Medicare Part D Reminder
It’s that time of year again! The Centers for Medicare and Medicaid Services (CMS) requires entities to provide an annual notice to Part D eligible individuals before October 15 indicating whether its plan’s coverage is creditable or non-creditable. The Disclosure Notice requirement applies to Part D eligible individuals who are active or retired employees, as well as those who are covered as spouses or dependents under active or retiree coverage.
If your plan data does not include dependent data in the detail necessary to identify eligible dependents who may be Medicare Beneficiaries, you may choose to provide the notice to all eligible employees to assure proper notice to all Medicare Beneficiaries. Notice to the employee will constitute notice to dependents unless you have a separate address for a non-resident spouse/dependent.
Plan Sponsors must also provide a Medicare Part-D notice:
- Prior to an individual’s Initial Enrollment Period for Part-D;
- Prior to the effective date of coverage for any Medicare eligible individual that joins the Plan;
- Whenever the entity no longer offers prescription drug coverage or changes the coverage offered so that it is no longer creditable or becomes creditable; and,
- Upon the request by the individual.
“Prior to” means that the individual must have received the Disclosure Notice within the past twelve months. So, plans that issue the Part-D notice at time of policy renewals do not need to provide another notice.
The notices have not changed since April 2011. Therefore, if the status of your plans is the same you can use last year’s notice. The notices are provided in English and Spanish at http://www.cms.gov
You can also contact your Brown & Brown Account Team to request a copy be emailed to you.
Delivery. Plan Sponsors may mail the notice as a stand-alone mailing or choose to incorporate the notice into other documents or disclosures, so long as there is prominent first-page, 14-point reference to the incorporated notice language.
Plan Sponsors may also deliver the notice electronically to plan participants who have the ability to access the Plan Sponsor’s electronic information system on a daily basis as a part of their work duties. Plan Sponsors should inform participants that they are to share the electronic notice with all family members who are covered under the group health plan.
Disclosure to CMS Form. Don’t forget that you must also disclose to CMS whether your plans’ coverage is creditable or non-creditable. This is done online at www.cms.hhs.gov/CreditableCoverage/45_CCDisclosureForm.asp
This disclosure must be made within 60 days following the start of the plan year, within 30 days after termination of a prescription drug plan, and within 30 days after any change in the plan’s creditable coverage status.
IRS Forms 1094 and 1095
The IRS has released the draft 2017 1094 and 1095 forms and instructions.
Section 6055 - Forms 1094-B and 1095-B and their Instructions.
Section 6056 - Forms 1094-C and 1095-C and their Instructions.
Background: The “B Forms” (1094-B and 1095-B) are filed by providers of health coverage (insurers for fully-insured and employers for self-insured), and the “C Forms” (1094-C and 1095-C) are filed by applicable large employers (ALEs). There are only a few changes from the final 2015 forms and instructions, with the highlights below.
The 1094-B Form. There were no changes to the transmittal form.
The 1094-C Form. The line 22 box for “Section 4980H Transition Relief” has been removed because that relief was only available for 2015 plan years.
The 1095-B and 1095-C Forms. There are no substantive changes on the face of these forms. A new paragraph in the Instructions for Recipients entitled “Additional information” refers recipients to an IRS webpage that provides an overview of the provisions of the individual shared responsibility, employer shared responsibility, and premium tax credits along with contact information for the IRS Healthcare Hotline for questions.
The 1094-C Form Instructions. There are two differences the draft instructions discuss with regards to the Form 1094-C. First, both boxes “B” and “C” on line 22 are now labeled “Reserved”. These boxes will never apply in 2017 as the transition relief for which boxes “B” and “C” could have been checked are no longer applicable. The second change is column (e) in Part III of the Form 1094-C is also labeled “Reserved”. Column (e) in Part III of the Form 1094-C was tied to box “C” on line 22 so it is logical that both the box and the column are labeled “Reserved” now that the transition relief provision that related to the box and column can never apply.
The 1095-C Form Instructions. A new note was added when discussing whether a corrected return needs to be filed because of an error on line 15 of the Form 1095-C. The draft instructions reference Notice 2017-9 which discusses de minimis errors that may occur on certain tax forms, including the Form 1095-C, that will not result in a penalty. In general, the safe harbor only applies if the line 15 amount does not differ from the correct amount by more than $100. One thing that is not clear is whether the $100 limit applies to the sum of line 15 for the entire calendar year or each of the 12 months of the calendar year. To us, the better interpretation is the $100 total applies to the entire year. This is supported by the fact that many employers complete the Form 1095-C using the “All 12 Months” box. Further clarity on this point would be appreciated in the final instructions or in the regulations the notice states the IRS plans on releasing in the near future.
Notice 2017-9 is clear that an employer who intentionally misreports a dollar amount or has a pattern of non-compliance will not be able to utilize the de minimis safe harbor. Additionally, the safe harbor would not apply for failure to file or furnish the Form 1095-C to the IRS or the employee even if the employer would otherwise qualify for the safe harbor. Presumably, this also means the Form 1095-C must be timely filed or furnished to utilize the safe harbor. If the safe harbor applies, an employer will not have to file a corrected Form 1095-C with the IRS and employee (or recipient of the Form 1095-C). However, if the employee (or recipient of the Form 1095-C) elects for the safe harbor to not apply, the employer would have to file a corrected Form 1095-C and furnish a corrected statement to the employee (or recipient of the Form 1095-C). For additional details, please review Notice 2017-9.
The only other addition worth mentioning is a new note before the line 16 codes stating that “There is no specific code to enter on line 16 to indicate that a full-time employee offered coverage either did not enroll in the coverage or waived the coverage.” It appears the IRS is trying to clarify that if an employer does not qualify for one of the affordability safe harbor codes (codes 2F, 2G, and 2H) and the employee does not enroll in coverage or waives coverage line 16 should be left blank. This is not a change from previous years. It is never ideal to have line 16 left blank as it leaves the employer subject to a potential section 4980H(b) penalty. Therefore, if it is at all possible an employer should try to see if one of the other line 16 codes would be appropriate.
Deadlines: As of now forms filed in 2018 reporting 2017 coverage on 1095-B and 1095-C must be provided to employees by January 31, 2018. Forms 1094-B, 1095-B, 1094-C and 1095-C are due must be submitted to the IRS by February 28, 2018, or April 2, 2018, if filing electronically (250+ forms).
Penalties: One big change from previous years is an employer will no longer be able to use the good faith efforts standard to protect itself from filing information returns or payee statements with inaccurate or incorrect information. An employer can be penalized $260 per return for failing to file a correct information return (the Forms 1094-C and 1095-C filed with the IRS). Similarly, an employer can be penalized $260 per statement for failing to provide a correct payee statement (the Form 1095-C that must be furnished to certain). Each penalty is capped separately. This amount has risen to $3,218,500 in 2017 compared to $3,193,000 in 2016. However, these penalties can be increased if there is intentional disregard for the filing requirements. If the same Form 1095-C that is furnished to an employee with incorrect information is provided to the IRS at the later deadline with the same incorrect information, that Form 1095-C with incorrect information could trigger a penalty of $520.
What’s Next: Please contact your Brown & Brown Account Team if you have any questions.
Despite the Congressional Republican’s failure to repeal the ACA, the Trump administration—especially the Departments of Health and Human Services (“HHS”), Labor, and Treasury—has been busy issuing new guidance that impacts employer-sponsored group health plans under the ACA. Following are some of the more notable guidance.
Cost Sharing Reductions. Certain low-income individuals who enroll in health insurance through the ACA’s Marketplace (i.e., Exchange) may be entitled to cost sharing reduction (“CSR”) payments, in addition to premium tax credits. CSR payments are made directly from the federal government to applicable insurers for the purpose of reducing cost-sharing features—such as deductibles and copayments—for these low-income individuals. The U.S. District Court for the District of Columbia agreed with the House of Representatives, and issued a decision prohibiting HHS from making CSR payments. However, the district court suspended its decision during appeal by HHS, which was initiated under the Obama administration.
Under the Trump administration, it is unclear whether HHS intends to pursue this appeal. But, the district court allowed the states to intervene in the lawsuit to continue the appeal, regardless of HHS’s decision. So far, 18 states have intervened. As a result, the appeal will proceed.
Further complicating this issue, it is unclear whether HHS—despite the district court’s decision—intends to continue making CSR payments in the future. The Trump administration allowed CSR payments to be made in September 2017, but the administration has remained silent on whether these payments will be made for the remainder of 2017, or in 2018. If HHS stops making CSR payments, it is likely that some insurers will stop offering health insurance policies on the Marketplace. For those insures that continue to offer polices on the Marketplace, it is expected that premiums will increase in most states by approximately 20 percent in 2018 (compared to 2017). As a result of these premium increases, the Congressional Budget Office (“CBO”) and the Joint Committee on Taxation (“JCT”) estimate an increase in corresponding premium tax credits that would add $194 billion to the federal deficit over the next 10 years.
Section 1557 Nondiscrimination. A trial court has suspended the proceedings in a case challenging the enforceability of the portions of the ACA Section 1557 regulations that prohibit discrimination on the basis of gender identity and termination of pregnancy. The challengers in Franciscan Alliance, Inc. v. Price contend that these rules exceed HHS’s authority and substantially burden their exercise of religion. At HHS’s request, the court has stayed the proceedings while HHS completes a review of the rules, noting that the review could resolve the challenges.
On August 4, 2017, HHS filed a status report with the district court. According to this status report, HHS has submitted—in draft form—revised proposed regulations under Section 1557 of the ACA to the Department of Justice (“DOJ”) for review. After the DOJ’s review, the revised regulations must go through inter-agency clearance, which is a process managed by the Office of Management and Budget (“OMB”). Finally, before the revised regulations can be finalized, HHS must conduct a public notice and comment period.
While the revised regulations have not yet been made publicly available, it is expected that these regulations omit the prohibition on employers from including a categorical exclusion of health services related to gender transition, as a matter of plan design.
Contraceptive Coverage Mandate. An appellate court has ruled against a challenge to the contraceptive coverage mandate based on moral objections of a nonprofit, nonreligious organization and its employees. According to the court in Real Alternatives, Inc. v. HHS, such an organization’s equal protection rights are not violated because it is not similarly situated to a qualifying religious employer, and its employees’ exercise of religion is not substantially burdened since nothing in the plan compels them to use the services.
In contrast with this district court decision, however, a recently “leaked” copy of the HHS interim final regulations regarding required contraceptive services indicates that any non-governmental organization that objects for religious or moral reasons to providing contraceptives is entitled to an accommodation from the contraceptive mandate. While this leaked copy of the interim final regulations appears to be official, the regulations are currently being reviewed by OMB. As a result, changes could be made before the regulations are published publicly.
Other ACA updates
HIT Tax Moratorium. On September 26th Senator Cory Gardner (R-CO) introduced S. 1859, legislation to extend the current one-year moratorium of the Health Insurance Tax (HIT) through calendar-year 2018. The tax, dubbed a fee, assesses a tax on all health insurance companies of insured plans both inside and outside the exchange based on their “net premiums” written. While it is charged to insurers to help pay for the ACA, it is ultimately passed down in the form of increased premiums. Over a 10-year period, this tax is projected to increase premiums for single coverage by an average of $2,150 and family coverage by an average of $5,080.
There has been longstanding bipartisan support for relief from the HIT, with nearly 400 bipartisan members of Congress supporting the one-year moratorium in 2015. Previous legislation in the 114th Congress had the official backing of 236 members of the House, more than half of the chamber, and the Senate companion bill was co-sponsored by 39
senators. Earlier this year, Representatives Kristi Noem (R-SD) and Kyrsten Sinema (DAZ) introduced H.R. 246, along with 81 co-sponsors to permanently repeal the tax.
Tom Price Resigns. Health and Human Services (HHS) Secretary Dr. Tom Price resigned his position effective immediately on Friday, September 29th. Don J. Wright of Virginia has been designated as the acting secretary of HHS. Wright serves as the deputy assistant secretary for health and director of the Office of Disease Prevention and Health Promotion. Mr. Wright will serve as acting secretary until a new nominee is confirmed by the Senate.
What’s Next: During the Congressional efforts to repeal the ACA, the administrative agencies tasked with implementing the ACA hit the regulatory “pause” button. In other words, these agencies took a break from issuing implementing guidance. Now that it appears that the ACA is around to stay—at least through 2017—these agencies are becoming more active in issuing guidance. We will continue to monitor this guidance and update you when new guidance is issued that impacts group health plans, including further developments with respect to the issues discussed above. Who Trump picks as the new HHS Secretary will be a key indicator as to how the administration will handle the ACA going forward.
Reauthorization for the Children’s Health Insurance Program (CHIP) was caught up in the midst of activity surrounding the Graham-Cassidy plan to repeal and replace the ACA this week and, as such, will not be considered prior to the September 30 deadline to extend funding. House Rules Committee Chairman Pete Sessions (R-TX) argued on the
House floor this week that funding is not “dire or urgent” as states have enough funding from the last reauthorization passed in 2015 to maintain the program through the end of the year. It is projected that Arizona, Minnesota, North Carolina and Washington, D.C. would exhaust their current CHIP funding by December, while another 27 states would
exhaust their funding during the first quarter of 2018. Legislation is currently pending in the Senate to reauthorize the program for an additional five years that would gradually eliminate the 23% federal matching rate under the ACA. The Senate has yet to announce a markup hearing on their bill, while the House Energy and Commerce Committee plans
to hold a hearing on their version of reauthorization legislation, which has yet to be released.
What’s Next: A Republican proposal from the House Energy and Commerce Committee released Monday night would fund CHIP for five years and send $1 billion in extra Medicaid funding to Puerto Rico to help with recovery from hurricane damage. The House committee plans to mark up the bill Wednesday, the same day that the Senate Finance Committee will consider its own CHIP legislation. Both bills would maintain for two years extra CHIP funding laid out under the ACA, and then phase it out.