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R&R Insurance Blog

ACA Affordability Percentages Will Increase for 2019

Posted by Pete Frittitta

ACA Affordability Percentages will IncreaseThe IRS recently issued a Revenue Procedure to index the medical insurance premium contribution percentages used to determine the affordability of an employer’s plan under the Affordable Care Act (ACA). These updated affordability percentages are effective for taxable years and plan years beginning Jan. 1, 2019. For plan years beginning in 2019, employer-sponsored coverage will be considered affordable if the employee’s required contribution for self-only coverage does not exceed 9.86 percent of the employee’s household income for the tax year. This is for purposes of both the “play or pay” rules and premium tax credit eligibility.

This represents a significant increase from the affordability contribution percentage for 2018. The 2018 affordability percentage for the “play or pay” rules and premium tax credit eligibility was 9.56 percent. As a result, some employers may have additional flexibility with respect to their employee contributions for 2019 to meet the adjusted percentage. For more guidance on this and other compliance topics, contact a KnowledgeBroker.

Topics: Affordable Care Act

An Important Health Care Reform Update

Posted by Pete Frittitta

clock.jpgLast Saturday, the U.S. Senate passed their version of a tax reform bill, the Tax Cuts & Jobs Act. The bill is not yet finalized. While the Senate and the House have passed similar tax reform plans, negotiators from both chambers need to develop agreement on a single piece of legislation that both chambers must approve before it is sent to the President for his signature.

One component of the Senate Bill that is not in the House Bill is regarding the Individual Shared Responsibility Payment (aka “Individual Mandate”) provision of the Affordable Care Act (ACA). If the Senate Bill provision makes its way into the final version of a tax reform bill, the Individual Mandate Tax would be set to zero dollars. However, all other ACA-related taxes would remain intact including the “Employer Mandate” (discussed here later).

While any other legislative actions to repeal/replace/repair the ACA remain to be seen, the Trump Administration has been busy focusing on what it can do via the rule-making agencies, namely, the Treasury (IRS), the Department of Labor (DOL) and the Department of Health and Human Services (HHS). Following is a summary of key updates, changes, and proposed changes:

FAST APPROACHING

  • It’s that time of year again. ACA Employer Reporting (IRS Forms 1094-C and 1095-C) is still required. For what it’s worth, none of the discussions involving ACA repeal/replacement/repair mentioned the elimination of reporting. This required reporting will be alive and well for some time.

    The Individual statements for 2017 must be furnished by January 31, 2018. IRS returns for 2017 must be filed by February 28, 2018 (April 2, 2018, if filed electronically, since March 31, 2018, is a Sunday). R&R has updated our Employer Reporting Tool for 2017 which will generate the required forms in PDF format (paper filing allowed by IRS for less than 250 forms).
TAXES and PENALTIES
  • Check your mailbox. The IRS recently released an outline of the processes and form letters that it will use to enforce assessment of ESRPs (Employer Shared Responsibility Penalties, aka the “employer mandate”). These are penalties that apply to large employers (with 50 or more full-time equivalent employees) to offer a medical plan (to at least 95% of its full-time employees) that is of a “minimum value” and is “affordable.”

    The IRS began to issue assessment letters last week informing employers of their liability for 2015 calendar year penalties. These letters will have a response deadline of 30 days from the date the letter was written. Timely response is crucial to maintain your appeal rights. Read more here regarding sample letters and the processes involved.
  • No more “Reinsurance Fees.” The ACA’s “Reinsurance Fees” were imposed for 2014, 2015, and 2016 only. The 2nd (last) installment payment for 2016 was to be made by November 15, 2017.
  • One more round. The PCORI fees continue to apply but are scheduled to sunset. The PCORI fees will no longer apply beginning with plan years ending on or after October 1, 2019.
  • “HIT” Restart. The ACA’s Health Insurance Tax (HIT) is a permanent, annual fee on health insurers that began in 2014. It was suspended for 2017 as part of the 2015 Budget Act but will restart for 2018 collection and payment. The traditional insurance market continues to be further challenged by innovative self-funding and level-funding arrangements which also have the advantage of being exempt from the ACA’s “HIT” (3.5% - 5% of premium).
  • Where did they park that Cadillac? Although it has been delayed until 2020, the ACA’s “Cadillac Tax,” if it is ever implemented, would put pressure on employers to reduce benefits to avoid/minimize paying a 40% excise tax. By its design, it is not a question of “if” an employer will be subject to the “Cadillac Tax” but “when.”

PROPOSED RULES

  • Simplified…almost. On October 6, 2017, the DOL, HHS and the IRS issued two interim final rules expanding certain exemptions from the ACA’s contraceptive coverage mandate. As a result, objecting employers are no longer required to choose between direct compliance and compliance through the accommodation. A plan sponsor, issuer and plan covered by these exemptions will not be penalized for failing to include contraceptive coverage in the plan’s benefits. Note that fully-insured policies will most likely need to file policy riders as appropriate once the rule is final.
  • Going up! On October 27, 2017, the Department of Health and Human Services (HHS) released its Proposed Notice of Benefit and Payment Parameters for 2019. Following are the current and proposed out-of-pocket maximums:
    • For 2017, the out-of-pocket maximum is $7,150 for self-only coverage and $14,300 for family coverage.
    • For 2018, the out-of-pocket maximum is $7,350 for self-only coverage and $14,700 for family coverage.
    • Under the proposed rule, the out-of-pocket maximum would increase for 2019 to $7,900 for self-only coverage and $15,800 for family coverage.
  • Who doesn’t want more flexibility? The same proposed rules would allow states more flexibility in their options to select a new EHB-benchmark (Essential Health Benefits) plan on an annual basis beginning in 2019. This would provide more plan design choices for the small group market (less than 50 employees in Wisconsin).
  • Off the table for now. The HIPAA certification requirement is delayed indefinitely, pending guidance from HHS as on October 4, 2017, HHS withdrew its proposed rule in order to reexamine the issues and explore options and alternatives to comply with the HIPAA certification requirement. This would apply to all self-funded plans including medical reimbursement HRAs.
DEVELOPING
  • Back to the drawing board. The EEOC’s (Equal Employment Opportunity Commission) “final rule” regarding “voluntary” wellness incentives turns out to be not so final after all as it has been challenged by the courts to revisit its position regarding the definition of “voluntary.” The current rules were not “vacated” by the courts so the EEOC guidance should still be complied with. Stay tuned.
  • That’s an order!  Several weeks ago, President Donald Trump signed “Presidential Executive Order Promoting Healthcare Choice and Competition Across the United States.” The executive order directs federal agencies to expand access to MEWAs (Multiple Employer Welfare Arrangement), HRAs and short-term, limited-duration insurance. More will follow on this as the agencies’ deadline to draft proposed regulations is December 11, 2017.
  • Coming home? Even without a “repair” or “replacement” of the ACA, it is anticipated that there will be a number of states that will apply for Section 1332 State Innovation Waivers. This has been discussed recently for consideration in Wisconsin by the Office of the Commissioner of Insurance.
The disruption and turbulence in the employee benefits market will continue. For now, the Affordable Care Act remains the “law of the land” and requires much in the way of compliance for which we have the knowledge, resources and experience in helping our clients. R&R continues to monitor discussions at the federal and state levels with respect to legislative changes that will impact employee benefits. As always, do not hesitate to contact your R&R Benefits Consultant with any questions or concerns.

Topics: Affordable Care Act, ACA