Health Care Reform- What’s Next?

As reported in our Brown & Brown Update on March 24th the American Health Care Act legislation to repeal portions of the Affordable Care Act (ACA) was withdrawn before a full vote in the House. The ACA remains the law of the land. Ongoing compliance is required unless and until official guidance to the contrary is issued.
What’s Next? Here are a few possibilities:

  • Regulatory Action for Market Stabilization & Regulatory Relief

Secretary of Health and Human Services Tom Price has authority to propose changes to current ACA regulations, which could be done to help stabilize the individual marketplace and/or provide regulatory relief “to the maximum extent permitted by law” as directed in the January 20 Executive Order.

  • Regulatory Non-Enforcement

Similar to directing agencies to offer regulatory relief, it is possible the Administration may adopt policies of non-enforcement of certain regulations, such as potentially directing the Internal Revenue Service (IRS) to not to enforce penalties related to specific ACA provisions.

  • Comprehensive Tax Reform

The Administration and House Republican Leadership have indicated that their next priority is tax reform. It’s possible that certain ACA taxes or penalties could be repealed or changed as part of Congressional efforts to rewrite the Internal Revenue Code.

  • Targeted Legislation

While the next steps for a new repeal and replace bill remain unclear, piecemeal legislation could be introduced on specific provisions, such as individual insurance market reforms. Bipartisan support will be required for this legislation to be successful in the Senate.

  • Increased State Autonomy

As part of the regulatory efforts, the Administration could defer decisions on certain health care reform provisions to the state level. Recently, Secretary Price invited governors to submit State Innovation Waivers (allowed under the ACA beginning in 2017), which would grant states more autonomy in making decisions about their health care structures.

Other Marketplace Issues to Watch
On February 15, 2017, the Centers for Medicare & Medicaid Services (CMS) released the Market Stabilization Proposed Rule. The rule is hoped to help stabilize the individual and small group health insurance markets created by the ACA.

Key Provisions:

  • Shortens the 2018 open enrollment period to November 1, 2017 – December 15, 2017 instead of through January 31, 2018.
  • Increasing pre-enrollment verification of eligibility for all categories of special enrollment period (SEP) from 50% to 100% of applicants. This would begin on July 1, 2017.
  • Strengthening the eligibility requirements of SEPs for applicants with a history of nonpayment of premiums, documentation for a move, and the marriage SEP.
  • Allowing issuers to apply a premium payment to an individual’s past debt owed for coverage from the same issuer enrolled within the prior 12 months.
  • Allowing states with federally facilitated exchanges to review network adequacy and require fewer essential community providers
  • Increase the allowable variation in actuarial value (AV) calculations of metal level plans from +/- 2 percentage points to -4/+2 percentage points.

In addition to any potential changes to the public Marketplaces, there is current litigation about funding for cost-sharing subsidies for individuals covered through a Marketplace. Additionally, insurers will soon submit their plans regarding if and where they will participate in Marketplaces for 2018.

If you have any questions regarding the ACA please contact your B&B Account Team.

SF HCSO Annual Reports

San Francisco’s Health Care Security Ordinance or Healthy San Francisco (HCSO) requires for-profit employers with 20 or more employees (and nonprofits with 50 or more employees) (Covered Employers) to spend a minimum amount on health care for covered employees and to report on these expenditures annually.
Deadline: Annual Reports due May 1, 2017
Covered Employers must file an Annual Report with the City of San Francisco on the health care expenditures made for employees working in San Francisco. Covered Employers must file the 2016 Annual Reporting Form (ARF) no later than May 1, 2017 (April 30, 2017 is on a Sunday). Below are links to the 2016 Annual Reporting Form and instructions:

Health Care Surcharges. Employers who impose a surcharge on their customers to offset the cost of complying with the HCSO must report two additional pieces of information on the Annual Report: the amount collected from the surcharge for Covered Employee health care, and the amount spent on Covered Employee health care. If the amount collected from the surcharge is greater than the amount spent on Covered Employee’s health care, the employer must irrevocably spend the excess surcharges on health care for these Covered Employees.
Potential Penalties. Employers who fail to submit the Annual Report are subject to a $500 penalty for each quarter that the violation occurs.
The 2016 and 2017 HCSO-required health care expenditure rates are as follows:

2016 and 2017 HCSO required health care expenditure rates

Notice Update. Covered Employers must replace last year’s posted Official Notice with the updated 2017 HCSO Official Notice at every workplace or job site where there is an HCSO-eligible individual.

Irrevocable Expenditures
On June 17, 2014, the San Francisco Board of Supervisors amended the HCSO to phase in, over a three-year period, a requirement that all health care expenditures made by Covered Employers on behalf of their Covered Employees, be made “irrevocably.”
As of January 1, 2017, employers may no longer make revocable health care expenditures to comply with the spending requirement of the HCSO. An Irrevocable Health Care Expenditure is an expenditure that the employer cannot recover, including premium payments to insurers for medical, dental, vision coverage, contributions to employees’ Health Savings Accounts, Medical Savings Accounts, etc. Of course, any payment to the City Option is irrevocable. Health Reimbursement Arrangements (HRAs) are generally considered revocable expenditures.
Covered Employers must keep, for a period of four years from each Covered Employee’s dates of employment, the following records:

  • Itemized pay statements;
  • The employee’s address, telephone number, date of first day of work;
  • Records of Health Care Expenditures made, including calculations of Health Care Expenditures required under the law for each Covered Employee;
  • Proof documenting that such expenditures were made each quarter of each year, unless they meet the requirements of the exception for self-funded plans; and
  • Documentation supporting the exemption of an employee from coverage, such as a signed Employee Voluntary Waiver Form for each employee for whom the employer is claiming an exemption from the Employer Spending Requirement.

PCORI Fees - IRS Audits are on the Horizon

Group health plan sponsors are well aware of the Patient-Centered Outcomes Research Institute fee (“PCORI Fee”) that they must pay each year with respect to their self-funded and insured group health plans. For 2016, this fee was $2.17 for each covered life (i.e., participants and dependents) and was reported by filing Internal Revenue Service (“IRS”) Form 720. The IRS has recently begun PCORI Fee audits. These examinations require the plan sponsor to:

  • identify all of its covered group health plans,
  • identify any plans the plan sponsor determined were exempt from the PCORI Fee and
  • provide the applicable legal authority for that conclusion,
  • specify the method of counting the average number of lives for all covered plans. (Covered lives may be determined under the actual count method, the snapshot method or the Form 5500 method), and
  • provide all associated work papers.
  • Those plans selected for audit will have 20 days from the date of the notice to assemble the required information. Accordingly, plan sponsors may want to perform a precautionary PCORI Fee review.

Action Items

  • Review your determination of covered group health plans to ensure none were inadvertently left out;
  • Double-check your determination of “covered lives;” and
  • Review your Form 720 filings for accuracy and timeliness.

Taking these measures should assist you in making sure your PCORI Fee filings are correct and up-to-date in the event you are selected for a PCORI Fee audit.

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

DOL Adjusts Penalties

The Department of Labor (DOL) announced an annual adjustment of civil monetary penalties for a wide range of benefit-related violations. On January 18, 2017 they published the DOL Federal Civil Penalties Inflation Adjustment Act Annual Adjustments for 2017.
Background: Congress enacted legislation in 2015 requiring an initial “catch-up” adjustment to specified penalty amounts, followed by annual adjustments. Regulations issued in 2016 (see our article ) established the catch-up amounts and called for future adjustments by January 15 of each year, starting in 2017. The adjustments just announced are effective for penalties assessed after January 13, 2017, with respect to violations occurring after November 2, 2015.

  • Form 5500. The maximum penalty for failing to file Form 5500 (which must be filed by ERISA health and welfare plans with 100+ participants, and most pension plans) increases from $2,063 to $2,097 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 $1,087 to $1,105 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 availability of Medicaid or children’s health insurance program (CHIP) assistance may result in penalties of $112 per participant per day, up from $110.
  • 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 $1,632 to $1,659 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 $131 to $133 per day. And the maximum penalty for failure to comply with the ERISA § 209(b) recordkeeping and reporting requirements remains at $28 per employee.

Other penalties increased by the regulations include those for failure to provide certain information requested by the DOL, Multiple Employer Welfare Arrangement (MEWA) failures, and defined benefit plan compliance failures.