Under the Affordable Care Act (ACA), group health plans are prohibited from establishing any annual dollar limit on the amount of benefits for any individual. Group health plans must also provide certain preventive care services without imposing any cost sharing requirements for those services. These requirements apply to all employee welfare benefit plans that provide medical care to employees and their dependents directly or through insurance, reimbursement or otherwise, unless they are “excepted benefits.”
Limited-scope dental and vision benefits are group health plans. However, under the old rules, they could qualify as excepted benefits if they were provided under a policy, certificate, or contract of insurance that was separate from and not otherwise an integral part of an employer’s group health plan, provided participants were required to pay an additional premium or contribution for their limited-scope vision or dental benefits.
In September 2014, final regulations were issued that changed the way that limited-scope vision or dental benefits could qualify as excepted benefits. Under the new rules, the requirement that participants pay an additional premium or contribution for limited-scope vision or dental benefits was eliminated. In addition, limited-scope vision or dental benefits do not have to be offered in connection with a separate offer of major medical or “primary” group health coverage. Finally, limited-scope vision or dental benefits will qualify as excepted benefit if participants can decline this limited benefit coverage or if the claims for these benefits are administered under a contract separate from claims administration for any other benefit plans.
Since these rules relax the requirements for establishing that limited-scope vision and dental benefits are excepted benefits, employers will be able to offer these benefits without the administrative costs and burdens associated with the prior rules.
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Showing posts with label Affordable Care Act. Show all posts
Showing posts with label Affordable Care Act. Show all posts
Can HRAs Survive Healthcare Reform?
Friday, April 25, 2014
Health Reimbursement Arrangements (HRAs) are used to help employees pay for medical expenses incurred by the employee, his or her spouse, dependents, and any children who, at the end of the taxable year, have not attained age 27. An HRA must be funded solely by the employer; employees cannot contribute to an HRA account. HRA reimbursements are not included in the employee’s taxable income. Unused amounts can be rolled over for use in other plan years if the plan so provides. HRAs can also be offered only to those employees who enroll in group medical coverage sponsored by another employer.
HRAs are group health plans that are subject to Health Care Reform under the Affordable Care Act (ACA). Under the ACA, group health plans are barred from establishing an annual limit on the dollar amount of benefits for any individual (the Annual Dollar Limit Prohibition). In order to comply with this requirement, an HRA must be integrated with other group health coverage that itself complies with the Annual Dollar Limit Prohibition. In other words, an HRA can be offered only if employer offers compliant primary group health coverage and the employee is actually covered under a group health plan that does not have an annual limit on the dollar amount of benefits. Two important points to keep in mind:
The ACA also requires that non-grandfathered group health plans must provide certain preventative services without imposing any cost sharing requirements for the service (the Preventive Services Requirements). An HRA can satisfy this part of the ACA if the group health plan coverage with which it is integrated complies with the Preventive Service Requirements.
If the primary group health coverage that is linked to the HRA does not provide minimum value to the employee (that is, if the plan’s share of the total allowed costs of benefits provided under the plan is less than 60% of the costs), the HRA can only be used to reimburse co-payments, co-insurance, deductibles, and premiums under the non-HRA group coverage, as well as for medical care expenses that do not constitute essential health benefits.
Finally, the ACA requires that at least annually, an HRA must permit participating employees (or former employees if they are allowed to participate in the HRA) to permanently opt out of and waive future reimbursements from the HRA. Upon termination of employment, either the remaining amounts in the HRA must be forfeited or the employee must be permitted to permanently opt out of and waive future reimbursements from the HRA.
These new HRA rules take effect for plan years that begin on or after January 1, 2014. However, they do not apply to funds credited to the HRA before January 1, 2013, or to amounts credited in 2013 under the terms of an HRA in effect on January 1, 2013. These funds can be used after December 31, 2013, to reimburse medical expenses pursuant to the terms of that HRA.
HRAs are group health plans that are subject to Health Care Reform under the Affordable Care Act (ACA). Under the ACA, group health plans are barred from establishing an annual limit on the dollar amount of benefits for any individual (the Annual Dollar Limit Prohibition). In order to comply with this requirement, an HRA must be integrated with other group health coverage that itself complies with the Annual Dollar Limit Prohibition. In other words, an HRA can be offered only if employer offers compliant primary group health coverage and the employee is actually covered under a group health plan that does not have an annual limit on the dollar amount of benefits. Two important points to keep in mind:
- the employer-sponsored HRA cannot be integrated with individual market coverage or with individual policies, even if the employer pays the premium; and
- the primary group coverage in which the employee is actually enrolled does not have to be provided by the same employer that offers the HRA; for example, the linked coverage could be sponsored by the employer of the employee’s spouse.
The ACA also requires that non-grandfathered group health plans must provide certain preventative services without imposing any cost sharing requirements for the service (the Preventive Services Requirements). An HRA can satisfy this part of the ACA if the group health plan coverage with which it is integrated complies with the Preventive Service Requirements.
If the primary group health coverage that is linked to the HRA does not provide minimum value to the employee (that is, if the plan’s share of the total allowed costs of benefits provided under the plan is less than 60% of the costs), the HRA can only be used to reimburse co-payments, co-insurance, deductibles, and premiums under the non-HRA group coverage, as well as for medical care expenses that do not constitute essential health benefits.
Finally, the ACA requires that at least annually, an HRA must permit participating employees (or former employees if they are allowed to participate in the HRA) to permanently opt out of and waive future reimbursements from the HRA. Upon termination of employment, either the remaining amounts in the HRA must be forfeited or the employee must be permitted to permanently opt out of and waive future reimbursements from the HRA.
These new HRA rules take effect for plan years that begin on or after January 1, 2014. However, they do not apply to funds credited to the HRA before January 1, 2013, or to amounts credited in 2013 under the terms of an HRA in effect on January 1, 2013. These funds can be used after December 31, 2013, to reimburse medical expenses pursuant to the terms of that HRA.
Can FSAs Survive Healthcare Reform?
Friday, March 28, 2014
Flexible Spending Accounts (FSAs) or Health FSAs have for years enabled employers to offer employees the opportunity to spend non-taxable compensation on eligible medical expenses. FSAs could not only be used to pay for routine deductibles and co-insurance, but they also could buffer against unexpected health care costs. Now, Health Care Reform under the Affordable Care Act (ACA) has changed the way in which FSAs can be offered to employees.
First, for plan years beginning in 2013, the amount an employee can contribute to an FSA through salary reductions is capped at $2,500. Next, for plan years beginning in 2014, Health FSAs can only be offered through Section 125 Cafeteria Plans. Otherwise, the FSA would not be exempt from the ACA requirement that group health plans may not establish any annual limit on the dollar amount of benefits for any individual. Finally, the FSA itself must be structured to qualify as something called an “excepted benefit.” If the employer provides a Health FSA that does not qualify as an excepted benefit, the Health FSA is subject to the ACA’s market reform rules, including the requirement that non-grandfathered group health plans provide certain preventive care services without imposing any cost-sharing requirements for these services. Health HSA’s are considered group health plans under the ACA.
Excepted benefits include, among other things, accident-only coverage, disability income, certain limited scope dental and vision benefits, and certain long-term care benefits. In order to qualify an FSA as an excepted benefit, an employer must make available group health plan coverage that is not limited to excepted benefits. In other words, if it offers its employees the opportunity to elect group health coverage, an employer will have satisfied this part of the test.
In addition to the availability of group health coverage, the FSA must be structured so that the maximum benefit payable to any participant cannot exceed two times the participant’s salary reduction election for the Health FSA for the year, or if greater, cannot exceed $500 plus the amount of the participant’s salary reduction election. Thus, for example, if an employee elects a Health FSA salary reduction of $2,500, the employer can match the employee’s contribution dollar for dollar up to a maximum of $2,500. If this were to happen, the employee would have $5,000 available in her or his FSA account for the plan year.
Health Care Reform has not eliminated the Health FSA. If an employer modifies plan documents as necessary and follows the rules summarized above, Health FSAs can continue to provide tax-free compensation to employees to pay for medical care expenses that are not covered by group health insurance.
First, for plan years beginning in 2013, the amount an employee can contribute to an FSA through salary reductions is capped at $2,500. Next, for plan years beginning in 2014, Health FSAs can only be offered through Section 125 Cafeteria Plans. Otherwise, the FSA would not be exempt from the ACA requirement that group health plans may not establish any annual limit on the dollar amount of benefits for any individual. Finally, the FSA itself must be structured to qualify as something called an “excepted benefit.” If the employer provides a Health FSA that does not qualify as an excepted benefit, the Health FSA is subject to the ACA’s market reform rules, including the requirement that non-grandfathered group health plans provide certain preventive care services without imposing any cost-sharing requirements for these services. Health HSA’s are considered group health plans under the ACA.
Excepted benefits include, among other things, accident-only coverage, disability income, certain limited scope dental and vision benefits, and certain long-term care benefits. In order to qualify an FSA as an excepted benefit, an employer must make available group health plan coverage that is not limited to excepted benefits. In other words, if it offers its employees the opportunity to elect group health coverage, an employer will have satisfied this part of the test.
In addition to the availability of group health coverage, the FSA must be structured so that the maximum benefit payable to any participant cannot exceed two times the participant’s salary reduction election for the Health FSA for the year, or if greater, cannot exceed $500 plus the amount of the participant’s salary reduction election. Thus, for example, if an employee elects a Health FSA salary reduction of $2,500, the employer can match the employee’s contribution dollar for dollar up to a maximum of $2,500. If this were to happen, the employee would have $5,000 available in her or his FSA account for the plan year.
Health Care Reform has not eliminated the Health FSA. If an employer modifies plan documents as necessary and follows the rules summarized above, Health FSAs can continue to provide tax-free compensation to employees to pay for medical care expenses that are not covered by group health insurance.
New Employer Rules Soften Start of Healthcare Reform
Wednesday, March 5, 2014
It is a work in progress. There are so many moving parts to Healthcare Reform that implementing the Affordance Care Act (ACA) requires adjustments as theory meets reality. In July 2013, the deadline for large employers to provide Minimum Essential Coverage (MEC) at affordable rates was pushed forward one year to 2015. In February 2014, new rules gave mid-sized employers another year ― to 2016 ― to do so. Recent guidance explains some of the ways these two types of employer can transition into compliance.
Large Employers
Large employers with at least 100 full-time employees (including full-time equivalents) still must offer affordable MEC in 2015. However, plan years that begin in 2014 (with start dates that haven’t recently been changed) won’t have to comply until the plan year beginning in 2015. Thus, if a plan year begins in October, compliance is not required until the October 2015 plan year. Also, the requirement that large employers offer minimum affordable coverage to all but 5%, or if greater 5, of their full-time employees (those who work at least 30 hours per week or the equivalent) has been changed. Now, for each calendar month in 2015 and any calendar month during the 2015 plan year that falls in 2016, the minimum participation rate has been reduced to 70%. The transition rules even give additional time to employers to ensure that their plans provide dependent coverage provided they take steps to satisfy this coverage requirement during the 2015 plan year.
Mid-Sized Employers
Mid-sized employers ― that is, those with 50-99 full-time employees (including full-time equivalents) ― are still large employers who must provide affordable MEC to their full time employees. However, because mid-sized employers may find it more difficult to comply with the ACA, the new rules delay until 2016 the date on which they must offer minimum essential affordable coverage to their full-time employees. Not so coincidentally, beginning in 2016 mid-sized employers will be eligible to obtain the coverage through the federal government’s online SHOP healthcare exchange, which was originally established to help small employers (fewer than 50 full time employees) find coverage. The SHOP exchange is currently online at https://www.healthcare.gov/what-is-the-shop-marketplace/.
In order to qualify for this deferred start date, an employer must certify that (a) it employed on average between 50 and fewer than 100 full time employees (including full time equivalents) during 2014, (b) there were no reductions in the size of its workforce or the overall hours of service of its employees during the period February 9, 2014, to December 31, 2014 (except for bona fide business reasons), and (c) the health coverage it offered as of February 9, 2014, was not eliminated or materially reduced (certain limited exceptions also apply). If these conditions are met, compliance is not required until the 2016 plan year.
While these and other changes will allow them to ease into compliance, both large and mid-size employers should not become complacent. These relaxations of the ACA’s implementation schedule do not change the underlying requirements that could subject them to significant penalties for failure to comply.
Large Employers
Large employers with at least 100 full-time employees (including full-time equivalents) still must offer affordable MEC in 2015. However, plan years that begin in 2014 (with start dates that haven’t recently been changed) won’t have to comply until the plan year beginning in 2015. Thus, if a plan year begins in October, compliance is not required until the October 2015 plan year. Also, the requirement that large employers offer minimum affordable coverage to all but 5%, or if greater 5, of their full-time employees (those who work at least 30 hours per week or the equivalent) has been changed. Now, for each calendar month in 2015 and any calendar month during the 2015 plan year that falls in 2016, the minimum participation rate has been reduced to 70%. The transition rules even give additional time to employers to ensure that their plans provide dependent coverage provided they take steps to satisfy this coverage requirement during the 2015 plan year.
Mid-Sized Employers
Mid-sized employers ― that is, those with 50-99 full-time employees (including full-time equivalents) ― are still large employers who must provide affordable MEC to their full time employees. However, because mid-sized employers may find it more difficult to comply with the ACA, the new rules delay until 2016 the date on which they must offer minimum essential affordable coverage to their full-time employees. Not so coincidentally, beginning in 2016 mid-sized employers will be eligible to obtain the coverage through the federal government’s online SHOP healthcare exchange, which was originally established to help small employers (fewer than 50 full time employees) find coverage. The SHOP exchange is currently online at https://www.healthcare.gov/what-is-the-shop-marketplace/.
In order to qualify for this deferred start date, an employer must certify that (a) it employed on average between 50 and fewer than 100 full time employees (including full time equivalents) during 2014, (b) there were no reductions in the size of its workforce or the overall hours of service of its employees during the period February 9, 2014, to December 31, 2014 (except for bona fide business reasons), and (c) the health coverage it offered as of February 9, 2014, was not eliminated or materially reduced (certain limited exceptions also apply). If these conditions are met, compliance is not required until the 2016 plan year.
While these and other changes will allow them to ease into compliance, both large and mid-size employers should not become complacent. These relaxations of the ACA’s implementation schedule do not change the underlying requirements that could subject them to significant penalties for failure to comply.
Small Employer Coverage Under the Affordable Care Act
Thursday, February 6, 2014
The Affordable Care Act (ACA) does not require small employers to offer health coverage to their employees. If coverage is offered, however, the coverage must meet ACA requirements. The only exception is for grandfathered plans. Grandfathered plans are those health plans that were in effect when the ACA was enacted on March 23, 2010 and have not been changed.
A small employer plan must provide the following Essential Health Benefits. If it does not, the plan must be changed unless it is a grandfathered plan.
Small employer plan deductibles are limited to $2,000 for individuals and $4,000 for families. Out-of-pocket expenses are limited to $6,250 for singles and $12,500 for families. If these limits are exceeded, the plan, unless exempt, must be changed.
The Small Business Health Options Program (“SHOP”) gives small employers the opportunity to go online (https://www.healthcare.gov/small-businesses/) and choose a health plan from among several coverage options and contribution levels. If an employer selects a SHOP plan, the coverage must be offered to all of its full-time employees (those working 30 or more hours per week on average). Generally, at least 70% of full-time employees must enroll. The minimum percentage may vary by state; for example, the New Hampshire minimum is 75%. The minimum enrollment requirement does not apply if SHOP coverage is selected during the open enrollment period that runs each year from November 15 to December 15.
A small business that buys SHOP coverage may also be eligible for a health care tax credit. In order to qualify, the employer must have fewer than 25 full-time equivalent employees making an average annual salary of $50,000 or less. The employer must pay at least half of the insurance premium. The tax credit is worth up to 50% of the employer’s contribution toward employee premium costs. The tax credit is highest for companies with fewer than 10 employees who are paid an average of $25,000 or less. The smaller the business, the bigger the credit.
A small employer plan must provide the following Essential Health Benefits. If it does not, the plan must be changed unless it is a grandfathered plan.
- Ambulatory patient services
- Emergency services
- Hospitalization
- Maternity and newborn care
- Mental health and substance use disorder services, including behavioral health treatment
- Prescription drugs
- Rehabilitative and habilitative services and devices
- Laboratory services
- Preventive and wellness services and chronic disease management
- Pediatric services, including oral and vision care
Small employer plan deductibles are limited to $2,000 for individuals and $4,000 for families. Out-of-pocket expenses are limited to $6,250 for singles and $12,500 for families. If these limits are exceeded, the plan, unless exempt, must be changed.
The Small Business Health Options Program (“SHOP”) gives small employers the opportunity to go online (https://www.healthcare.gov/small-businesses/) and choose a health plan from among several coverage options and contribution levels. If an employer selects a SHOP plan, the coverage must be offered to all of its full-time employees (those working 30 or more hours per week on average). Generally, at least 70% of full-time employees must enroll. The minimum percentage may vary by state; for example, the New Hampshire minimum is 75%. The minimum enrollment requirement does not apply if SHOP coverage is selected during the open enrollment period that runs each year from November 15 to December 15.
A small business that buys SHOP coverage may also be eligible for a health care tax credit. In order to qualify, the employer must have fewer than 25 full-time equivalent employees making an average annual salary of $50,000 or less. The employer must pay at least half of the insurance premium. The tax credit is worth up to 50% of the employer’s contribution toward employee premium costs. The tax credit is highest for companies with fewer than 10 employees who are paid an average of $25,000 or less. The smaller the business, the bigger the credit.
Does Healthcare Reform Have A Future?
Monday, October 28, 2013
I suppose it is a mark of the times that health care reform has long ceased to be a public policy debate about the state of health care in America. Instead, it marks the latest dividing line between opposing visions of what America is and what it ought to be. To those opposed, Obamacare represents an existential threat to the continued existence of the prototypical self-reliance individualism that defines the “true” American. To those convinced that “social justice” demands that our society provide what can be the most basic of human needs, the Affordable Care Act, passed by the legerdemain of an ascendant Democratic Party, remains a fundamental step toward erasing inequality of every kind in America. Both sides have a point. The United States has indeed been populated by those who saw opportunity in many forms and sacrificed to take advantage of it to benefit themselves and their families. On the other hand, Pilgrim settlers in New England sought religious refuge to create their own “City on a Hill” and America has never lacked for utopian ideas and those who believe in them. Oddly, both points of view are quintessentially American. We want to reward hard work and risk taking and at the same time we recognize a civic to help others.
What is lost in this debate, however, is a more immediate concern. How do we solve the problems facing health care in America. While it is indeed imperfect, the Affordable Care Act has sown seeds for improvement in what was a deeply flawed, was increasingly dysfunctional, expensive, and unworkable health care system. We cannot simply revert to the world as it existed prior to the enactment of health care reform in 2010, and this point has so far escaped the notice of many caught up in today’s mindless political debate.
So, does health care reform have a future? The answer: Yes, but it is a hugely complex problem and it will be expensive, it will not be the most logical outcome, and it will only happen when those who elect our politicians tell them that something must be done to make it better. The road will not be straight.
What is lost in this debate, however, is a more immediate concern. How do we solve the problems facing health care in America. While it is indeed imperfect, the Affordable Care Act has sown seeds for improvement in what was a deeply flawed, was increasingly dysfunctional, expensive, and unworkable health care system. We cannot simply revert to the world as it existed prior to the enactment of health care reform in 2010, and this point has so far escaped the notice of many caught up in today’s mindless political debate.
So, does health care reform have a future? The answer: Yes, but it is a hugely complex problem and it will be expensive, it will not be the most logical outcome, and it will only happen when those who elect our politicians tell them that something must be done to make it better. The road will not be straight.
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