Doctor’s note

Pending legislation would do away with “Letter of Medical Necessity” requirement

This week, the House of Representatives passed the Restoring Access to Medication Act (H.R. 1270), which would overturn a provision* of the ACA and restore the ability of plan participants to use FSAs, HRAs and HSAs funds to purchase over-the-counter drugs and medicines. The bill will now head to the Senate for further consideration.

The Administration says it strongly opposes the repeal effort because it “would create new and unnecessary tax breaks that disproportionately benefit high-income people, increase taxes for low and middle income people, and do nothing to improve the quality of or address the underlying cost of health care.” Thus signaling that if the President were presented with H.R. 1270, he would veto the measure.

TASC believes the idea is based on common sense principles and puts healthcare cost management back where it belongs – in the hands of the people. The Governmental Affairs team will continue to follow this topic and provide our Clients/Providers with status updates throughout the year.

*Section 9003

Stand-alone HRAs making a comeback?

Pending bill responds to agency action

Since its introduction, TASC has been actively monitoring a piece of legislation known as the Small Business Healthcare Relief Act with great interest. Last week the House of Representatives passed H.R. 5447 on a voice vote.

Sponsored by Rep. Boustany (R-LA) and Rep. Thompson (D-CA), this measure would greatly improve small business access to competitive health benefits by restoring the use of stand-alone HRAs that could be used to reimburse employees for qualified medical expenses and/or individual health insurance premiums. It is specifically aimed at those entities not subject to the ACA’s Employer Mandate (i.e. those with fewer than 50 full-time employees) and who do not offer a group health plan to their employees. To qualify, the maximum benefit provided under the plan would be capped at $5,130…or $10,260 if the HRA includes reimbursements for family members.* Employees covered under these arrangements would be prohibited from receiving a subsidies for health insurance purchased under the public marketplaces.**

For eligible employers, this bill would overturn guidance issued by the Internal Revenue Service and the Department of Labor that stated that these arrangements violated the ACA’s insurance market reforms.*** As a result of that previous interpretation, employers who continue to offer stand-alone HRAs today face the potential of a $100 per day, per employee penalty ($36,500 per year).

While it’s a good sign that this bi-partisan legislation passed the House with very little opposition, our work is not done. The measure now goes to the Senate where a companion bill – S. 3060 – has been introduced by Sen. Grassley (R-IA) and Sen. Heitkamp (D-ND).   Although similar legislation has received opposition in the past from members of the Democratic leadership in that body, we’re hopeful that it will be taken up this fall/winter as part of the year-end agenda.

This a common-sense solution ensuring that small businesses aren’t penalized for trying to do the right thing. HRAs are an affordable solution for both employees and employers to combat the escalating cost of health insurance. Since many small employers do not have human resource departments or benefits specialists, this change would provide them with the necessary flexibility to help their employees pay for health care.

TASC remains a strong supporter of both H.R. 5447 & S. 3060, and we will continue to advocate for their passage throughout the remainder of this Congressional session by engaging with Senators and their staff.

* Indexed for inflation

** H.R. 5447 also establishes a number of notice/reporting requirements and requires that employers report contributions on their employees’ W-2 forms.

*** Notice 2013-54 (dated Sept. 13, 2013)

Obama’s Budget Proposal Tweaks Cadillac Tax

Administration’s outline also has a potential impact on Flex Plans

Last week, the Obama Administration released its (final) budget proposal for the 2017 fiscal year. And although presidential budgets are usually viewed as highly partisan documents, there are a few noteworthy provisions in this particular budget proposal that will be of interest to TASC Providers / Clients.

Cadillac Tax Changes                                                                                                   As ACA supporters attempt to ease the opposition toward this controversial policy item, which is unpopular with both political parties,* the administration is backing what they’ve dubbed “sensible improvements” in an effort to decrease the likelihood that employer plans will trigger the excise tax.

Health plan costs by geographic regions                                                                   Under the proposal, a health plan would be considered high cost and subject to the tax if it exceeded the greater of the current law threshold ($10,200 for individual coverage and $27,500 for family coverage) or a new “gold plan average premium” which would be determined/calculated and published for each state.** A family multiplier would be applied to this amount to create the family threshold. This reform is intended to protect employers from paying the tax only because they are in high-cost locales and ensure that the penalty remains targeted at the appropriate population (i.e. those with overly generous plans).

GAO study                                                                                                                     The President’s budget also requires that the Government Accountability Office (GAO) study the potential effects of the excise tax on entities with unusually sick employees…presumably leading to legislative measures if the study finds that such firms are adversely impacted.

FSA salary reduction                                                                                            Currently, each employee’s actual FSA salary reduction contribution is counted in determining whether the cost of coverage for that employee exceeds the limit and is subject to the excise tax. But under the new recommendations, employers would determine the average amount of FSA salary reduction contributions for similarly situated employees and use that average amount in determining the cost of coverage.

Elimination of Dependent Care FSAs                                                                          As part of the administration’s attempt to increase the child and dependent care tax credit and create a larger credit for taxpayers with children under the age of 5, dependent care FSAs would no longer be permitted.  The executive branch believes that the new credits would provide better assistance to families with children then is currently available through a dependent care FSA.

Of course, the budget request of a president in his final year in office – particularly one facing a hostile Congress – is unlikely to lead to enacted legislation. That said, this proposal at least offers an insight into some of the interesting options that the next president might pursue, depending on his/her political leanings.

Overall, these provisions simply fall short of the mark and do not address TASC’s core concerns; in fact, they seem to be just as – if not more – administratively complex than the rule it attempts to replace. While we appreciate recognition of the budget’s implicit acknowledgment that the excise tax is imposed inequitably on those who live in high-cost geographic areas, this adjustment completely disregards the other uncontrollable factors that are used to calculate the tax, as well as the detrimental effects the tax could have on employer-sponsored health care plans.

The Cadillac Tax does nothing to help reduce the cost of health care or improve its quality. Instead, it places unparalleled financial challenges on employers, siphoning off resources that otherwise could sustain or improve benefits for workers and their families. Therefore, TASC continues to support full repeal of the tax or at the very least a carve-out exempting contributions to FSAs, HRAs and HSAs from the tax’s calculation. 

* Clear bipartisan majorities of both the House and Senate have voted to repeal the tax, and ALL presidential hopefuls – including both Democratic candidates – have also publicly called for repeal.

** A “gold” level plan is a tier of coverage found on a state-based or federally-facilitated public marketplace; would be calculated based on a weighted average of the lowest cost (self-only) silver level plans, multiplied (by 8/7) to simulate the cost of an actuarially equivalent gold plan.

IRS Extends ACA Reporting Deadlines

As a third-party vendor for Affordable Care Act (ACA) Employer Reporting, TASC stays on top of developments that may affect our Clients. On December 28, 2015, the Internal Revenue Service (IRS) released a Notice that may affect compliance with the ACA Employer Reporting requirements. Please review the following information to determine the best way to proceed.

IRS Notice 2016-4 extends the due dates for furnishing and filing the new ACA reporting forms for the 2015 calendar year. The new extended deadlines are as follows:

  • For the distribution of Forms 1095-B and 1095-C to individuals, the deadline is now March 31, 2016 (previously February 1).
  • For the filing of Forms 1094-B / 1095-B and 1094-C / 1095-C with the IRS, the deadline is now May 31, 2016 (previously February 29)…and June 30, 2016 if filed electronically. (previously March 31).

IRS Transitional Relief                                                                                                     For 2015 only, individuals who rely upon this information from their coverage providers or employers – but do not receive their Form 1095-B or Form 1095-C prior to filing their income tax returns – need not amend their returns once they finally obtain the appropriate documentation. Individuals also need not send this information to the IRS, but should keep it with their tax records.

What Does This Mean?                                                                                             TASC recommends that Clients furnish the necessary data to complete the Employee Statements as soon as possible. Despite the due date extension, Clients are encouraged to provide the applicable Forms to individuals on or before the original due dates. Completing these items now will allow employees who rely on the Employee Statements to complete their tax returns on time…and with confidence.

Therefore, in order for TASC to file by the initial deadlines, Clients have until January 11, 2016 to submit the required data. Note: If the original deadline is missed, TASC will furnish Clients with instructions on how to file taxes (without Form 1095) that can be supplied to employees.

Thank you for trusting TASC for your compliance needs!

IRS Guidance: Notice 2015-87

Late yesterday, the IRS provided further guidance on the application of the market reforms that apply to group health plans (under the ACA) to various types of employer health care arrangements. Among other things, the notice covers (1) HRAs – including HRAs integrated with a group health plan, and similar employer-funded health care arrangements – and (2) group health plans under which an employer reimburses an employee for some or all of the premium expenses incurred for an individual health insurance policy, or an arrangement under which the employer uses its funds to directly pay the premium for an individual health insurance policy covering the employee.  This notice supplements the guidance provided in Notice 2013-54; FAQs Part XXII; Notice 2015-17; and the final regulations published on November 18, 2015.

TASC Governmental Affairs is currently in the process of reviewing this latest release in order to assess the effect–if any–on our NESP/NEFSA Plan. We will communicate further on this topic in the near future.

ALERT – Cadillac Tax & Transit Parity

Early this morning, Congressional negotiators reached an agreement on legislation to fund the federal government through September 2016 and to extend certain expiring tax breaks. The package deal contains at least two provisions that will have a positive impact on TASC’s Clients/Participants…first and foremost the ACA’s Cadillac Tax* has been delayed for two years (from 2018 to 2020), and secondly, parity has been permanently restored between qualified parking and transit benefits, meaning that the monthly limitations will now reflect equal dollar amounts.

The deal – which has bipartisan support – is expected to pass both the House and the Senate prior to December 22, when Congress will adjourn for the year.

We are continuing to review the language to see if any additional changes have been made to other TASC interests, but wanted to make you aware of these important items as soon as possible.

* The legislation also makes the excise tax deductible by businesses and calls for a study to determine suitable benchmarks for the age and gender adjustment that could result in an increase in the base thresholds.

 

 

 

 

If at first you don’t succeed…try, try again (AND AGAIN)

Congressional Republicans have voted to repeal the health care law 56 times

On Thursday, the Senate passed legislation repealing the core pillars of the Affordable Care Act (ACA), marking the first time such a bill has reached the president’s desk.  The measure attempts to gut the law by eliminating the individual and employer mandates, the medical device tax and the so-called “Cadillac” tax.  The Senate version also includes a delay of Medicaid expansion and exchange subsidies until 2018, among other things.

Republicans wrapped the measure in a special budgetary, filibuster-proof process (known as reconciliation) that required just 51 votes for Senate passage, circumventing the 60-vote hurdle usually required for controversial bills.  Ironically, Democrats used the same obscure budget procedure to pass the ACA back in 2009.

Not surprisingly, the White House has already promised a veto, saying the bill would “take away critical benefits and health care coverage” from families.

A significant — if only symbolic — victory

During the vigorous debate on the reconciliation bill, Senators adopted an amendment sponsored by Sen. Dean Heller (R-NV) to repeal the so-called “Cadillac” tax on high cost health plans by a vote of 90-10…providing momentum to the campaign being championed by companies across the nation in an effort to protect middle class workers who could see their benefit accounts scaled back or eliminated.

Created by the ACA, the Cadillac Tax is intended to discourage employers from offering health insurance plans with excessively rich benefits. Upon implementation in 2018, it will be equal to 40 percent of the value of any coverage in excess of $10,200 for an individual and $27,500 for a family. To determine whether these cost thresholds are exceeded, an overly broad net has been cast – one that includes many employer sponsored and consumer directed arrangements.  In particular, the statute is being interpreted such that employer and employee contributions to FSAs, employer contributions to HRAs, and employer and employee pre-tax contributions to HSAs are subject to the calculation. .

As the largest privately-held third party administrator in the United States, TASC – along with the Employers Council on Flexible Compensation (ECFC) – is leading the charge to lobby Congress in hopes of repealing the excise tax.  And while continuing to advocate for a full repeal, we recognize that achieving that goal by years end is unlikely given the various political realities, funding issues and time constraints.  Therefore, TASC believes Congress should enact legislation that would carve-out employee contributions to FSAs and HSAs, thus ensuring that they are not counted toward the calculation of whether an employer maintains high cost health coverage.

The simple reality is that these contributions are the employees’ own money and including them will harm the very people the ACA was trying to help.  Exempting employee contributions from the tax is an immediate step that will go a long way towards ensuring that American families will continue to be able to access important health benefits.

TASC will continue to keep you informed on this very important issue.

President Signs PACE ACT

A win-win for businesses and bipartisanship as companies faced a premium increase of 18%

This week, President Obama signed HR 1624 – the Protecting Affordable Coverage for Employees (PACE) Act – that amends the Affordable Care Act (ACA) definition of a “small employer” for the purpose of purchasing health insurance coverage.  The PACE Act repeals the mandatory expansion of the small group market to employers with up to 100 employees and reverts back to the prior definition of up to 50 employees[i]…although states still maintain the option to redefine the small market in order to cover businesses with up to 100 employees if they feel the conditions in their state necessitate the change.

This change is important; small employers are treated very differently than large insurers for purposes of insurance regulation under the ACA.  Insurers covering small employers must, for example, cover the ten essential health benefits and can only offer plans that fit into the actuarial value levels (platinum, gold, silver, and bronze) defined by the ACA. Large group plans are not bound by any of these requirements.

Most states have long defined a small group as consisting of 50 or fewer employees, which is how the term was originally defined by the Health Insurance Portability and Accountability Act (HIPAA).  The drafters of the ACA had hoped that extending the definition to encompass groups as large as 100 would both reduce premiums for the under 50 groups and extend the small group protections of the ACA to a larger population.  However, as 2016 approaches, it’s become increasingly clear that the change might do more harm than good.  The definition change would have also subjected mid-size employers to both the employer mandate and the strict small group insurance components, a result that could appear unfair.

A recent analysis[ii] by the Congressional Budget Office (CBO) and the Joint Committee on Taxation estimated that most states would not expand the definition of small employers.  As a result, they project that federal revenues will increase $400 million over the next decade.  Thus meaning it’s one of the few potential amendments to the ACA that does not increase the deficit and require a “pay-for.”

There will be some tangles to work out for sure given the fact that the change occurred so late in 2015 (i.e. insurers have presumably filed their 2016 rates and likely cannot refile in most states), but given the rancor that surrounds anything related to the ACA in a sharply partisan and largely nonfunctional Congress, this is a remarkable occurrence worthy of note.  With a total of 235 cosponsors, the measure represents an uncommon instance in which both parties rallied behind an effort to improve flexibility for states, avoid coverage disruptions, and avoid premium increases for employees in mid-size firms.

[i] Firms with 51-100 employees would not be able to offer coverage through a Small Business Health Options Program (SHOP) exchange.

[ii] “Estimate of H.R. 1624, the Protecting Affordable Coverage for Employees Act, as introduced,” September 2015

 

Breaking News: Federal Subsidies Upheld

SCOTUS rules 6-3 in favor of Burwell

In the biggest legal threat to the Affordable Care Act (ACA) since it was ruled constitutional three years ago, the Supreme Court upheld a key provision of the law on Thursday by affirming that consumers in all states—not just those that established their own marketplaces—are eligible to receive (and can continue to receive) insurance subsidies that allow them to purchase healthcare plans. The King v. Burwell ruling marks the second major win for the administration before Court.

The plaintiffs in the case had argued that the ACA subsidies were only available to those who enrolled through a marketplace “established by the state,” which by their interpretation clearly excluded those on the federal platform (HealthCare.gov). According to the Dept. of Health & Human Services, an estimated 6.4 million Americans currently receive subsidies in the 34 states that don’t have their own state-based marketplaces.

In the 6-3 decision, authored by Chief Justice John Roberts, a majority of the justices opined that a ruling killing off the subsidies would have set the state markets into a death spiral, and that this could not have been Congress’ intent…

“The combination of no tax credits and an ineffective coverage requirement could well push a State’s individual insurance market into a death spiral. It is implausible that Congress meant the Act to operate in this manner. The argument that the phrase ‘established by the State’ would be superfluous if Congress meant to extend tax credits to both State and Federal Marketplaces is unpersuasive. Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them. If at all possible, we must interpret the Act in a way that is consistent with the former, and avoids the latter.”

The court’s four liberal justices (Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor and Elena Kagen) joined the Roberts opinion, as did Justice Anthony Kennedy, who is often a swing vote on the court; conservative Justices Antonin Scalia, Clarence Thomas and Samuel Alito dissented.

Regardless of whether you agree with the Court or not, the public marketplaces make health insurance more accessible, more affordable and more attainable for many Americans. That being said, many employers continue to struggle with the health insurance options available to them, such as high deductible health plans or plans that increase the amount of cost sharing borne by employees. This trend is echoed on both the state-based and federally-facilitated marketplaces, where much of the coverage available has/does just that. Consequently, the importance of account-based, consumer-directed employee benefit arrangements—like those offered by TASC—is heightened in this ACA environment as employers take action to reduce the costs of their health coverage.

TASC believes that employee benefit plans (i.e. FSAs, HRAs & HSAs) are an important component of the current employer provided health system, and is dedicated to maintaining and expanding these products/service offerings, which in return encourages the efficient and effective use of tax-advantaged healthcare funds. This is consistent with TASC’s pro-Client/pro-Participant stance, and reflects our efforts to ensure customer footing at the forefront of the decision making processes.

Cafeteria Plan = Employer Payment Plan? No.

NOTE: This is a follow-up to a previous Capital Connection entry (Compliance of Premium Reimbursement Arrangements) dated Nov. 7, 2014.  

FAQ Part XXII – http://www.dol.gov/ebsa/faqs/faq-aca22.html

Analysis of the latest round of FAQs further clarifies that the Department’s* prior guidance (i.e. IRS Notice 2013-54) was specifically aimed at health reimbursement arrangements (HRAs) and “employer payment plans”…and does not apply to a Cafeteria Plan under Section 125.

A Section 125 Cafeteria Plan is an IRS Code creation that allows pre-taxed premium for qualified benefits, includes an option for employer funding and requires employee salary reduction. These FAQs do nothing to redefine the term “qualified benefits” under Section 125.** TASC has yet to see a regulatory statement converting a Section 125 Cafeteria Plan into a “group health plan,” thus making it subject to ERISA or PPACA & PHS Act mandates.

As a result, TASC maintains compliance and continues to back its NESP/NEFSA Plans with an Audit Guarantee for all enrolled employers and their Participants. TASC will support and assist enrolled employers or Participants whose Plan is challenged by the IRS. If all procedures and parameters are adhered to, TASC will assume financial responsibility for any penalty and/or interest charged as a result of an audit.

Click here for more information on TASC’s position https://tasccapitalconnection.com/2014/07/30/tascs-response-to-2013-54-compliance-bulletin-10-2/

* Departments of Labor (DOL), Health and Human Services (HHS), and Treasury
** Public Marketplace Plans are not considered a qualified benefit and premiums cannot be reimbursed; see IRC §125(f)