In a November 20, 2017 post, we reported on Massachusetts’ passage of H. 3822, “An Act Further Regulating Employer Contributions to Health Care,” (the “Act”), the purpose of which is to shore up the finances of the Commonwealth’s Medicaid program and its Children’s Health Insurance Program (CHIP). The law has two components or tiers.

  • Tier 1 increases the Employer Medical Assistance Contribution (“EMAC”) from an annual maximum fee of $51 per employee to $77 per employee; and
  • Tier 2 imposes a tax penalty— or “EMAC supplement”— on employers with more than 5 employees. The penalty is 5% of a covered employee’s unemployment insurance taxable wages up to the $15,000 per year (i.e., a cap of $750 per covered employee) for each nondisabled employee who receives health insurance coverage through the Massachusetts Division of Medical Assistance (i.e., MassHealth) or subsidized insurance through the Massachusetts Health Insurance Connector Authority (i.e., ConnectorCare). Employers are not, however, liable for the Tier 2 EMAC supplement in the case of employees who enroll in MassHealth’s Premium Assistance Program.

The Act directs the Commonwealth’s Department of Unemployment Assistance (DUA) to promulgate regulations implementing the new Tier 2 penalty. Employers pay EMAC supplemental contributions quarterly. The DUA recently issued draft rules regulations along with useful set of FAQs on the subject. As we explained previously:

[T]he draft regulations implementing the tier 2 EMAC supplement follow the statute while providing additional details. . . .The rules governing which employers are affected generally follow existing rules governing unemployment insurance in the Commonwealth. Identifying which employers are affected, and how assessments—or “contributions”—are assessed and collected closely track existing law.

Two features of the draft regulations are worth noting.

  • What data is use to determine, and who determines the Tier 2 EMAC supplement payments?

First, the principal responsibly for determining which employees trigger assessments by reason of qualifying for and receiving health insurance coverage from MassHealth or subsidized insurance from ConnectorCare rests with the DUA. Thus the EMAC rules operate in a manner that is fundamentally different from the now repealed “fair share employer contribution” requirement under the 2006 Massachusetts health care reform law. (The Commonwealth’s fair share employer contribution requirement was the precursor, and roughly analogous to the employer shared responsibility provisions of the Affordable Care Act.) Under the fair share employer contribution requirements, employers were obligated to obtain signed forms—referred to as Health Insurance Responsibility Disclosure (or “HIRD”) forms. The Tier 2 EMAC rules don’t operate this way. Rather, the DUA determines and assesses the penalty. Any required EMAC supplement payments that an employer owes are simply added to the statement showing the employer’s Unemployment Insurance.

Subject to the execution of a confidentiality agreement, the DUA will provide the employer employee information for purposes of reviewing and/or appealing the EMAC. An employer may request a hearing to appeal a determination. The request for a hearing must be filed within 10 days of the employer’s receipt of notice of the determination, and the Director issue a written decision affirming, modifying, or revoking its initial determination.

Based on our direct experience with clients and the reports of other benefits practitioners, we understand that some employers are asking employees to voluntarily tell their employees whether they qualify for and are receiving health insurance coverage from MassHealth or subsidized insurance from ConnectorCare. We think this is a bad idea.

We note at the outset that, despite the claim made by some, such a request does not raise HIPAA privacy concerns. While the fact that a person’s enrollment in a particular health plan is PHI in the hands of the health plan or other covered entity, that same employee is free to tell anyone that he or she is enrolled in MassHealth or subsidized insurance from ConnectorCare, or any other group health plan. Rather, the problem is that if an employee is dismissed after disclosing that he or she might be the cause of an EMAC assessment, the employee may claim they have been unlawfully terminated in violation of public policy.

  • Impact on Employers—Redux

We concluded our post of November 20 with the following claim:

If an employee chooses to voluntarily forgo an employer’s offer of coverage and instead applies and qualifies for MassHealth (excluding the premium assistance program) or subsidized ConnectorCare, the employer is penalized irrespective of the quality or affordability of the coverage that it offers. There is no exemption similar to that provided under the Affordable Care Act’s employer shared responsibility rules under which an applicable large employer can escape excise tax exposure by offering coverage that is affordable and provides minimum value.

Where an employer offers coverage that is both affordable and provides minimum value, that employee would not be eligible for subsidized ConnectorCare coverage. So the above statement is misleading in part. Where an employer offers coverage that is both affordable and provides minimum value, it will not be liable for the EMAC supplement with respect to employees who don’t qualify for MassHealth. (Special thanks to Kathryn Wilber, Senior Counsel, Health Policy, at the American Benefits Council for calling this item to our attention.)

Tis the season . . . for ERISA disclosure requirements, of course!  Between open enrollment and the calendar year end, the list of documents, notices and updates required under ERISA looms large and annoying.

In these trying months of increased administrative hassle, many employer turn to electronic distribution in order to be environmentally forward, administratively efficient, and cost effective, and respond to wishes of employees who, let’s face it, don’t want (and won’t read) a big pile of paper.  But while electronic distribution is sound business practice, employers should keep in mind that there are rules to follow, at least with respect to ERISA notices.

This article contains a helpful guide to these rules, as well as some helpful steps employers can take to comply.  Note that the article was written shortly before the last presidential election, and while the rules have not changed, some of the author’s predictions about the proliferation of Affordable Care Act audits were based on incorrect assumptions about the election outcome and haven’t exactly come to pass.  Ahem.

The Internal Revenue Service has for some time made available a comprehensive set of Questions & Answers covering the Affordable Care Act’s (ACA) employer shared responsibility rules. (These are the rules that are codified in Section 4980H of the Internal Revenue Code, the compliance with which is reported on IRS Forms 1094-C and 1095-C, etc.) Entitled, “Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act,” this web-based resource provided generally useful information about how the rules worked. Until recently, however, the IRS’ Questions and Answers merely said that the IRS “expects to publish guidance of general applicability describing the employer shared responsibility payment procedures in the Internal Revenue Bulletin before sending any letters to ALEs [Applicable Large Employers] regarding the 2015 calendar year” (Q&A 57). On November 2, that changed. This post explains what happened, and what it means for employers.

Continue Reading IRS (Quietly) Announces Procedures for the Assessment and Payment of Excise Taxes under the Affordable Care Act’s Employer Shared Responsibility Rules

On October 13th, President Trump signed an Executive Order directing various federal agencies to consider how to achieve three administration health reform objectives: (1) expand access to Association Health Plans (AHPs); (2) increase the current limits on short-term health insurance; and (3) allow wider use of employer health reimbursement arrangements so employees can buy coverage on their own in the individual market. This post considers what regulatory actions are necessary to accomplish the first objective—expanded access to AHPs.

Continue Reading Expanding Association Health Plans—Which Agencies Need to do What

In recent weeks, the Trump Administration has been considering allowing health insurance to be purchased across state lines and expanding access to “Association Health Plans” (AHPs) that could take economic advantage of cross-border purchasing. President Trump is expected to issue an executive order this week to make that happen without legislation.

This post addresses the key issue of whether the administration has the authority under existing law to act on its own initiative, and in doing so, it will address the seminal legal issues affecting AHPs under federal and state law.  As explained below, we conclude that the administration has some—and perhaps even ample—authority to act without Congress, and that any legal constraints will depend on how the AHPs are structured.

Continue Reading Association Health Plans—Can The Trump Administration Expand Access Without Congress?

At this writing, the prospects for success of the latest Republican effort to replace the Affordable Care Act appear bleak—but the Graham-Cassidy bill on which the GOP has pinned its last-ditch hopes highlights a major political and policy flashpoint in the fight to repeal, replace, or repair the law: the degree to which states should be free to innovate and experiment by adopting non-standard health insurance product designs in their individual and small group markets. Under current law, there is little flexibility. Proposals abound to change this, but to do so invites consequences with which lawmakers must be prepared to deal—involving complex economic and actuarial issues and fundamental questions regarding the role of the federal government and the states in health care.

This post addresses these issues.

Continue Reading Fractal Geometry, Actuarial Risk, and §1332 Waivers—The Role of the States in Reforming Health Care

On August 1, Massachusetts Governor Charlie Baker signed into law H. 3822, “An Act Further Regulating Employer Contributions to Health Care” (the “Act”). The purpose of the Act is to shore up the finances of the Commonwealth’s Medicaid program and its Children’s Health Insurance Program (CHIP), which in Massachusetts are combined into a single program called MassHealth. MassHealth covers about 1.9 million low income, minor and disabled Massachusetts residents, and it costs about $15.6 billion annually.

Continue Reading Massachusetts Employers Face $200 Million Increase in Health Care Costs under MassHealth Amendments

With its “employer mandate”—i.e., the requirement that applicable large employers make an offer of group health coverage to substantially all full-time employees or face the prospect of a penalty—the Affordable Care Act (ACA) opened a fault line in the previously monolithic market for group health insurance. There is large cohort of American workers who, before the ACA, were not offered major medical coverage under an employer-sponsored group health plan. These employees are sometimes referred to as the “contingent” workforce. They include part-time, seasonal and temporary employees, as well as employees whose work schedules are generally irregular or intermittent. Found predominantly though not exclusively in industries such as staffing, restaurants, media and advertising, transportation and hospitality, among others, these workers tend to be on the lower end of the pay scale. They also often have significant “deferred” health issues (a euphemism for undiagnosed conditions owing to lack of previous access to health care). The ACA provided “applicable large employers” (those with 50 or more full-time and full-time equivalent employees) with an incentive to cover these workers.

Continue Reading The Rise of the Group Health Insurance Captive

Senate Majority Leader Mitch McConnell recently gave a candid assessment of the chances of getting an Affordable Care Act (ACA) replacement bill through the Senate, saying “I don’t know how we get to 50 (votes) at the moment.” That succinctly captures the political dilemma. There has long been broad bipartisan agreement that the nation’s health care system was in need of repair. Something had to be done to contain rapidly rising health care costs, increase the quality of medical outcomes, and to expand coverage. But there was little or no bipartisan agreement on how to do it. Indeed, no major health care initiative since Medicare was enacted in 1965 has enjoyed true bipartisan support.

Continue Reading Can Congress Get to “Yes” on Replacing the Affordable Care Act?

The 21st Century Cures Act (Cures Act), enacted on December 13, 2016, provides a new opportunity for small employers to help employees pay for health insurance: the “qualified small employer health reimbursement arrangement” (QSEHRA). Under  QSEHRA, certain small employers can give their employees pre-tax dollars to pay for premiums and other medical expenses, so long as the QSEHRA meets certain standards.

Continue Reading QSEHRA – The 21st Century Cures Act Creates a New Health Care Plan Option for Small Employers