May 2013 Compliance Observer

Cost Sharing Limits – Additional Guidelines Released

Source: Employee Benefits Security Administration

The Departments of Health and Human Services, Labor and Treasury, issued final regulations regarding Cost Sharing Limits under ACA. Additional guidance was issued in the Form of FAQs on February 20, 2013. They include:

ESSENTIAL BENEFITS – Non-grandfathered small group and individual plans are required to cover 10 categories of Essential health benefits.

OUT OF POCKET MAXIMUM LIMITS – the final regulations confirm that out of pocket maximums for cost sharing apply to self-funded and large group non-grandfathered plans as well as non-grandfathered small group and individual plans. This includes all expenses for deductibles, coinsurance, and copayments for in-network providers. It does not include premiums, non-covered services, balance billing amounts, or cost sharing for out of network providers. The out of pocket maximum limit will be based on the amounts allowed for high deductible health plans (HDHPs) coordinated with health savings accounts (HSAs). Special transition rules apply for plans that have separate service providers (such as separate administrators for medical and pharmacy coverage).

DEDUCTIBLE LIMITS – non-grandfathered small group health plans are also subject to a limit on the amount of their annual deductibles. In 2014, these limits will be $2000 for employee only coverage and $4000 for family coverage. The final regulations allow that small group health coverage may exceed the annual deductible limit if it cannot reasonable reach a given tier level (bronze, silver, gold, platinum metal tier) without exceeding the deductible amount.

ACTUARIAL VALUE – non-grandfathered individual and small group plans must provide coverage that meets certain levels of coverage. These levels of coverage are based on the Actuarial Value (AV) of the plan—commonly called the metal tiers: Bronze = 60% AV, Silver = 70% AV; Gold = 80% AV; Platinum = 90% AV. HHS has developed the AV calculator that will be used to determine AV.

MINIMUM VALUE – In 2014, Employers must offer a health plan that has a “minimum value” (MV) of at least 60% in order to avoid a potential $3,000 penalty for each employee who receives subsidized Exchange coverage. The full value of employer contributions to HSAs and HRAs will not be included in determining MV. HHS has provided a MV calculator for use in determining the minimum value of a plan.

IRS Announces 2014 HSA Contribution Limits, HDHP Minimum

Deductibles, and Out-of-Pocket Maximums

Source: Thomson Reuters/EBIA, May 02, 2013

The IRS has released the 2014 cost-of-living adjustments affecting Health Savings Accounts (HSAs) and High Deductible Health Plans (HDHPs). Only the HSA contribution limits and the HDHP out-of-pocket maximums will increase for 2014. The HDHP minimum required deductibles will be unchanged. Here are the details:

• HSA Contribution Limits. The 2014 annual HSA contribution limit for individuals with self-only HDHP coverage is $3,300 (a $50 increase from 2013), and the limit for individuals with family HDHP coverage is $6,550 (a $100 increase from 2013).

• HDHP Minimum Required Deductibles. The 2014 minimum annual deductible for self-only HDHP coverage is $1,250 and the minimum annual deductible for family HDHP coverage is $2,500. Both are unchanged from 2013.

• HDHP Out-of-Pocket Maximums. The 2014 maximum limit on out-of-pocket expenses (including items such as deductibles, co-payments, and co-insurance, but not premiums) for self-only HDHP coverage is $6,350 (a $100 increase from 2013), and the limit for family HDHP coverage is $12,700 (a $200 increase from 2013).

• Available at http://www.irs.gov/pub/irs-drop/rp-13-25.pdf

Transition Relief – Cafeteria Plan Election Rules Relaxed

Source: Thomson Reuters/EBIA

In order for employees and employers to take advantage of the health insurance Exchanges starting January 1, 2014, the IRS has provided transition relief under which non-calendar year plans can permit certain accident and health plan election changes during the cafeteria plan year beginning in 2013.

In 2014, employees will be able to purchase coverage through the Exchanges, and health care reform’s individual mandate penalty will become applicable for individuals without qualifying coverage. As such, employees may wish to drop employer-provided health coverage and enroll in coverage through an Exchange, or enroll in qualifying employer-provided coverage to avoid the penalty. However, the permitted election change regulations do not currently provide for midyear cafeteria plan election changes on account of either of these events. In order to accommodate employees participating in non-calendar-year cafeteria plans (who would otherwise be locked into their elections as of January 1, 2014), the IRS has provided transition relief under which non-calendar-year plans can permit certain accident and health plan election changes during the cafeteria plan year beginning in 2013.
The transition relief allows non-calendar-year cafeteria plans to be amended to provide for one or both of the following midyear election changes during the cafeteria plan year beginning in 2013:

• Employees may prospectively revoke or change their salary reduction elections for accident and health plan coverage election once during the plan year, without regard to whether there has been a change in status event under the permitted election change regulations.

• Employees who failed to make salary reduction elections for accident and health plan coverage prior to the deadline under IRS rules for making elections for the plan year beginning in 2013 may make a prospective salary reduction election for such coverage during the plan year, without regard to whether there has been a change in status event under the permitted election change regulations.

An IRS official has informally commented that health FSA election changes are not permitted under this transitional relief. In addition, the transition relief does not allow changes in elections for other coverages.

Employers have until 12/31/14 to amend cafeteria plan documents to reflect the transition rules effective retroactively to the first day of the 2013 plan year.

Early Renewals Offered to Small Employers

Source: Zywave Legislative Brief 4/2013

To help mitigate the impact of the Affordable Care Act (ACA) on health insurance premiums, some health insurers in the small group market are encouraging small employers to renew their coverage early for 2014. The early renewal option offers small employers to option to renew their coverage in late 2013 instead of waiting to renew until their 2014 policy anniversary date.

According to various issuers, renewing early will allow small employers to postpone additional costs that are due to ACA’s premium rating and other reforms.

EXAMPLES OF ACA REFORMS WHICH ARE EXPECTED TO IMPACT PREMIUMS IN THE SMALL GROUP MARKET:

For example, the following ACA reforms are expected to impact premiums in the small group market:

Premium Rating – Effective for plan years beginning on or after Jan. 1, 2014, health insurance issuers in the small group market will be generally prohibited from determining premium rates based on health status, gender or other factors. Issuers will be able to vary premium rates based only on age, rating area, family coverage and tobacco use. This reform, which is often referred to as “community rating,” does not apply to grandfathered plans.

Essential Health Benefits – Effective for plan years beginning on or after Jan. 1, 2014, health insurance issuers that offer health coverage in the small group market will be required to provide the essential health benefits package required of plans sold in the ACA Exchanges. This requirement does not apply to grandfathered plans.
• Pre-existing Condition Exclusions – Group health plans and health insurance issuers may not impose pre-existing condition exclusions on coverage for any enrollees, effective for plan years beginning on or after Jan. 1, 2014.

Cost-sharing Restrictions – Effective for plan years beginning on or after Jan. 1, 2014, non-grandfathered plans will be subject to limits on cost-sharing and out-of-pocket costs. Plans in the small group market will need to comply with ACA’s out-of-pocket maximum limit and ACA’s annual deductible limit.

According to health insurance issuers, by renewing before the end of 2013, small employer plans will not be subject to ACA’s reforms, such as the new community rating requirements, until the 2014 renewal.

Please note that this does not delay compliance with the Play or Pay provisions of the ACA.

LEGAL CONCERNS

When considering an early renewal, it is important to keep in mind that the federal agencies in charge of implementing ACA and other employee benefit laws have not addressed whether these early renewals are permissible. Because federal agencies have not addressed these early renewals, small employers should proceed with caution and consult their benefit advisors if they are considering an early renewal.

When an employer renews early, it is essentially changing the health coverage’s policy or plan year. The
Internal Revenue Service (IRS) has limited plan year changes in the following contexts:

• The IRS’s proposed rule on ACA’s employer shared responsibility penalty provides that once a plan year is established it can only be changed for a valid business purpose. Large employers (50 or more full-time employees) are prohibited from changing plan years to avoid the employer penalty under the proposed rule.

• The IRS’s proposed cafeteria plan regulations provide that employers can only change a cafeteria plan’s year based on a valid business purpose. Examples provided by the IRS of changes based on a valid business purpose include switching insurance carriers or experiencing a corporate merger, acquisition or other change in business operations.

• In Notice 2012-40, consistent with the proposed cafeteria plan regulations, the IRS states that a plan year is permitted to be changed only for a valid business purpose. If a principal purpose of changing the plan year of a health flexible spending account (FSA) is to delay the application of ACA’s $2,500 limit, the change is not for a valid business purpose.

In these contexts, the IRS has indicated that a plan year change that is not made for a valid business purpose will be disregarded and considered ineffective.

Please discuss this option with your Employee Benefits Team at AssuredPartners NL.

AssuredPartners NL Provides Timely Information for Employers:

Recent Compliance Observer Alerts were published with timely information about the following topics:

May 3, 2013 ALERT:

• IRS Issues Proposed Rules on Determining if a Plan Provides Minimum Value

• Summary of Benefits & Coverage – DOL Provides Guidance

May 13, 2013 ALERT:

• Employers Must Provide Employees with Exchange Notice by October 1, 2013 – Model Notices Released

• Kentucky Expands Medicaid

The Next Edition in our Webinar Series: Large Employer Pay or Play Compliance,

Updates and More

Join us for a webinar on May 20, 2013 at 2:00 PM EDT.

Register now! https://attendee.gotowebinar.com/register/32061009767935744

Are you a Large Employer and still confused on your obligations under the employer mandate?

We will provide a detailed assessment of the large employer “pay or play” rules and the new wellness rules. We will put both in the context of the emerging exchange options and explore the relationship among wellness, affordability and the exchange options. The “pay or play” discussion will include an overview of the basic compliance requirements (including the brand new plan “minimum value” affordability rules) and potential compliance strategies along with a discussion of some issues that remain unresolved.

We are excited to have Scott A. Sinder Partner of Washington D.C. based law firm of Steptoe & Johnson, LLC as our presenter.

Scott serves as the Chair of his firm’s Government Affairs & Public Policy Practice Group. He is an experienced commercial & public law litigator and a legislative advocate. Scott actively represents trade associations and companies on a wide range of issues in state and federal trial and appellate courts, in state legislatures and Congress, and before regulatory agencies.

Scott also serves as the outside General Counsel for the Council of Insurance Agents & Brokers and – on behalf of the Council – he and his Steptoe team have been engaged in every phase of the enactment and regulatory development of the Patient Protection & Accountable Care Act. In conjunction with that work, Scott and his Steptoe team have developed PPACA compliance guides and materials targeted at employers. Scott has led over 100 seminars and webinars targeted at employers grappling with the intricacies of the new law and he has been counseling clients on their PPACA compliance and avoidance strategies.

Scott is a member of the bars of the United States Supreme Court and of numerous United States district and appellate courts, as well as in the District of Columbia and Colorado. Scott received his J.D. from the University of Michigan Law School in 1988, his M.P.P. from the University of Michigan Institute of Public Policy Studies in 1987 and his A.B. from the University of Michigan in 1984.

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