Tag: health benefits

Final Rule Expanding Excepted Benefits to Include Limited Wrap Around Coverage

The U.S. Departments of Labor (DOL), Health and Human Services (HHS), and Treasury published final rules on March 18, 2015 to amend the definition of excepted benefits to include certain limited coverage that wraps around individual health insurance. The significance of this is that plans providing excepted benefits do not need to comply with many provisions of ERISA and the Tax Code (such as HIPAA and the Affordable Care Act Coverage Mandates).

To qualify as excepted benefits under the new rules, “wrap around” coverage would have to be specifically designed to provide meaningful benefits such as coverage for expanded in-network medical clinics or providers, reimbursement for the full cost of primary care, or coverage of the cost of prescription drugs not on the formulary of the primary plan.

In addition, under the final rules group health plan sponsors may, in limited circumstances, offer wraparound coverage to employees who are purchasing individual health insurance in the private market, including in the Health Insurance Marketplace. The final rule sets forth two pilot programs for limited wraparound coverage. One pilot allows wraparound benefits only for multi-state plans in the Health Insurance Marketplace. The other allows wraparound benefits for part-time workers who enroll in an individual health insurance policy or in Basic Health Plan coverage for low-income individuals established under the Affordable Care Act. These workers could, under existing excepted benefit rules, qualify for a flexible spending arrangement alternative to this wraparound coverage.

icon The Final Rule

Additional Background Information:

There are four categories of statutorily excepted benefits.

The first category includes benefits that are generally not health coverage (such as automobile insurance, liability insurance, workers compensation, and accidental death and dismemberment coverage). The benefits in this category are excepted in all circumstances. In contrast, the benefits in the other categories are types of health coverage but are excepted only if certain conditions are met.

The second category of excepted benefits is limited excepted benefits, which may include limited scope vision or dental benefits, and benefits for long-term care, nursing home care, home health care, or community based care.

The third category of excepted benefits, referred to as “noncoordinated excepted benefits,” includes both coverage for only a specified disease or illness (such as cancer-only policies), and hospital indemnity or other fixed indemnity insurance. In the group market, there benefits are excepted only if all of the following conditions are met: (1) the benefits are provided under a separate policy, certificate, or contract of insurance; (2) there is no coordination between the provision of such benefits and any exclusion of benefits under any group health plan maintained by the same plan sponsor; and (3) the benefits are paid with respect to any event without regard to whether benefits are provided under any group health plan maintained by the same plan sponsor.

The fourth category of excepted benefits is supplemental excepted benefits. Such benefits must be: (1) coverage supplemental to Medicare, coverage supplemental to the Civilian Health and Medical Program of the Department of Veterans Affairs (CHAMPVA) or to Tricare, or similar coverage that is supplemental to coverage provided under a group health plan; and (2) provided under a separate policy, certificate, or contract of insurance.

CMS 2016 Payment Notice effectively embeds individual out of pocket limit in family HDHPs

The Health and Human Services (HHS) Centers for Medicare & Medicaid Services (CMS), recently issued its final 2016 Notice of Benefit and Payment Parameters (2016 Payment Notice), in which it stated that, starting in the 2016 plan year, the self-only annual limitation on cost sharing applies to each individual, regardless of whether the individual is enrolled in other than self-only coverage, including in a family high deductible Health Plan (HDHP). The significance of this is that it effectively embeds an individual out-of-pocket limit in all family group health plans with a higher family deductible.

For example, an HDHP plan that has a $10,000 family deductible may provide payment for covered medical expenses for a member of the family if that member has incurred covered medical expenses during the year of at least $2,600 (the minimum deductible for a 2015 family HDHP). Under the policy finalized in the 2016 Payment Notice, this plan must also apply the annual limitation on cost sharing for self only coverage ($6,600 in 2015) to each individual in the plan, even if this amount is below the $10,000 family deductible limit.

IRS Proposes Various Approaches to Cadillac Tax Implementation

IRS released Notice 2015-16 on February 23, 2015. The notice describes potential approaches the IRS may take in developing regulations to implement the Cadillac Tax, which imposes a 40% excise tax on high cost employer-sponsored health coverage in excess of a statutory dollar limit. The tax applies if the cost of coverage is in excess of $10,200 per employee for self-only coverage and $27,500 per employee for other than self-only coverage. The issues addressed in Notice 2015-16 primarily relate to:

(1) defining the coverage to which the tax applies,

(2) determining the cost of applicable coverage, and

(3) applying the annual statutory dollar limit to the cost of applicable coverage.

Significant for many employers: the cost of applicable coverage will most likely include amounts made available under a Health Reimbursement Arrangement (HRA), as well as both employer and employee salary reduction contributions to Health Flexible Spending Accounts (Health FSAs), Health Savings Accounts (HSAs), and Archer MSAs. In addition, Notice 2015-16 describes various potential approaches where an employee is covered by both individual coverage (for example an employee may have self-only major medical coverage and supplemental coverage (such as an HRA) that covers the employee and the employee’s family. The notice invites comments on various potential approaches to these and other issues raised by the Cadillac Tax.

icon Notice 2015-16

Filing Requirements for IRS Forms 1094 and 1095

The IRS has released final Forms 1094 and 1095, which will be used to enforce the ACA employer mandate penalties and the individual mandate and tax credit eligibility rules. These forms must first be filed by employers and insurers in early 2016, for the 2015 calendar year. Filing is optional in 2015 for the 2014 calendar year. While we do not recommend voluntary filing, we do recommend employers review the forms and the instructions so they are aware of what filing in 2016 will involve because they need to be gathering the information to report now.

IRS Announces Transition Relief for Employer Payment Plans (IRS Notice 2015-17)

IRS Notice 2015-17 provides transition relief for employers that are not Applicable Large Employers (“ALEs”) (i.e. those with less than 50 FTEs) that pay, or reimburse employees for individual health policy premiums. These “employer payment plans” do not satisfy the ACA market reforms, which exposes the employers to excise taxes under Code § 4980D ($100 per day per affected individual), as of January 1, 2014. Notice 2015-17 provides that the excise tax will not be asserted (1) for 2014 against employers that are not ALEs for 2014 , and (2) for January 1 through June 30, 2015 for employers that are not ALEs for 2015. After June 30, 2015, such employers may be liable for the Code § 4980D excise tax.

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icon Our subsequent post about reporting and paying the excise tax