The ACA and What Comes Next. 2014 EPSHRM BENEFITS CONFERENCE.
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2014 EPSHRM BENEFITS CONFERENCE
Transition Relief /
For stability periods that begin in 2015, even those that are twelve months, employers may use a transition measurement period that is six months
Rehired Employees and Breaks in Service
The Final Rule sets forth the following methodologies to determine the MV (total allowed costs of benefits provided is no less than 60 percent):
Calculating Penalties /UNAFFORDABLE COVERAGE OR FAILS TO MEET MINIMUM VALUE
“It shall be unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of an employee benefit plan..., or for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan.” 29 USC § 1140
“These provisions were added by the Committee in the face of evidence that in some plans a worker’s pension rights or the expectation of those rights were interfered with by the use of economic sanctions or violent reprisals. Although the instances of these occurrences are relatively small in number...” S. Rep. No. 93-127, 93d Cong., 2d Sess. (1974).
“[p]revent unscrupulous employers from discharging or harassing their employees in order to keep them from obtaining vested pension rights.” West v Butler, 621 F.2d 240, 245 (6th Cir. 1980).
Issue: An employers workforce management efforts interfered with an employee’s attainment of a right to which such participant is or may become entitled.
Risk is likely stratified based on employment:
Manage communications around workforce management to avoid “specific intent” arguments
Grandfather current 30 hour employees
Revise employment agreements to reflect employee status
Legislative and regulatory solutions???
Employer Payment Plans
Last month, federal appeals courts issued conflicting opinions on a key aspect of the ACA.
The heart of the dispute centers on the statutory text of the ACA itself. According to the ACA, penalties under the employer mandate are triggered only if an employee receives a subsidy to purchase coverage “through an Exchange established by the State under section 1311” of the ACA.
If a state elected not to establish an exchange or was unable to establish an exchange, the Secretary of HHS was required to establish a “federal facilitated exchange” under section 1321 of the ACA.
Thus, subsidies provided through federally facilitated exchanges would originate from an exchange established under section 1321 of the ACA not through an exchange established by the state under section 1311.
In 2012, the IRS asserted that “the statutory language … and other provisions” of the ACA “support the interpretation” that credits are available to taxpayers who obtain coverage through both state and federally facilitated exchanges.
The plaintiffs in both cases argue that the IRS does not have the authority to administer subsidies in states that did not establish a state-run exchange because the exchanges were not “established by the State under 1311.”
The D.C. Circuit, in Halbig v. Burwell agreed with the appellants and vacated the IRS regulation.
The 4th Circuit, in King v. Burwell agreed with the IRS that the statutory language was not plain, but ambiguous.
The Administration has sought en banc review of the Halbig decision by the entire D.C. Circuit.
Rule of 4: Only four justices are required to grant cert.
Employer mandate penalties are triggered only if an employee receives a subsidy to purchase coverage through an exchange.
Accordingly, if subsidies are unavailable, then no penalties could be triggered against an employer in the 36 states with a federally facilitated exchanges.
Beginning in 2018, employer-sponsored plans will be subject to a 40 percent non-deductible excise tax on the dollar amount of coverage that exceeds certain specified thresholds.
As one of the Affordable Care Act’s principal “pay-fors,” the Cadillac tax is expected to raise $111 billion ($80 billion) over 10 years.
Was designed to apply to “Cadillac health plans,” high-end health plans that provide the most generous level of benefits to employees.
In practice, the Cadillac tax will affect far more modest plans and could be a significant burden on all employers
Takeaway: While regulations implementing this provision are still a ways off, plans will need to take action in the near future to avoid penalties.
The Cadillac tax applies to the dollar amount that exceeds the specified threshold using the following formula:
Example: If an employer offered individual coverage that cost $12,000 per employee, the excess amount for a month would be calculated by ($12,000 / 12 months) − ($10,200 / 12) = $150. Therefore, the employer would be taxed 40 percent of $150, or $60 per employee per month. Over a year, the Cadillac tax liability per employee would be $720.
The ACA states that each “coverage provider” is responsible for payment of the tax.
While the penalties may technically apply to the health insurance issuer or TPA, it is likely that the cost of the penalties will be passed down to the employer.
The Cadillac Tax applies to “applicable employer-sponsored coverage.”
Applicable employer-sponsored coverage includes coverage under any group health plan made available to the employee by an employer which is excludable from the employee’s gross income or would be excludable if it were employer-provided coverage.
Until the regulations are released it is unclear how the cost of applicable employer-provided coverage will be calculated.
The ACA does say that the cost of coverage will be determined under rules similar to the rules used for calculating cost of coverage under COBRA.
Use COBRA costs to determine plan status
Look at benefits offerings for potential efficiencies.
Compare cost strategies to recruitment and retention strategy
Union employers- this discussion need to be reflected in next negotiations.
Regulations promulgated in 2012 require most self-funded group health plans to obtain a Health Plan Identification Number (“HPID”) by November 5, 2014.
While insured group health plans must also obtain an HPID, that responsibility will fall on their insurers.
Section 1104(c)(1) of the Affordable Care Act (“ACA”) required the Secretary of HHS to establish a standard unique health plan identifier for use in HIPAA standard transactions.
The goal of this provision is to standardize the way in which health plans are identified in HIPAA standard transactions to reduce delay and errors caused by: improper routing of transactions; rejected transactions due to insurance identification errors; difficulty in determining patient eligibility; and challenges resulting from errors in identifying the correct plan during claims processing.
Any entity that meets the definition of “Controlling Health Plan” (“CHP”) must obtain an HPID.
An employer may offer multiple plans and options. As a result, the rules differentiate between health plan entities that are required to obtain an HPID (CHPs) and those that would be eligible, but not required, to obtain an HPID (subhealth plans).
A CHP means a health plan that: (1) controls its own business activities, actions, or policies; OR (2) (i) is controlled by an entity that is not a health plan; and (ii) if it has subhealth plans, exercises sufficient control over the subhealth plans to direct their business activities, actions, or policies.
While the definition of CHP does not provide much guidance to employers, the regulations suggest the following test to determine if an entity is a CHP. If the answer to both questions is “yes,” then the entity would meet the definition of CHP.
More guidance is coming...
HHS has established an on-line portal that employers must use to obtain their HPID.
Additionally, HHS has created a number of online manuals, video presentations, and PowerPoints that will walk you through the application process.
Prior to beginning the application process, we encourage employers to carefully review the documentation requirements available on the guidance website.
Sources: PwC HRI analysis for year 2021, Current Population Survey, Medical Expenditure Panel Survey and CBO
Health Care & Life Sciences Practice