfare benefit.

IMPACT / MOVING FORWARD

Beginning January 1, 2017, qualified businesses can now establish a Small Business HRA (SBHRA) to use tax-advantaged funds to reimburse employees for individual health insurance premiums and family out-of-pocket medical expenses. This change does not affect one-employee, integrated, or Limited Purpose HRA Plans that are already compliant with federal law.

Highlights include:

  • Employers must have fewer than 50 FTEs[i] and cannot offer a group health plan.
  • SBHRAs may reimburse an employee for qualified out-of-pocket medical expenses under §213(d) of the Code and individual health insurance premiums – including for plans purchased on the public ACA Marketplaces.
  • Employer annual contributions will be capped at $4,950 for a single employee and $10,000 for an employee with a family. These numbers will be indexed annually for inflation and are to be prorated for mid-year enrollment.
  • Participation in a SBHRA does not necessarily disqualify participants from receiving Marketplace subsidies (i.e. premium tax credits), but monthly SBHRA reimbursements will be included in income calculations for determining eligibility for any subsidy.
  • Generally, employers must make the same contributions to all eligible employees; however, the benefit may vary based on the cost of health insurance tied to the employee’s age and/or number of family members covered.[ii]
  • Employees must have minimum essential coverage in order to participate; if not, the reimbursement amount will be reflected as part of the employee’s gross income for tax purposes.[iii]
  • SBHRAs are solely funded by an eligible employer; they are employer-sponsored and reimbursed benefits. The employee is not allowed to contribute pre-tax dollars via salary reduction.
  • Unused elected amounts can be carried over to reimburse medical expenses in future years OR can be offered as a use it or lose it feature to limit the employer’s liability to the current Plan Year.
  • Employers must provide notice of the benefit to their employees at least 90 days before the start of each plan year.[iv]
  • The employer is required to report the SBHRA benefit on each employee’s Form W-2[v]
  • Group health premiums (i.e. for coverage offered by a spouse’s employer) cannot be reimbursed.
  • Not considered a group health plan for purposes of COBRA, ERISA, HIPAA, etc.

SBHRAs provide a tremendous opportunity to those small employers who do not, or are no longer able to, offer Group health but want to assist their employees with ever rising healthcare costs. As with any new legislation impacting our business, additional guidance is expected to be issued that may affect the scope of our service offering. Furthermore, any efforts by President-elect Trump and the new GOP Congress to repeal and replace the ACA may very well impact these new rules…stay tuned to TASC’s Capital Connection for more information.

[i] This count is based on the current ACA definition, meaning that the Employer was not considered an “Applicable Large Employer” during the previous year.

[ii] Thus, an employer could provide a greater benefit to an employee who is older or covers multiple family members.

[iii] These payments/reimbursements nevertheless continue to be excluded from wages for employment purposes.

[iv] “Transitional relief” is provided for the first year (2017)…the notice must delivered within 90 days after the date of the enactment of this Act (i.e. on or before March 13, 2017).

[v] Tentatively set to take effect in 2018 (for the 2017 tax year). Currently, this ACA provision only applies to employers with 250+ employees; small employers (i.e. those eligible to offer a SBHRA) are temporarily exempt.

SBHRA language headed to White House as Congress approves Cures Act

Stand-alone” HRAs one step closer to compliance

UPDATE: President Obama is expected to sign the measure into law soon after it reaches his desk, meaning a solution for beleaguered small businesses is on the way. Once enacted, a Small Business HRA will allow qualified entities to use tax-advantaged funds to reimburse employees for individual health insurance premiums and other out-of-pocket medical expenses. (Note: This change does not affect integrated or one-employee HRA plans that are already compliant with federal law.)

This legislation provides a tremendous opportunity for those small employers who do not offer group health but want to assist their employees with ever rising health care costs. Be on the look-out for additional communications from TASC (including here at Capital Connection) in the coming weeks to ensure peace of mind for our Providers, Clients and Participants. We’ve got you covered!

For additional details on this topic, please see our previous posts:

Lawmakers reach tentative deal to expand small biz health options (Nov. 28, 2016) https://tasccapitalconnection.com/2016/11/28/lawmakers-reach-tentative-deal-to-expand-small-biz-health-options/

Stand-alone HRAs making a comeback? (June 30, 2016) https://tasccapitalconnection.com/2016/06/30/stand-alone-hras-making-a-comeback/

Lawmakers reach tentative deal to expand small biz health options

Over the weekend, Congress introduced an end of the year health package containing mental health initiatives, Medicare provisions, medical research funding…AND one of TASC’s top priorities – the Small Business Healthcare Relief Act (SBHRA). If enacted, the SBHRA would allow small businesses to once again use an HRA to assist employees with health insurance premiums and out-of-pocket medical expenses.

Brief summary:

  • Has an effective date of January 1, 2017.
  • Available to small employers (with fewer than 50 full-time employees) who do not offer a group health plan.
  • Participants must have minimum essential coverage in order to receive the benefit.
  • Employer annual contributions would be capped at $4,950 (employee) / $10,000 (family).
  • Generally, employers must make the same contributions to all eligible employees; amounts may vary based on family status (i.e. single vs family).
  • Would not disqualify participants from premium tax credits (i.e. marketplace subsidies); however, monthly HRA reimbursements will be included in income calculations for determining eligibility.

This 900 page, $6.3 billion negotiated deal is expected to be voted on by the House as early as Wednesday. The Senate is then expected to follow suit, taking up the measure sometime before final adjournment in December.

 

ALERT: IRS delays some ACA reporting

Following consultation with stakeholders, the agency has determined that a substantial number of employers, insurers, and other coverage providers may need additional time to prepare 2016 Forms 1095-B and 1095-C. As a result, the deadline for furnishing this information (to individuals) has been extended from January 31, 2017, to March 2, 2017.

Because some individuals may not receive a Form 1095-B or Form 1095-C by the time they are ready to file their 2016 tax return, taxpayers may rely on other information received from their employer or coverage provider for the purposes of determining eligibility for premium tax credits and confirming that they had minimum essential coverage. Taxpayers do not need to wait to receive Forms 1095-B and 1095-C before filing their returns.

Note: This guidance does not extend the timeframe for submitting 2016 Forms 1094-B, 1095-B, 1094-C, or 1095-C to the IRS…those dates remain the same (February 28, 2017 or March 31, 2017, if filing electronically.)

Notice 2016-70: https://www.irs.gov/pub/irs-drop/n-16-70.pdf

Form 5500 Regs. released

Agency also publishes changes to annual reporting under ERISA

Last week, the Department of Labor (DOL) issued a proposal to modernize and improve the Form 5500 Annual Return / Report filed by private-sector employee benefit plans in order to keep pace with market developments and changes to the legal requirements governing employee benefit plans.

Under Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code, pension and other employee benefit plans are generally required to file annual documentation concerning, among other things, the financial condition and operations of the plan…and the 5500 is the primary source of that information. In addition to serving as an essential compliance and research tool for federal agencies, Congress and the private sector also rely on the 5500 as an important source of information for assessing employee benefits, taxes, economic trends and policies.

Most notably, the revisions appear to require reporting by ALL group health plans covered by Title I of ERISA. This includes eliminating the current exemption from Form 5500 reporting for small insured and self-insured welfare benefit plans.

Implementation of the new forms could begin as early as the 2019 Plan Year.

The Governmental Affairs team continues to review the language of this latest guidance in order to determine if any additional changes have been made, and whether or not TASC will submit public comments by the Oct. 4 deadline. We will communicate further on this topic in the future.