Category Archives: Health Care Reform

The Impact of the Employer Mandate Penalty Delay

From the National Association of Health Underwriters, 7/4/13:


The Department of the Treasury announced late yesterday that the Obama Administration intends to delay the application of the health reform law’s employer shared responsibility payments (aka employer mandate penalties, not the mandate itself) until 2015. Furthermore, information reporting by employers and health insurers regarding employer-sponsored coverage relative to the individual mandate and pay-or-play reporting will not be mandatory until 2015.

What this means is that the IRS will not assess employers penalties for failure to offer coverage in 2014 or for coverage mistakes in 2014. It seems that the earliest an employer could receive a coverage penalty would be 2015, with payments presumably due in 2016. NAHU has issued a press statement and our counsel, Washington Council Ernst and Young, has also prepared an alert on the change.

The blog post from the Treasury Department states that formal guidance on implementation of the delays will be issued in the next week, which is great news because more information is certainly needed. The announcement issued yesterday was certainly dramatic and perhaps even a little exciting to all of us health-policy nerds out there, but it’s also fairly vague and raises many questions.

On one hand, NAHU and our coalition partners have been asking for more robust transition relief for employer requirements since the get-go. While we have always pursued a legislative track of working toward substantive changes in the employer-mandate requirements, on the regulatory front we have consistently asked the Administration for more time, simpler requirements and enforcement relief. NAHU has had longstanding concerns that employers attempting to comply with very complex requirements that differ significantly from time-tested benefit and employment practices on very short notice could be penalized for inadvertent violations. As such, we are pleased that the Administration has acknowledged the need to provide transition relief and we hope the extra time will allow businesses recovering from the economic hardships of the past five years to make sound business decisions to comply with the health reform law’s requirements without fear of significant financial penalties in the first year of changed operations.

On the other hand, we are sure that all of you who are helping employers large and small comply with this new law are being besieged with questions about what this hoopla really means. First and foremost, can we all stop counting employees right now, relax for a year and then start back up with all of this next summer? Or should we all just enjoy the fireworks and a quick celebratory cocktail or cupcake this weekend, then get right back to work because the IRS will require employers to take reasonable compliance steps over the coming year and employers will still need all the help they can get from their licensed benefit professionals? No one is sure yet, but we are considering the last few sentences of the Treasury blog post as a clue. The Administration very clearly states: “During this 2014 transition period, we strongly encourage employers to maintain or expand health coverage. Also, our actions today do not affect employees’ access to the premium tax credits available under the ACA (nor any other provision of the ACA).”

We’re also wondering how this announcement will impact existing transition relief provided under the proposed employer shared-responsibility rules, and if there will any further transitions to make the path into 2015 smoother. As a reminder, we already have transition relief for employers contributing to multiemployer plans, for those that do not yet fully offer dependent coverage and for those who have off-calendar plan years. This is just a guess, but we are thinking that by giving 2014 as a transition year, the Administration will be fairly serious about penalties and will want to move forward with all of the shared-responsibility requirements right away in 2015.

Another concern many NAHU members have raised is how this announcement will impact exchange enrollment and distribution of exchange-based subsidies in the year ahead. While the blog post clearly states that distribution of exchange-based premium tax credits will be unaffected by the delay, it also said that other provisions of the law remain unchanged. Therefore, if individuals have a valid offer of affordable and minimum-value employer-sponsored coverage, they will technically not be qualified for exchange-based individual subsidies when exchange coverage is issued in 2014. Given the large number of bigger employers that offer coverage today to employees, and given our guess that the Administration will still require at least a good-faith effort for employers to comply with the mandate’s provisions over the course of the next year, we’re not sure how the proposed delay will influence employer behavior. However, the guidance expected in the coming week could help make a more accurate prediction.

Finally, there are lots of provisions of the law that relate to the employer-mandate requirements and reporting requirements, but aren’t contingent on them. Until we hear otherwise, those requirements and provisions of the law continue on unaffected. Provisions and requirements we believe this announcement does not impact include:

Individual mandate. Presumably, the IRS will monitor compliance with the individual mandate through self-certification on each individual’s tax return.

The law’s health insurance market reforms that go into effect as of the first day of the plan year that begins in 2014. For example, these reforms include rating changes in the individual and small-group markets, out-of-pocket limits for all markets, annual and lifetime limits, prohibitions on waiting periods of more than 90 days for all plans and many more. This chart identifies those reforms and whether they are applicable to all plans or just non-grandfathered plans.

Health insurance exchanges. Pending further notice, open enrollment is still expected to begin on October 1, 2013, for all state-based, partnership and federally facilitated marketplaces.

The marketplace notice. Unless the Administration issues an additional delay, all employers subject to the Fair Labor Standards Act (not just PPACA’s employer-mandate provisions) are required to send a marketplace notice to all employees by October 1, 2013. Also, the plan affordability/minimum-value information required to be provided in the notice is still required. Affordability/minimum value are not concepts limited to the employer-mandate provisions of the law—they are concepts relevant to ANY employee (part-time, full-time, temporary, seasonal,  etc.) of ANY employer (regardless of size) who is eligible for employer-sponsored coverage and who wishes to apply for a subsidy in the exchange.

Summaries of Benefit and Coverage. Unless we receive additional guidance that indicates otherwise, the notices for the coming plan year must include information about whether or not a plan meets the minimum-value or minimum-essential-coverage standards. These standards relate to the employer-mandate provisions in the law, but they aren’t limited to it, and the SBC requirements, which apply to all plans, are also generally unaffected by yesterday’s announcement.

PCORI fee. The first payment of this fee is due by July 1, 2013, if you have a calendar plan year or a plan year that ended in October or November of 2012. For fully insured plans, the issuer will pay this fee, but for self-funded arrangements or plans that include both a fully insured and self-funded component, the payment responsibility lies with the employer.

The transitional reinsurance fee and the new national health insurance premium tax. Both will be built into 2014 premiums. Other new taxes, like the medical device tax and pharmaceutical tax, will also continue and impact coverage costs.

W-2 reporting requirements. These still apply for employers that issue more than 250 W-2s.

The expiration of annual limit waivers for certain limited medical benefit plans. This type of group coverage may not continue after January 1, 2014.

The limit on health FSA salary reductions.

NAHU will continue to provide you with the latest information about how this change to the law’s implementation will impact employer-sponsored benefit plans as soon as additional guidance becomes available. Furthermore, we have changed the focus of our July compliance corner webinar to address these requirement changes. If you have not registered already, you can sign up here for the free one-hour webinar, featuring Anne Phelps of Washington Council Ernst and Young, to be held on Thursday, July 11, at 1:00 pm Eastern. The session is limited to 1,000 participants; if you can’t make it or it fills up, the session will be recorded and the slides and webinar recording will be posted online in the members section of our website by July 12.


Medical Loss Rebates in the mail this month…

Under Health Care Reform, Insurance Carriers are required to return any excess premiums they received to policyholders.  These checks come out in July and are required to be delivered by August 1, and most of the major carriers have announced they will be in compliance. HEalth and Human Services reports about 500 million will be returned throughout the US, although there are some other estimates as high as 3.9 billion.   United Healthcare will be returning more than $148 million.  Aetna is returning $27.8 million


THis averages about $100 a family.  Remember that, if you charge your employees for coverage, their share is supposed to be returned to them.

Reference-based pricing?

    This article is about making your employees shop for the least expensive coverage- “We will allow you $12, 000 for that procedure” – and if the employee picks a more expensive provider, they pay the difference. – Reeve
      Anne Matthews, Wall Street Journal, June 25
      As companies seek ways to curb health-care spending, insurer WellPoint Inc. WLP +0.17% is rolling out a program that lets employers pay only a set amount for a medical service, asking workers who select costlier care to pay the difference.

    The idea has been tested for years by a limited number of large employers. But the new option from the second-biggest U.S. insurer, which will be available for coverage that kicks off next January, will be offered broadly to any client with at least 100 employees.

    Under the approach, workers are supposed to be given choices among hospitals, doctors or other providers to be used for a procedure—such as an imaging scan or even a surgery—each with pricing and quality information. If they pick one that costs more than the employer offers, they pay the difference. If workers opt for a provider that costs less than the employer’s price, an employer could choose to offer them a credit, WellPoint said.

    The approach, known as reference-based pricing, is one of the options that companies are using to put more choice and responsibility on the shoulders of workers—ranging from high deductibles to “defined contribution” designs that supply a lump sum for health benefits and let workers pick their own plans in a marketplace.

    Benefits consultants said that broader availability of the per-procedure pricing setups, if they work smoothly, may spark more widespread adoption by employers. A survey of large and midsize employers by Aon AON -0.94% Hewitt, a unit of Aon PLC, released earlier this month, found that 8% were using the approach. However, nearly two-thirds were considering the model for the future.

    The new approach “encourages a member or employee to shop and become a smarter health-care consumer,” said Ken Goulet, chief executive of WellPoint’s commercial business unit, who said the company has seen “strong interest” from employers.

    WellPoint said its program can include more than 900 different services. The vast majority are routine things like lab tests, but the list also includes some more complex procedures like hip and knee replacements and bariatric surgeries.

    Consultants said that other insurers are also offering such options, though generally not as broadly as WellPoint will. Aetna Inc. AET -0.08% said it started offering reference-based pricing to self-insured companies with at least 250 workers in most of its markets for plans starting this year, and has a “handful” of big clients signed up. The program covers up to 11 outpatient procedures including imaging scans and colonoscopies.

    Cigna Corp. CI -0.10% said it has been piloting the approach with a big client since 2011, but has seen mixed results, and is considering whether to launch more pilots. The Cigna test found that employees ended up paying around $600 on average out of their pockets for imaging scans, signaling that they may not have been shopping around as the program intended. “We do not want to roll out solutions that will be riddled with consumer gotchas,” said Wendy Sherry, vice president for product development at Cigna.

    Employers will want to be sure that any reference-based pricing program can be explained clearly to employees, is simple to use, can offer multiple different providers, and provides accurate and complete information about costs and quality, consultants said. Otherwise, “it’ll just be seen as unworkable by the workforce,” said Alexander Domaszewicz, a principal at Mercer, a unit of Marsh & McLennan Cos. MMC -0.92%

    WellPoint, which has tested its program with some big clients, said it has seen good results. The insurer recently announced that a version used by the California Public Employees’ Retirement System cut the costs of hip and knee replacements by 19% and found similar or better outcomes at lower-cost hospitals.

    WellPoint is working with Castlight Health Inc., which has an online tool that gives pricing and other information about health-care providers. The companies will offer Web and printed materials and a call-in line for employees, and Castlight will send people to employers’ work locations to train workers on how to use the service. WellPoint and Castlight said workers would get quality information about providers drawn from multiple sources.


    What about a State Exchange

    The exchanges in more than half the US will be Federally Facilitated Exchanges (FFE), but there will be 18 state exchanges.  How do the rules work on a State Exchange?

    How do employers use exchanges?

    There is rolling enrollment for employers, but, upon enrollment, the employer is locked into the plan for one-year periods. The plan premiums are also locked in for the same amount of time. Once the employer enrolls in a state exchange:

    • The employer must offer Exchange coverage to all employees.
    • The Exchange must provide an aggregate bill to the employer for all employees.
    • Employers must notify the Exchange about any employee change of status, for example, adding dependents or terminating employment.
    • Employers with multiple worksites can offer access to a single Exchange or to state Exchanges where employees are located.


    Health insurance tax repeal gaining traction

    Interesting concept- Of course we don’t want higher premiums!  Here is the question – if you start repealing the funding methods in an already underfunded bill, how are we gonna pay for all of Health Care Reform? – Reeve


    Kathryn Mayer, LifeHealthPro 6/28/13

    The health insurance industry is pushing legislation that would repeal the new tax on health insurance plans — and it has some serious support.

    The Jobs and Premium Protection Act (H.R. 763), bipartisan legislation to repeal the health insurance tax in President Obama’s health care law, now has 218 cosponsors in the House, America’s Health Insurance Plans reported this week.

    For months, the carrier group has slammed the tax and thrown its support at the legislation to repeal it.

    The House bill was introduced by Reps. Charles Boustany, R-La., and Jim Matheson, D-Utah.

    Related story: Senate Dems vote to repeal part of PPACA

    The Patient Protection and Affordable Care Act imposes a new sales tax on health insurance that starts at $8 billion in 2014, increases to $14.3 billion in 2018, and will increase based on premium trend thereafter. The Joint Committee on Taxation estimates that the health insurance tax will exceed $100 billion over the next decade.

    Revenue from the tax will help pay for PPACA, which is expected to extend coverage of millions of uninsured Americans.

    Opponents argue the fees would be largely passed through to consumers in the form of higher premiums on private coverage.

    “Taxing health insurance makes it more expensive, and that is the opposite of what health care reform was supposed to accomplish,” AHIP President and CEO Karen Ignagni said.

    In comments submitted to the House Ways and Means Committee Work Groups in April, AHIP wrote the “tax will be particularly painful for vulnerable populations, including consumers who buy coverage on their own, small business owners who struggle to provide coverage to their employees, seniors who rely on the Medicare Advantage program as a health care safety net, and low-income people who are served by state Medicaid programs.”

    Small business groups also have been fighting back against the tax, arguing it will kill thousands of private-sector jobs.

    A study by the National Federation of Independent Business suggested that the health care tax could reduce private-sector employment by several hundred thousand jobs over the next decade, more than half of which would come from small businesses.

    But in testimony last month Paul Van de Water, an economist with the Center on Budget and Policy Priorities, said that those claims that the tax will kill jobs were “unfounded.”

    “CBO foresees a small net reduction in labor supply, primarily because some people who now work mainly to obtain health insurance will choose to retire earlier or work somewhat less, not because employers will eliminate jobs,” he said.

    The bottom line, the administration has argued, is that the tax is needed to help pay for the law.

    “The health insurance tax forms part of a carefully thought-out structure to expand health insurance coverage and slow the growth of health care costs without adding to the budget deficit,” Van de Water said. “Any effort to modify or repeal this tax must not undercut any of these critical objectives.”


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    Reeve Conover is a Registered Representative. Securities offered through Cambridge Investment Research, Inc., a Broker/dealer member FINRA/SPIC. Cambridge and Conover Consulting are not affiliated. Licensed in SC, NC, NY, CT, NJ, and CA. - SIPC - Brokercheck