If you sponsor or administer a group health plan, you are almost certainly taking steps to prepare for legal requirements that will become effective on or before January 1, 2015. New rules under HIPAA, the Affordable Care Act (ACA), and other laws will affect your plans. As we pass the midpoint of 2014, it is an appropriate time to take stock of the measures you have completed and those you will need to take regarding recent guidance. The following list addresses a number of the health plan matters that we have discussed with our clients in recent weeks.
Privacy and Security. After a major effort to comply with the comprehensive privacy and security regulations in 2013, many plan sponsors still have work to do to finish their implementation programs. These efforts may include fine-tuning policies and procedures, completing training, and, most of all, finalizing revisions to long-standing business associate agreements before the grace period for those revisions expires on September 23, 2014.
Health Plan ID Numbers. It has taken the federal government a long time to implement the requirement that health plans obtain a unique identification number, but a deadline has been set. Larger plans (with receipts of at least $5 million) must obtain this ID number by November 5, 2014. Smaller plans have an additional year to obtain the ID. Although some commenters have suggested that employers wait before filing for a health plan ID number, employers will need to allow adequate lead time to complete the process.
AFFORDABLE CARE ACT
Employer Mandate. Having already benefited from a one-year delay, most employers will need to comply with the employer mandate for health coverage under the ACA in 2015. Employers that do not offer affordable health coverage that meets prescribed standards for value to all full-time employees may be required to make a payment to the federal government. To avoid these payments, employers will need to identify which of their employees are full-time (working at least 30 hours per week) and make certain other determinations. Final regulations issued earlier this year address both basic rules for implementing the employer mandate and various specific situations. The final rules also include certain transitional rules that may help employers comply with the mandate in 2015. Employers must take steps in 2014 to prepare for the implementation of these requirements.
Reporting. The ACA’s shared responsibility requirements carry with them certain reporting obligations. Although the IRS has not yet made available the actual forms that will need to be completed to meet these obligations, it has published considerable guidance on the reporting requirements arising from both the employer mandate and the individual mandate. Employers should consider how they will collect the data for 2015 that will need to be provided to individuals and the government under these new rules. Because the collection of that data may involve systems changes, it is not too early to begin this review.
Waiting Periods. Effective in 2014, the ACA limits the length of waiting periods under group health plans to 90 days. The 90-day period may not be extended to allow coverage to begin on the first day of the next month. However, the waiting period limitations are not intended to supersede permissible eligibility requirements under a plan. The rules allow plans to require an employee to work a cumulative number of hours (not to exceed 1,200) before the employee becomes eligible to participate. In addition, under recently finalized regulations, an employer may regard this limit as beginning after an orientation period of up to one month. Employers, particularly those with high rates of employee turnover, may consider whether to refine their eligibility requirements in view of these new rules.
Payment of Premiums for Individual Coverage. As the implementation of the employer mandate drew closer, employers started to hear about various types of health benefit arrangements that involve the purchase of individual health insurance policies. Last year, the IRS published a notice that essentially prohibits active employees from purchasing individual health insurance with pre-tax dollars. This prohibition applies whether the coverage is purchased through a cafeteria plan or through payments or reimbursements made by an employer. This notice reversed IRS guidance that had been in place for more than 50 years. Employers presented with an arrangement that involves the purchase of individual health insurance coverage will need to pay careful attention to these rules.
Health Reimbursement Accounts. The same notice that addresses the payment of premiums for individual coverage provides guidance on Health Reimbursement Accounts (HRAs) under the ACA. Perhaps most significantly, it sets forth two methods for integrating an HRA into a group health plan to meet the ACA’s prohibition against annual and lifetime dollar limits and preventive care requirements. Both methods, for example, require the plans to allow employees to opt out of the HRA and forfeit amounts in their HRA accounts. Employers with HRAs should review how their arrangements are documented to make sure that they comply with these integration requirements.
Cost-Sharing Limits. The ACA establishes limits on the amount of out-of-pocket expenses (such as deductible, co-payments, and co-insurance) that a plan participant will need to pay before the plan reimburses medical expenses at 100 percent. The limits are $6,350 and $12,700 for single and family coverage, respectively, in 2014 and will increase to $6,600 and $13,200 in 2015. Regulations addressing this subject clarify that network-based plans will need to meet these requirements only with respect to in-network expenses. Other guidance offers a one-year reprieve from the obligation to coordinate expenses that are administered by different plan vendors to meet a single unified cost-sharing limit. This reprieve applies, for example, where major medical claims are administered by a third-party administrator and prescription drug claims are administered separately by a pharmacy benefit manager. The reprieve applies only to plan years beginning in 2014. In preparation for 2015, plan sponsors that carve out the administration of certain types of benefits under their medical plans will need to make sure that plan vendors can share data appropriately to track out-of-pocket expenses against the unified cost-sharing limit (or that the sum of the cost-sharing limits for each type of benefit is low enough that coordination is not needed).
Excepted Benefits. Plans that qualify as excepted benefits will not be subject to certain ACA requirements and will not disqualify individuals from obtaining a subsidy for coverage purchased through a health insurance exchange. Under guidance issued late last year, excepted benefits now include:
Stand-alone dental and vision plans, whether or not employees must contribute toward their cost
Certain employee assistance plans
Certain plans designed to wrap around individual coverage purchased by employees for whom the employer's medical plan is unaffordable
Employers may consider whether they wish to take advantage of any of these new rules.
COBRA and Health Insurance Exchanges. The Department of Labor (DOL) has published revised model COBRA forms that alert individuals who are entitled to elect continuation coverage under COBRA of the alternatives that may be available through the ACA’s Health Insurance Marketplace (otherwise known as the health insurance exchanges). Although this information is not strictly required to be included in COBRA notices, employers may wish to inform those considering a COBRA election about other coverage options that are available to them, potentially at a lower cost.
Same-Sex Marriage. Employers that have not already reviewed the definition of “spouse” and other relevant terms of their health and cafeteria plans following the U.S. Supreme Court’s decision to recognize same-sex marriage may wish to do so in view of other developments. These developments include guidance issued by the IRS and DOL and the recognition of same-sex marriage in an increasing number of states, including Pennsylvania, New Jersey, New York, Delaware, Maryland, and California, as well as Washington, D.C.
Subrogation/Third-Party Reimbursement. Many employers face ongoing issues with the enforcement of provisions allowing plans to recover benefit costs from third parties responsible for a participant’s injury or illness. Employers that have sought to recover amounts paid from their medical (or disability) plans in these circumstances know how important the subrogation or third-party reimbursement provisions of a plan document or summary plan description (SPD) can be. The significance of these provisions was reinforced last year when the U.S. Supreme Court upheld a plan’s specific terms providing that the plan is not responsible for paying a portion of a participant’s attorneys’ fees. Employers may wish to review the relevant provisions in their plan documents and SPDs.
Health FSA Carryforwards. Employers that sponsor health flexible spending arrangements (health FSAs) may consider whether they wish to allow employees to carry forward unused contributions from one year to the next. An IRS notice issued last year allows for these carryforwards up to $500. This notice required employers to choose between this new carryforward opportunity and the two-and-a-half-month grace period that many employers implemented to allow an employee additional time to incur expenses that could be applied against his or her account. More recent guidance describes how to address carryforwards for a participant who enrolls in a high deductible health plan with a health savings account, given that any amount in a general purpose health FSA would preclude the participant from making or receiving health savings account contributions.
Religious Freedom Restoration Act. In a very recent decision, the U.S. Supreme Court ruled that the Religious Freedom Restoration Act protected three closely held for-profit corporations from the requirement to cover certain forms of contraception that was developed under the preventive care provisions of the Affordable Care Act. The scope of this ruling may be tested in future years.
As the federal health care reform effort gained steam, Ballard Spahr attorneys established the Health Care Reform Initiative to monitor and analyze legislative developments. With federal health care reform now a reality, our attorneys are assisting health care entities and employers in understanding the relevant changes and planning for the future. They also have launched the Health Care Reform Dashboard, an online resource center for news and analysis on developments under the ACA. The initiative includes attorneys in the firm’s Employee Benefits and Executive Compensation Group.