In our Q2 Insurance Brief we discuss the following topics:

  • DOL Updates

  • SF HCSO Annual Reporting

  • PCORI Fee Reminder

  • Legislative Updates


DOL Updates

CHIP Notice

The Department of Labor (DOL) has updated its model notice for employers to provide information on eligibility for premium assistance under Medicaid or the Children's Health Insurance Program (CHIP).   Employers that provide health insurance coverage in states with premium assistance through Medicaid or CHIP must provide employees with the Employer CHIP notice annually before the start of each plan year.  An employer can choose to provide the notice on its own or concurrent with the furnishing of:

  • Materials notifying the employee of health plan eligibility;
  • Materials provided to the employee in connection with an open season or election process conducted under the plan; or
  • The summary plan description (SPD).

The updated model notice includes information on how employees can contact their state for additional information and how to apply for premium assistance, with information current as of January 31, 2018.

Annual Adjustments to Employee Benefit Plan Penalties

The DOL has announced the 2018 annual adjustments of the civil monetary penalties for a wide range of benefits-related violations. As background, legislation enacted in 2015 requires annual adjustments to certain penalty amounts by January 15 of each year. The 2018 adjustments are effective for penalties assessed after January 2, 2018, with respect to violations occurring after November 2, 2015. Here are highlights:

  • Form 5500. The maximum penalty for failing to file Form 5500 increases from $2,097 to $2,140 per day that the Form 5500 is late.
  • Group Health Plans. The maximum penalty for failing to provide the summary of benefits and coverage (SBC) required under health care reform increases from $1,105 to $1,128 per failure. Violations of the Genetic Information Nondiscrimination Act (GINA), such as establishing eligibility rules based on genetic information or requesting genetic information for underwriting purposes, and failures relating to disclosures regarding the availability of Medicaid or CHIP assistance may result in penalties of $114 per participant per day, up from $112.
  • 401(k) Plans. For plans with automatic contribution arrangements, penalties for failure to provide the required ERISA § 514(e) preemption notice to participants increase from $1,659 to $1,693 per day. Penalties for failing to provide blackout notices (required in advance of certain periods during which participants may not change their investments or take loans or distributions) or notices of diversification rights increase from $133 to $136 per day. And the maximum penalty for failure to comply with the ERISA § 209(b) recordkeeping and reporting requirements increases from $28 to $29 per employee.

The affected penalties relate to a wide range of compliance issues. But not all violations will give rise to the highest permitted penalty.  In some instances, the DOL has discretion to impose lower penalties, such as under programs designed to encourage Form 5500 filing.

For a complete listing of penalties contact your Brown & Brown account team.

SF HCSO Annual Reporting

The 2017 Annual Reporting Form is now available online.  Register here to attend an instructional webinar on how to complete the 2017 form to be held Thursday, April 5th at 10:00 PST.  A recording of the webinar will be posted on this page by Monday, April 9th.

Deadline:  April 30, 2018.  Failure to meet the deadline can result in penalties of $500 per quarter.

We recommend you review the instructions prior to beginning the form.  You may also want to view the Annual Reporting Form PDF preview.

As a reminder:  you are not a "covered employer" under the HCSO and you should not submit the Form if (1) you are a private employer and you employed fewer than 20 persons, (including those employed outside of San Francisco) in each of the four calendar quarters of 2017;  or (2) ;  you are a non-profit corporation and you employed fewer than 50 persons (including those employed outside of San Francisco) in each of the four calendar quarters of 2017; or (3) if you did not have any employees in San Francisco in 2017. If you are not required to submit the Form, no further action is required.

2017 Expenditure Rates are $1.76 for medium employers (20-99) and $2.64 for large employers (100+).

If you have any questions please visit the Office of Labor Standards Enforcement's HCSO website to access the text of the HCSO, the implementing regulations, answers to “Frequently Asked Questions,” and other helpful forms and notices.  You can also contact the OLSE by phone at (415) 554-7892 or by email at hcso@sfgov.org.

PCORI Fee Reminder

2017 PCORI Fees

The Patient Centered Outcomes and Research Institute (PCORI) fee, also known as the Comparative Effectiveness Research (CER) fee, is due annually using IRS form 720 by July 31st. 

Background:  This fee applies to both insured and self-insured medical plans.  It is based on the number of covered lives—employees and dependents.  For insured plans, the fee is paid by the carrier and included in premiums.  For self-insured plans, the employer plan sponsor must calculate and pay the fee.   The fee is based on the average number of covered lives for the 12-month policy period that ended in the preceding year.   

Rates:  For policies ending between January 1, 2017 through September 30, 2017, the cost is $2.26 per person.  For policies ending between October 1, 2017 through December 31, 2017 the fee is $2.39.

Counting Methods:  There are three allowable counting methods for self-insured policies.  Once chosen, the plan sponsor must use only the one method for that reporting year. Here are the options:

Actual Count Method. Plan sponsors calculate the sum of lives covered for each day of the plan year and then divide that sum by the number of days in the year. This count includes employees plus dependents.

Snapshot Method. Plan sponsors calculate the sum of the lives covered on one or more dates in each quarter of the plan year and then divide that number by the number of dates used. Each date must be within three days of the date used for the first quarter. E.g. If using February 15th (1st quarter), then must use a day between May 12 – 18th (2nd quarter). Under this method, the plan sponsor can count the number of covered employees and multiply that number by 2.35 to obtain the spouse and dependents count.

The 5500 Method. By adding the total number of employee lives on the first day of the plan year to the total number of lives on the last day of the plan year as reported on the Form 5500 (without dividing by 2). Can only use this method if the 5500 for that plan year is filed no later than the due date for the fee imposed for that plan year. E.g. Calendar plan year 2017, the 5500 is due by 7/31/18, and the employer obtains an automatic 2 ½ month extension. The employer is not eligible to use the Form 5500 method because they did not file by the 7/31 fee due date.

Health Reimbursement Account (HRA). An HRA that only provides excepted benefits (e.g. dental and vision) is excluded.  In the event the employer has a self-funded medical plan and a medical HRA with the same Plan year, the fee will only be payable on the self-funded medical plan. If the employer has a fully-insured medical plan and a HRA covering the same group, the fee is payable on the HRA. Most HRA third-party administrators are able to provide the covered lives count required to make payment.

Retiree Coverage: The fee applies to health insurance policies and self-insured health plans that provide accident and health coverage to retirees, including retiree-only policies and plans.

COBRA continuation coverage: COBRA and similar continuation coverage (Cal-COBRA, for example) must be taken into account when determining the PCORI fee.

 If you have any questions regarding your PCORI Fees or filings, please contact your B&B Account Team.

Legislative  Updates

In early March a memo was leaked which indicates what the White House was seeking in return for backing legislation which would stabilize the ACA markets. 

White House Memo:  Obamacare Relief Provisions Congress Should Pursue

Obamacare has led to skyrocketing premiums and declining choices for American families. Middle-class families, in particular, have seen their premiums and deductibles soar year after year as a result of the law. Although congressional efforts to provide taxpayer money to prop up the exchanges is understandable, any such efforts must also provide relief to middle-class families harmed by the law and protect life. In order to support such efforts, the administration believes these three policies to provide greater choice and control for middle-class families must be included:

  • Increase consumer options of more affordable, flexible insurance coverage by clarifying that issuers selling short-term, limited-duration insurance may offer renewals of that coverage to individuals without those individuals going through health underwriting.
  • Increase control for middle-class families over their healthcare dollars by expanding Americans’ access to health savings accounts (HSAs). This will enable middle-class families to save pre-tax dollars for their healthcare expenses and help put them back in control of their healthcare. This can be accomplished by raising HSA contribution limits and allowing HSAs to be integrated with a broader number of plans.
  • Modify age-rating requirements to permit premium variation of up to 5:1 in the individual and small group markets.

In addition to these three policies, any efforts to provide taxpayer money to stabilize the exchanges must be properly designed so that public dollars do the most good and that ensures all federal dollars are life-protected. The president also supports congressional efforts to fund and life-protect Obamacare’s cost-sharing reduction (CSR) payments after 2018. This would lower premiums for those who purchase their coverage on the exchanges as well as decrease federal spending due to a reduction in the premium tax credit amounts.

HSA Improvement Act

The Bipartisan HSA Improvement Act will make HSAs more useful and effective for employers, according to the American Benefits Council. The bill was introduced recently by Representatives Mike Kelly (R-PA), Earl Blumenauer (D-OR), Erik Paulsen (R-MN) and Ron Kind (D-WI).
“Workplace-based health insurance covers more than 178 million people nationwide, compelling employers to be innovative in managing rising health care costs,” Council President James A. Klein said. “Not only will the Bipartisan HSA Improvement Act give employers more flexibility in HSA-based plan design, it will also allow HSAs to take full advantage of cost-saving innovations like chronic care management and onsite and near-site health centers.”
The bill includes provisions that would:

  • Clarify that certain services and prescription drugs that prevent chronic disease progression are preventive care that will not be subject to a deductible;
  • Allow employers to provide primary care, chronic disease prevention, and other high-value services at on-site and near-site medical clinics without imposing a deductible;
  • Permit the use of HSA funds to pay for medical expenses for adult children up to age 26; and
  • Permit HSA contributions if a spouse has a health FSA.

As Klein noted in a letter of support for the legislation, our employer-based health insurance system “is predicated on smart tax incentives and companies’ ability to design and offer plans that best suit the needs of a modern workforce. HSAs are the direct descendants of this sound public policy, allowing employees and their families to take greater control of their health care.”

2018 Updated IRS Guidelines

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