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  • Healthcare Reform Comments Off on House Replublicans introduce bill to delay ACA Taxes

    House Republicans have unveiled a set of bills that would delay some of the Affordable Care Act taxes that have bedeviled the healthcare industry.

    Most notably for health insurers, one of the bills would suspend the health insurance tax (HIT) for two years. The catch is that in 2018, the exemption will only apply to individual market, group market, Medicare Advantage and Part D plans, and insurers must provide the plan holder with a premium rebate. In 2019, though, the bill would delay the tax for all insurers.

    The HIT has long been opposed by the health insurance industry, which lobbied successfully to have Congress pass a one-year moratorium on the tax for 2017. One analysis predicted that the tax’s return in 2018 will raise premiums by an average of 2.6%.

    Another bill introduced by House GOP lawmakers would implement a one-year delay of the Cadillac tax on high-cost employer health plans. It would also give employers “three years of retroactive relief and one year of prospective relief“ from the ACA mandate that they provide health insurance to their employees—a provision that complements Republicans’ push to repeal the individual mandate in their tax overhaul legislation.

    The rest of the bills would implement a five-year delay on the medical device tax, enact a two-year delay on the tax on over-the-counter medications, and suspend the HIT for two years for health plans regulated by Puerto Rico, according to an announcement from the Ways and Means Committee.

    “As we continue working toward a patient-centered healthcare system, Ways and Means Republicans are taking action to provide targeted relief from taxes that stand in the way of affordable healthcare, innovative treatments, access to medications, more jobs and bigger paychecks for hardworking Americans,” said Committee Chairman Kevin Brady, R-Texas.

    A spokeswoman for the committee told Reuters that the bills wouldn’t be included in the GOP’s broader tax overhaul bill. A more likely vehicle would be Congress’ year-end spending bill, but attaching them to that legislation could prove challenging because Republicans will need Democrats’ support.

    In fact, some Republicans’ resistance to delaying the Cadillac tax had reportedly been a sticking point in behind-the-scenes negotiations with Democrats—with some suggesting the GOP wants to keep the tax in play as leverage to boost future efforts to limit the tax-exempt status of employer plans.

  • Healthcare Reform Comments Off on The Future Of The Affordable Care Act Week 8: An Employer’s Guide To The Collapse Of The American Health Care Act (Spoiler Alert—The News Is Not All Bad)

    By Alden Bianchi & Edward Lenz on March 28, 2017
    The stunning failure of the U.S. House of Representatives to pass the American Health Care Act (AHCA) (which we previously reported on here) has political and policy implications that we cannot forecast. Nor is it clear to us whether or when the Trump administration and Congress will make another effort to repeal and replace, or whether Republicans will seek Democratic support in an effort to “repair,” the Affordable Care Act (ACA). And we are similarly unable to predict whether and to what extent the AHCA’s provisions can be achieved through executive rulemaking or policy guidance. The purpose of this post is not to assess why the AHCA failed, or to speculate on the outcome of any future legislative efforts to repeal and replace the ACA, but rather to offer some thoughts about how the AHCA’s failure will impact employers in the near term. As our title suggests, the news may not be all that bad.

    Immediate Impact on Employers

    Employers were not a major focus of the architects of the ACA, nor were they a major focus of those who crafted the AHCA. This is not surprising. These laws address health care systems and structures, especially health care financing. Rightly or wrongly, employers have not been viewed by policymakers as major stakeholders on those issues. In a blog post published at the end of 2014, we made the following observations:

    The ACA sits atop a major tectonic plate of the U.S. economy, nearly 18% of which is health care-related. Health care providers, commercial insurance carriers, and the vast Medicare/Medicaid complex are the law’s primary stakeholders. They, and their local communities, have much to lose or gain depending on how health care financing is regulated. The ACA is the way it is largely because of them. Far more than any other circumstance, including which political party controls which branch of government, it is the interests of the ACA’s major stakeholders that determine the law’s future. And there is no indication whatsoever that, from the perspective of these entities, the calculus that drove the ACA’s enactment has changed. U.S. employers, even the largest employers among them, are bit players in this drama. They have little leverage, so they are relegated to complying and grumbling (not necessarily in that order).

    With the AHCA’s collapse, the ACA remains the law of the land for the foreseeable future. The AHCA would have zeroed out the penalties on “applicable large” employers that fail to make qualified offers of health coverage, but the bill’s failure leaves the ACA’s “play or pay” rules in full force and effect. The ACA’s reporting rules, which the AHCA would not have changed, also remain in effect. This means, among other things, that many employers, especially those with large numbers of part-time, seasonal, and temporary workers that face unique compliance challenges, will continue to be in the position of “complying and grumbling.”

    This does not mean that nothing has changed. The leadership of the Departments of Health and Human Services, Labor and Treasury has changed, and these agencies are now likely to be more employer-friendly. Thus, even though the ACA is still the law, the regulatory tone and tenor may well be different. For example, although the current complex employer reporting rules will remain in effect, the Treasury and IRS might find administrative ways to simplify them. Similarly, any regulations issued under the ACA’s non-discrimination provisions applicable to insured health plans (assuming they are issued at all) likely will be more favorable to employers than those issued under the previous administration.

    There are also unanticipated consequences of the AHCA’s failure that employers might applaud. We can think of at least two.

    Stemming the anticipated tide of new state “play or pay” laws
    The continuation of the ACA’s employer mandate likely will put on hold consideration by state and local governments of their own “play or pay” laws.

    In anticipation of the repeal of the ACA’s employer mandate, the Governor of Massachusetts recently introduced a budget proposal that would reinstate mandated employer contributions to help cover the costs of increased enrollment in the Medicaid and Children’s Health Insurance Program, known as MassHealth. Under the proposal, employers with 11 or more full-time equivalent employees would have to offer full-time employees a minimum of $4,950 toward the cost of an employer group health plan, or make an annual contribution in lieu of coverage of $2,000 per full-time equivalent employee. While the Governor’s proposal is not explicitly conditioned on repeal of the ACA’s employer mandate, the ACA’s survival may prompt a reconsideration of that approach.

    California lawmakers were also considering ACA replacement proposals, including a single-payer bill introduced last month by Democratic state senators Ricardo Lara and Toni Atkins. Had the ACA’s employer mandate been repealed, those proposals were likely just the tip of an iceberg. When the ACA was enacted in 2010, Hawaii, Massachusetts, and San Francisco were the only jurisdictions with their own health care mandates on the books. But in the prior two-year period, before President Obama was elected and made health care reform his top domestic priority, more than two dozen states had introduced various “fair share” health care reform bills aimed at employers.

    Most of the state and local “play or pay” proposals would have required employers to pay a specified percentage of their payroll, or a specified dollar amount, for health care coverage. Some required employers to pay employees a supplemental hourly “health care” wage in addition to their regular wages or provide health benefits of at least equal value. California, Illinois, Pennsylvania, and Wisconsin considered single-payer proposals.

    To be sure, any state or local “play or pay” mandates would be subject to challenge based on Federal preemption under the Employee Retirement Income Security Act (ERISA). While some previous “play or pay” laws were invalidated under ERISA (e.g., Maryland), others (i.e., San Francisco) were not. In sum, given the failure of the AHCA, there would appear to be no rationale, at least for now, for any new state or local “play or pay” laws to go forward.

    Avoiding upward pressure on employer premiums as a result of Medicaid reforms
    The AHCA proposed to reform Medicaid by giving greater power to the states to administer the Medicaid program. Under an approach that caps Medicaid spending, the law would have provided for “per capita allotments” and “block grants.” Under either approach, the Congressional Budget Office (CBO), in its scoring of the AHCA, predicted that far fewer individuals would be eligible for Medicaid. According to the CBO:

    CBO and JCT estimate that enacting the legislation would reduce federal deficits by $337 billion over the 2017-2026 period. That total consists of $323 billion in on-budget savings and $13 billion in off-budget savings. Outlays would be reduced by $1.2 trillion over the period, and revenues would be reduced by $0.9 trillion. The largest savings would come from reductions in outlays for Medicaid and from the elimination of the Affordable Care Act’s (ACA’s) subsidies for nongroup health insurance.

    (Emphasis added).

    While employers rarely pay attention to Medicaid, the AHCA gave them a reason to do so. Fewer Medicaid-eligible individuals would mean more uncompensated care—a significant portion of the costs of which would likely be passed on to employers in the form of higher premiums. As long as the ACA’s expanded Medicaid coverage provisions remain in place, premium pressure on employers will to that extent be avoided.

    Long-Term Impact on Employers

    As we conceded at the beginning of this post, it’s not clear how the Republican Congress and the Administration will react to the AHCA’s failure. If the elected representatives of both political parties are inclined to try to make the current system work, however, we can think of no better place that the prescriptions contained in a report by the American Academy of Actuaries, entitled An Evaluation of the Individual Health Insurance Market and Implications of Potential Changes. (We reported on this paper in an earlier post.)

    The actuaries’ report does not of course address, much less resolve, the major policy differences between the ACA and the AHCA over the role of government—in particular, the extent to which taxpayers should be called on to fund the health care costs of low-and moderate-income individuals, and whether U.S. citizens should be required to maintain health coverage or pay a penalty. And even if lawmakers can reach consensus on those contentious issues, they still would have to agree on the proper implementing mechanisms. But whatever the outcome, employers are unlikely to play a major role.

  • Healthcare Reform Comments Off on Lawmakers Release Recommendations to Repeal the ACA and Implement the American Health Care Act

    On March 6, 2017, the House Ways and Means Committee and the House Energy and Commerce
    Committee released recommendations for legislation to repeal and replace the Affordable Care Act
    (ACA). This is the first step in what promises to be heated and rigorous debate in Washington – both
    sides of the aisle have already begun fanning the flames of public opinion through the media.
    Lawmakers claim that the new law will help ensure that workers and their families will have access to
    health care that is tailored to their needs. Moreover, they propose that the law will allow states to
    better deliver affordable options based on their unique patient populations and give Americans greater
    choice, lower cost and the freedom and flexibility to make their own health care decisions.
    Both committees have scheduled sessions to mark up the new legislation on March 8, 2017, and GOP
    leaders have stated a final version of the American Health Care Act will come to a floor vote by as early as April 7, 2017.
    Key features of the committees’ recommendations include:

    Dismantle ACA’s taxes and mandates
     Repeal the individual and employer mandates, retroactive to January 1, 2016, which means no
    penalties for 2016 and presumably greatly reduced future annual reporting requirements (certain
    reports will remain necessary to monitor the newly proposed individual tax credit system).
     Delay the so-called Cadillac Tax until January 1, 2025.
     Eliminate ACA taxes on prescription drugs, over-the-counter medications, health insurance
    premiums and medical devices.
     Repeal the Medicare Hospital Insurance surtax effective January 1, 2018.
     Restore the individual income tax deduction for qualifying medical expenses to the pre-ACA
    threshold of 7.5% of adjusted gross income.

    Eliminate current ACA advance tax credit system
     Repeal current individual ACA tax credits effective January 1, 2020.
    – Expand tax credits in the interim to plans that offer only catastrophic coverage.
    – Expand tax credits in the interim to certain individual plans purchased outside the Marketplace.
    – Prohibit tax credits for plans that cover elective abortions.
     Require individuals to repay any excess premium tax credits for 2018 and 2019.
     Repeal small business tax credits effective January 1, 2020.
    – Prohibit tax credits for plans that cover elective abortions

    Repeal ACA cost-sharing subsidies
     Eliminate the ACA’s cost-sharing subsidies for Marketplace coverage effective January 1, 2020
    Create new tax credit system
     Establish advanceable, refundable tax credits to purchase state-approved individual major medical
    insurance and unsubsidized COBRA coverage.
     Disqualify individuals if they have offer of coverage from employer or access to governmental health
    insurance program.
     Exclude grandfathered plans (i.e., certain pre-ACA plans still in effect) and grandmothered plans
    (i.e., certain non-ACA compliant plans that remain effective under ongoing agency guidance that has
    allowed states and carriers to continue to offer them) as well as certain excepted benefits and
    coverage for elective abortions.
     Based on age:
    – Under 30 $2,000
    – Between 30 and 39 $2,500
    – Between 40 and 49 $3,000
    – Between 50 and 59 $3,500
    – Over age 60 $4,000
     Indexed annually for inflation and capped at $14,000 for family, and only applicable to the five
    oldest family members.
     Phased out for individuals earning $75,000 per year ($150,000 for joint filers); $100 less for each
    $1,000 in income above thresholds.

    Enhance and expand Health Savings Accounts (HSAs)
     Increase limit on aggregate HSA contributions to equal the maximum annual deductible and out-ofpocket
    expenses allowed under a High-Deductible Health Plan (HDHP) (e.g., at least $6,550 for
    individual coverage and $13,100 for family coverage in 2018).
     Allow both spouses to make catch-up contributions to one HSA.
     Allow qualified medical expenses to be reimbursed if incurred during 60-day period after HDHP
    coverage begins, even if HSA established after HDHP coverage starts.
     Allow over-the-counter medications to be reimbursed starting January 1, 2018.
     Effective January 1, 2018, reduce penalty for HSA distributions not used for qualified medical
    expenses to pre-ACA 10 percent level.

    Eliminate ACA limit on Flexible Spending Account (FSA) contributions
     Repeal $2,500 indexed limit effective January 1, 2018.
    Incentivize maintaining continuous health coverage
     For individual and small group markets, starting with the 2019 plan year (and special enrollments
    starting in 2018), a penalty of 30% of premiums will apply for the first 12 months of coverage to any
    individual who during the 12 months immediately prior to enrollment had a break in coverage of at
    least 63 continuous days.

    Allow carriers to set premiums using expanded age bands
     Beginning January 1, 2018, carriers can set rates using 5:1 bands rather than current 3:1 bands.
     States could set their own ratios as long as they are consistent with the new law.
    Eliminate actuarial value component of metal tier plans
    The proposal eliminates the actuarial value standards that apply to maintaining qualified plan offerings.
    This provision purports to allow carriers greater flexibility in designing plans that will open up more
    coverage options for consumers.

    Simplify W-2 reporting (no details given as budget process prevents Congress from repealing this).

    Other provisions
    The Energy and Commerce Committee recommendations include sweeping changes to Medicaid
    expansion and call for establishing a Community Health Center Fund that will award grants to Federally
    Qualified Health Centers (FQHC) that provide health services to medically underserved areas.
    Specifically, the committee calls for total repeal of the ACA’s Medicaid expansion by January 1, 2020.
    Also, the committee calls to block applicants from receiving Medicaid coverage until after providing
    proof of U.S. citizenship or satisfactory immigration status. Currently, these individuals can receive aid while they work to provide proof.
    Additionally, the new law would establish the Patient and State Stability Fund which aims to lower
    patient costs and stabilize state insurance markets. The fund would give states $100 billion to design
    programs for high-risk individuals and to allow certain entities to help states stabilize premiums in their individual markets.
    In one of its more controversial sections, the committee calls for a one-year freeze on any federal
    funding through Medicaid, CHIP and other block grant programs to entities primarily engaged in family
    planning and reproductive health services. Observers note that this provision specifically targets Planned Parenthood.
    Finally, in its press release regarding these committee recommendations, Republicans state that the
    American Health Care Act will preserve vital patient protections like prohibiting health insurers from
    imposing pre-existing condition limitations and allowing dependents to remain on their parents’ health
    plans until they reach age 26.

    The expected costs of the proposed repeal and replace legislation have not yet been released, and no
    vote will occur before that happens. Democratic opposition is sure to be fierce, and some reports have
    certain Republican lawmakers on the fence regarding some of the proposals in the committee
    As President Trump has promised since starting his campaign, he is urging and working in step with
    Congress to repeal and replace the ACA in one fell swoop as quickly as possible. Despite fits and starts over the past two months, last night’s actions show that Republicans remain committed to swift and drastic changes to America’s health care system.

  • Healthcare Reform Comments Off on Repeal of ACA with new plan

     A draft budget reconciliation bill recently leaked out of ongoing committee sessions
    outlines Republican intentions regarding replacing the Affordable Care Act (ACA).
     The draft bill does NOT repeal the ACA in total, and addresses only certain portions
    of the law relating primarily to taxes and penalties.
     The draft bill would eliminate the ACA’s individual and employer penalties immediately.
     All currently effective ACA rules remain in place, and employers should continue to comply with the law.
    A 106-page draft budget reconciliation bill leaked to the media on February 24 sheds light on certain
    concepts that the GOP had also described in a policy brief issued on February 16. The policy brief had
    reiterated the Trump administration’s goal to repeal the ACA and implement a replacement plan aimed
    at expanding health care choices, lowering health care costs and giving consumers greater control over
    their health care. The draft bill contains items that mirror many of the key policy brief provisions. In addition, the draft bill calls for a transition period until 2019 to implement many of its proposed changes.

    Impact on employers
    The draft bill does NOT repeal the ACA. Thus, the ACA’s compliance requirements remain intact . . . for
    now. Employers should continue to comply with current ACA compliance requirements. However, efforts
    appear to be well underway to make changes to critical ACA provisions.
    Lawmakers continue to say a final version of a repeal and replace bill should be ready sometime in March2017, but the draft bill and the policy brief provide valuable insight into how certain aspects of thecurrent health care system, including employer plan rules, could change.
    Neither the draft bill nor the policy brief target the ACA’s market reforms, which include:
     covering dependent children up to age 26.
     prohibiting pre-existing condition exclusions.

    The Future of the ACA: Draft Repeal and Replace BillLeaked
     forbidding discriminating in providing health care on the basis of race, nationality, disability or sex.
     capping out-of-pocket maximums.
     eliminating annual and lifetime limits.
    The draft bill includes:
     eliminating all ACA taxes and mandates, including immediately eliminating the individual mandate
    and employer shared responsibility penalties.
     creating portable, monthly tax credits that individuals can use to purchase health insurance.
     providing Health Savings Account (HSA) enhancements, including increased contributions and
    reduced penalties for distributions for expenses not spent on qualified medical expenses.
     rolling back ACA’s cap on Flexible Spending Account (FSA) contributions.
     decreasing the threshold amount above which individuals can claim a tax deduction for medical
    expenses to 7.5% of income.
     granting more flexibility and control to states in managing their Medicaid programs.
     establishing a state innovation grant and stability program to help stabilize state insurance markets.

    Relief from ACA taxes
    The draft bill provides relief from all ACA tax increases, including the Cadillac tax, health insurance tax, tanning salon tax, medical device tax, and prescription drug manufacturers’ tax.

    Health care tax credits
    The draft bill would eliminate cost-sharing reduction payments after 2019 and modify the current ACA
    health insurance tax credits through 2019 to allow individuals to use them for coverage outside of the
    Marketplace after 2017, but only as a claim on an individual’s income tax filing (not as an advance credit).
    In 2020, the draft bill calls for an age-based portable tax credit for all individuals to use to purchase any eligible plan approved by a state and sold in its individual insurance market (including catastrophic coverage).
    The new tax credit would be available to an individual even if he or she has no tax liability, and an
    individual could receive the tax credit when he or she receives treatment or services (rather than being reimbursed when filing a tax return). In addition, the tax credit would be:
     available for all citizens or qualified aliens not offered other qualifying insurance.
     age-based to reflect the higher cost of insurance for older individuals.
     available for dependent children up to the age of 26 – taxpayers would be able to receive credits for their dependents, including children up to the age of 26.
     portable from job to job, state to state, into the home to start a business or raise a family, or even into retirement. If an employer does not subsidize COBRA coverage, the individual would be able use the credit to help pay unsubsidized COBRA premiums while he or she is between jobs. Additionally, if an individual does not use the full value of the credit, the excess amount may be deposited into an HSA.

    The credit would not be available to individuals who are eligible for coverage through other sources
    (specifically, through an employer or government program). In addition, it would not be available to be
    used for plans that cover abortion.
    To provide relief during a projected transition period, individuals eligible for an ACA health insurance subsidy will be able to use their credit for expanded options, including catastrophic plans. Moreover, to promote market stability and premium stabilization during the transition, ACA subsidies would be adjusted slightly to provide additional assistance for younger individuals and reduce over-subsidization of older individuals.

    Enhance Health Savings Accounts (HSAs)
    The draft bill would increase the amount of money that individuals can contribute to an HSA, and allow
    HSA dollars to be used on over-the-counter health care items. It would also allow spouses to make
    additional contributions, and expand the amount of time a consumer has to use HSA funds on certain
    The GOP’s proposal provides:
     Increased HSA contribution limits. HSA contribution limits will increase to equal maximum out-of pocket
    limits — in 2017, the limit is $6,550 for self-only coverage and $13,100 for family coverage.
     Both spouses to make catch-up contributions to the same HSA. If both spouses are eligible for catchup contributions and either has family coverage, their combined annual contribution limit includes
    both catch-up contribution amounts.
     Administrative fix for expenses incurred prior to establishing an HSA. If a taxpayer establishes an
    HSA within 60 days of the date that his or her High Deductible Health Plan (HDHP) coverage begins,
    he or she can exclude from gross income any distribution from an HSA used as a payment for a
    medical expense incurred during that 60-day period, even though he or she incurred the expense
    before establishing the HSA.

    Utilize state innovation grants
    The proposed replacement plan would implement state innovation grants in an effort to allow states to
    repair their health insurance markets. House Republicans believe that providing funding for state
    innovation programs – whether to fund high-risk pools, cut patient out-of-pocket costs or promote access to health care services – will allow states to gain resources to best take care of their unique patient populations. Under these new state innovation grants, states will have sole discretion to use the funds as they see fit to help lower the cost of care for some of their most vulnerable patients.

    Capping deductions for employer-provided health insurance
    The draft bill includes an inflation-adjusted annual limit on the value of employer-provided health
    insurance that individuals will continue to be able to exclude from taxable income. Costs above a stated amount – the 90th percentile cost for single-only coverage in the draft bill – will now be taxable to individuals. The limit would not apply to employer contributions to HSAs, medical savings accounts or other excepted benefits.

    Other coverage changes
    The draft bill includes a provision that states health insurance premiums could be up to 30% higher for
    the initial 12 months of coverage for anyone in the individual or small group market who has a break in
    coverage longer than 63 days, or for a dependent who loses coverage and doesn’t enroll at the first
    available open enrollment (starting in 2018 or 2019).
    Beginning in 2020, the draft bill will allow states to define what benefits comprise essential health
    benefits (EHB). It also will permit age-banded rates up to a 5:1 ratio as opposed to the current 3:1 limit.

    Stay the course!
    Any final bill to repeal and replace the ACA undoubtedly will differ from the information we have seen in the past two weeks, but we now have a better grip on ACA provisions key congressional leaders have
    targeted as they navigate the legislative process. All currently effective ACA rules remain in place, and employers should continue to comply with the law.

  • On December 18, 2015, President Obama signed into law the Consolidated Appropriations Act (H.R. 2029), which, among other things, delays the implementation of the Affordable Care Act (ACA) excise tax on high cost health plans (generally referred to as the Cadillac tax) until January 1, 2020. The act also makes the Cadillac tax a tax-deductible expense.

    The Cadillac tax, previously scheduled to go into effect on January 1, 2018, is a 40 percent excise tax on employers and insurers who offer health insurance plans that exceed specified high-cost limits ($10,200 for individual coverage and $27,500 for families for 2018). The 40 percent tax applies to the cost of the plan above these thresholds.

  • Healthcare Reform Comments Off on EXTENSION OF THE DUE DATES FOR 2015 INFORMATION REPORTING UNDER I.R.C. §§ 6055 AND 6056

    This notice extends the due dates for the 2015 information reporting
    requirements (both furnishing to individuals and filing with the Internal Revenue Service
    (Service)) for insurers, self-insuring employers, and certain other providers of minimum
    essential coverage under section 6055 of the Internal Revenue Code (Code), and the
    information reporting requirements for applicable large employers under section 6056 of
    the Code. Specifically, this notice extends the due date (1) for furnishing to individuals
    the 2015 Form 1095-B, Health Coverage, and the 2015 Form 1095-C, EmployerProvided
    Health Insurance Offer and Coverage, from February 1, 2016, to March 31,
    2016, and (2) for filing with the Service the 2015 Form 1094-B, Transmittal of Health
    Coverage Information Returns, the 2015 Form 1095-B, Health Coverage, the 2015
    Form 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage
    Information Returns, and the 2015 Form 1095-C, Employer-Provided Health Insurance
    Offer and Coverage, from February 29, 2016, to May 31, 2016, if not filing electronically,
    and from March 31, 2016, to June 30, 2016 if filing electronically. This notice also
    provides guidance to individuals who might not receive a Form 1095-B or Form 1095-C
    by the time they file their 2015 tax returns.
    The Service is prepared to accept filings of the information returns on Forms
    1094-B, 1095-B, 1094-C, and 1095-C beginning in January 2016. Following
    consultation with stakeholders, however, the Department of the Treasury (Treasury) and
    the Service have determined that some employers, insurers, and other providers of
    minimum essential coverage need additional time to adapt and implement systems and
    procedures to gather, analyze, and report this information. Notwithstanding the
    extensions provided in this notice, employers and other coverage providers are
    encouraged to furnish statements and file the information returns as soon as they are
    Section 6055 and section 6056 were added to the Internal Revenue Code by
    sections 1502 and 1514 of the Patient Protection and Affordable Care Act (ACA),
    enacted March 23, 2010, Pub. L. No. 111-148. Section 6055 requires health insurance
    issuers, self-insuring employers, government agencies, and other providers of minimum
    essential coverage to file and furnish annual information returns and statements
    regarding coverage provided. Section 6056 requires applicable large employers
    (generally those with 50 or more full-time employees, including full-time equivalents, in
    the previous year) to file and furnish annual information returns and statements relating
    to the health insurance that the employer offers (or does not offer) to its full-time
    employees. Section 6056 was amended by sections 10106(g) and 10108(j) of the ACA
    and was further amended by section 1858(b)(5) of the Department of Defense and FullYear
    Continuing Appropriations Act, 2011. Section 36B, which was added to the Code
    by section 1401 of the ACA, provides a premium tax credit for eligible individuals who
    referred to above in this paragraph and in the following paragraph fall on weekend days;
    accordingly, in 2016 these two due dates are February 1 and February 29,
    respectively.) The Service has designated Form 1094-B and Form 1095-B to meet the
    requirements of the section 6055 regulations.
    The regulations under section 6056 require every applicable large employer or a
    member of an aggregated group that is determined to be an applicable large employer
    (ALE member) to file with the Service an information return and a transmittal on or
    before February 28 (March 31 if filed electronically) of the year following the calendar
    year to which it relates and to furnish to full-time employees a written statement on or
    before January 31 following that calendar year. The Service has designated Form
    1094-C and Form 1095-C to meet the requirements of the section 6056 regulations.
    The preambles to the section 6055 and section 6056 regulations (T.D. 9660, 79
    FR 13220; T.D. 9661, 79 FR 13231-01) provide that, for 2015 coverage, the Service will
    not impose penalties under section 6721 and section 6722 on reporting entities that can
    show that they have made good faith efforts to comply with the information reporting
    requirements, and that this relief applies only to furnishing and filing incorrect or
    incomplete information, including TINs or dates of birth, reported on a return or
    statement and not to a failure to timely furnish or file a statement or return. Notice
    2015-87, 2015-52 I.R.B. 889, reiterates that relief, and Notice 2015-68, 2015-41 I.R.B.
    547, provides additional information about that relief with regard to reporting under
    section 6055. The preambles also note, however, the general rule that, under section
    6724 and the related regulations, the section 6721 and section 6722 penalties may be
    waived if a failure to timely furnish or file a statement or return is due to reasonable
    cause, that is, the reporting entity demonstrates that it acted in a responsible manner
    and the failure is due to significant mitigating factors or events beyond the reporting
    entity’s control.
    This notice extends the due date for furnishing the 2015 Form 1095-B and the
    2015 Form 1095-C from February 1, 2016, to March 31, 2016. This notice also extends
    the due date for filing with the Service the 2015 Form 1094-B and the 2015 Form 1094-
    C from February 29, 2016, to May 31, 2016, if not filing electronically, and from March
    31, 2016, to June 30, 2016, if filing electronically. In view of these extensions, the
    provisions regarding automatic and permissive extensions of time for filing information
    returns and permissive extensions of time for furnishing statements will not apply to the
    extended due dates. Employers or other coverage providers that do not comply with
    these extended due dates are subject to penalties under section 6722 or 6721 for failure
    to timely furnish and file. However, employers and other coverage providers that do not
    meet the extended due dates are still encouraged to furnish and file, and the Service
    will take such furnishing and filing into consideration when determining whether to abate
    penalties for reasonable cause. The Service will also take into account whether an
    employer or other coverage provider made reasonable efforts to prepare for reporting
    the required information to the Service and furnishing it to employees and covered
    individuals, such as gathering and transmitting the necessary data to an agent to
    prepare the data for submission to the Service, or testing its ability to transmit
    information to the Service. In addition, the Service will take into account the extent to
    which the employer or other coverage provider is taking steps to ensure that it is able to
    comply with the reporting requirements for 2016.

    Reference: IRS government notice https://www.irs.gov/pub/irs-drop/n-16-4.pdf.

  • Healthcare Reform Comments Off on Possible loss of subsidies for the insured

    On March 4th, the Supreme Court heard oral arguments in King v. Burwell on whether the language of the Affordable Care Act (ACA) allows the Internal Revenue Service (IRS) to provide subsidies or premium tax credits to residents of the 34 states that declined to establish health insurance Marketplaces/Exchanges. If the Court disagrees with how the IRS interprets the ACA’s language regarding subsidy availability, the ruling could affect the future availability of subsidies in states with Federal Exchanges and change the nature of ACA compliance from a fairly unified system to one that is more fragmented with state-by-state variations. In addition, estimates are up to 8 million current ACA enrollees could lose their current government health care subsidies. The Court is expected to issue its decision at the end of June 2015.

  • Healthcare Reform, Human Resources Comments Off on W-2 Reporting of Health Insurance is Mandatory as of 1/1/2013

    Employers need to understand that the reporting of health insurance premiums is mandatory for the year beginning 1/1/2013 for those employers who have filed less than 250 W-2’s in 2012.  This means that by year end of 2013, all employers will be required to report the cost of health insurance premiums on each employee’s W-2.

    The total cost of the health insurance premium is what should be reported, not just the employer portion.  There is no change in its pretax status, it is for information reporting only.

    There has been transitional relief for employers that filed less than 250 W-2’s up through year 2012, but that exception has now gone away.

    What to Report on the Form W-2:
    • Aggregate reportable cost of the coverage
    • Any employer-sponsored coverage except
    – Archer Medical Savings Accounts
    – Health Savings Accounts
    – Salary reductions for flexible spending arrangements

    • Coverage for long-term care
    • HIPAA “excepted benefits”
    • Dental and vision coverage
    • Specialized coverage if paid on an “after tax” basis

    If you, as an employer, have not been liable to report this in the past, you should start tracking this information in a spreadsheet for reporting at year end 2013. Most payroll companies allow employers to either enter the information per pay period, or it can be entered manually once per year on the year end payroll.

    NOTE:  For those employers who offer 401K plans, be advised that you may need to include this benefit cost as fringe benefit income for 401K testing purposes. Check with your 401K provider about that.




  • Healthcare Reform Comments Off on Will HDHP’s and HSA’s Survive the ACA?

    With the passage of the ACA in June 2012, there has been speculation that HDHP’s(High Deductible Health Plan) and HSA’s (Health Savings Account) because they may no fit into the concept of affordable health insurance that is sought to be provided to Americans.

    Some of the other reasons that these plans may not survive are:

    1.  Actuarial Value Description:  Since HDHPs are considered to cover a much lower percentage of health costs until the deductible is met, these plans would not meet the actuarial requirement of covering at least 60% of healthcare costs.  HDHP plans require participants to pay 100% of all medical costs until the high deductible is met (often times $2,000 for individual coverage and $4,000 for family coverage).

    2.  Medical Loss Ratio: Under ACA, insurance plans are required to distribute premium costs so that at least 80% go to medical costs, and 20% go to administrative costs.  HDHPs typically have lower MLRs because of their lower premiums, so these plans may not meet this rule.

    3.  Preventive Care Definition:  The definition of “preventive care” is critical to the ACA, and right now, HDHP plans and the ACA have different definitions.  If the ACA expands its terms of preventive care that are not covered under HDHPs, then carriers will stop offering HDHPs entirely in order to comply with the law.  If HDHPs adjust their definition of preventive care, the premium costs will increase under these plans, and may no longer make them a cost-efficient alternative to traditional medical plans. (Any increase in premiums to HDHP’s may also exclude them as being qualified plans under the ACA if the increased premiums exceed 9.5% of the participant’s household income.)

    When the Employer Penalties (Pay or Play Tax) go into effect on 1/1/2014, those employers that will be subject to the tax (have 50+ employees) should be aware that if they continue to offer HDHP plans with an HSA, yet an employee elects the State Exchange insurance program, that employer will be subject to the $3,000 penalty per employee.

    At this time, Congress has not outlined clearly how HSA/HDHPs will be affected, other than to say that their survival is subject to regulatory agencies.

  • Healthcare Reform Comments Off on Individual Mandate Imposed Under PPACA

    Beginning on 1/1/2014, the Healthcare Reform Act (PPACA), mandates that all individuals have health insurance. Note that this means medical insurance, and does not include dental, vision, life, or disability insurance.

    Individuals can obtain health insurance in the following ways:

    1. If full time over 30 hours per week, through an employer’s group health plan, if one is available.
    2. Through the individual health insurance plan market
    3. Through Medicaid if the individual is at 133–400% of the Federal Poverty Level, and the state of residence has expanded Medicaid.
    4. Through the State Insurance Exchange Program.

    If an individual does not obtain health insurance beginning in 2014, he can either:

    1. Request a waiver if religion is a factor in obtaining coverage.
    2. Pay the required tax penalty upon filing an annual income tax return.

    The penalty for failure to obtain coverage is calculated on annual income.

    1. For those making less than $9500 per person, or $19,000 per couple, no tax return is filed, so no penalty is assessed.
    2. In the year of 2014 only, the penalty will only be $95 per person for those making above the tax return minimum income.
    3. For all years thereafter, the penalty will be calculated at 2.5% of total income for those making above the tax return minimum income.
    4. The penalty cannot exceed the cost of a “Bronze” insurance plan purchased through a state exchange.  A “Bronze” plan is the one of the lowest level plans, offering 60% coverage by insurance, with the individual paying 40% of costs.

    For example, a person filing individually with an income of $60,000, the penalty will be $1500.

    Keep in mind, that the tax is imposed on total ADJUSTED GROSS HOUSEHOLD INCOME, so, individuals need to look at the whole picture of their taxation status.


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