minimum essential coverage

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

This post concludes our half-year series of posts focusing on the Affordable Care Act’s reporting requirements. These requirements are challenging in the extreme. Carriers and employers, and their vendors, service providers and strategic partners, have scrambled up a steep learning curve. And in a few short months—a few more than originally anticipated as a result of Notice 2016-4, which was covered in last week’s post —compliance will begin in earnest. This post offers some predictions about how we expect compliance to unfold.

Continue Reading The Affordable Care Act’s Reporting Requirements for Carriers and Employers (Part 24 of 24): 5 Predictions

It took a while, but most employers and their advisors have finally gotten the hang of the Affordable Care Act’s employer shared responsibility rules. That is, they understand generally that:

  1. “Applicable Large Employer Members” (i.e., each separate legal entity within a controlled group that collectively comprises an Applicable Large Employer) must make an offer of “minimum essential coverage” to substantially all of their full-time employees or face the prospect of a potentially very big penalty;
  2. If coverage is offered, but it is unaffordable or fails to provide minimum value, then the employer faces the prospect of a potentially (hopefully, maybe) not very big penalty; and
  3. If coverage is offered that is both affordable and provides minimum value, then the employer has no penalty exposure, but this approach might be costly.

When it comes to telling the government about compliance, however, not everyone has gotten the proverbial “hang-of-it,” and many questions remain (at least enough to fill this blog from week-to-week). Most too have heard that the IRS has announced that it will be applying a “good faith” standard. While they get that this is a “good thing,” many are not sure why, exactly. (Trust me, it’s a good thing.) And there are of course a cohort of presumably small but indeterminate size employers that remain unaware of the rules or simply assume that their consultant or payroll service has it covered.

The lingering reporting-related questions appear to cluster around full-time employee determinations, offers of coverage, and eligibility, participation and coverage. This post examines issues relating to coverage, both under the rules governing the reporting of minimum essential coverage and under the employer shared responsibility rules, with a particular emphasis on “MEC plans.”

Continue Reading The Affordable Care Act’s Reporting Requirements for Carriers and Employers (Part 21 of 24): Reporting for “MEC” Plans

Last week we examined the reporting challenges associated with employee terminations, changes in status, and breaks in service under the monthly measurement method. As we explained, “[t]he final regulations under Code § 4980H establish two—and only two—methods for determining an employee’s status as full-time: the monthly measurement method and the look-back measurement method.” This week, we turn our attention to selected issues involving terminations, changes in status, and breaks in service under the look-back measurement method.

Continue Reading The Affordable Care Act’s Reporting Requirements for Carriers and Employers (Part 19 of 24): Terminations, Changes in Status and Service Breaks under the Look-back Measurement Method

The final regulations under Code § 4980H establish two—and only two—methods for determining an employee’s status as full-time: the monthly measurement method and the look-back measurement method. Under the former (as the name suggests) an employee’s status as full-time is determined month-by-month. An employee who works on average at least 30 hours per week, or 130 hours per month, is full-time. (An employer may alternatively use 120 hours per month in months with 4 weeks and 150 hours per month in months with 5 weeks.) The monthly measurement method is particularly well-suited to employers and industries with stable workforces and low turnover. In most instances, the reporting burdens for these employers will be relatively manageable. But even in this environment, employees will from time-to-time terminate, change status, or incur service breaks.

This post explores the reporting challenges associated with employee terminations, changes in status, and breaks in service under the monthly measurement method. Next week’s post will do the same for the look-back measurement method.

Continue Reading The Affordable Care Act’s Reporting Requirements for Carriers and Employers (Part 18 of 24): Terminations, Changes in Status and Service Breaks under the Monthly Measurement Method

In an earlier post, we reported on a troubling development in the draft 2015 instructions for Forms 1094-B and 1095-B which, if adopted, would have required sponsors of Health Reimbursement Arrangements (“HRA”) to issue separate Forms 1095-B and transmit on Form 1094-C when the HRA was integrated with fully-insured coverage. We argued in that post that this made little sense under the circumstances, as covered individuals were already receiving a Form 1095-B for the fully-insured coverage. We were therefore pleased to see the IRS change course in the final 2015 Instructions. There, the IRS adopted a rule under which,

“An employer with an insured major medical plan and HRA coverage for which an individual is eligible because the individual enrolls in the insured major medical plan is not required to report the coverage under the HRA for an individual covered by both arrangements.”

This rule applies only to coverage provided to active employees and only in instances where the employer sponsors both the fully-insured major medical plan and the HRA, however. Noting residual “confusion” about the reporting obligations that apply to retiree-HRAs, Notice 2015-68 offers some welcome clarification—which is the topic of this post.

Continue Reading The Affordable Care Act’s Reporting Requirements for Carriers and Employers (Part 16 of 24): Reporting for, and Clearing Up Confusion Over, Post-65 Retiree Health Reimbursement Arrangements

This series is devoted principally to the reporting requirements imposed by Internal Revenue Code §§ 6055 and 6056 as added by §§ 1502 and 1514 of the Affordable Care Act (ACA), respectively. The former reports offers of minimum essential coverage, which allows taxpayers to demonstrate that they have complied with the law’s individual mandate. The latter solicits from applicable large employers the information needed to enforce the law’s employer mandate. As we have explained in a previous post, the IRS has prescribed Form 1094-B and Form 1095-B for purposes of reporting minimum essential coverage, and Form 1094-C and Form 1095-C for purposes of reporting by applicable large employers, except that self-funded plans consolidate their reporting on a single form, Form 1095-C.  These ACA reporting rules (and related forms) are far more complex than other reporting requirements (and their forms) to which employers are accustomed.

This post attempts to clarify how the Forms 1095-B and 1095-C have been structured by the IRS (and how the forms should be completed) to obtain this data (in particular Form 1095-C, Parts II and III).

Continue Reading The Affordable Care Act’s Reporting Requirements for Carriers and Employers (Part 12 of 24): Deconstructing Form 1095-C, Parts II and III

In Notice 2014-69,  the Treasury Department and the IRS clarified that a group health plan that fails to provide substantial coverage for in-patient hospitalization and physician services will not be treated as providing minimum value, despite that the plan might otherwise return a value of 60% from the Department of Health and Human Service’s (HHS) online minimum value calculator. These arrangements were sometimes referred to for marketing purposes as “MV-lite” or “MVP-lite” plans. By whatever name, they were particularly attractive to employers with large cohorts of low- and moderate-wage employees who were not previously offered coverage.

Notice 2014-69 provided a transition rule under which a plan that was adopted before November 4, 2014 and that had a plan year beginning no later than March 1, 2015 would not be subject to the new rules until the following plan year. Such a plan was treated for purposes of complying with the Affordable Care Act’s employer shared responsibility rules as providing minimum value. But employees covered under an affordable MV-lite plan were not barred from qualifying for premium subsidies from a public insurance exchange.

The 2015 Final Instructions for Forms 1094-C and 1095-C do not provide a way for employers to claim reliance on the Notice 2014-69 transition relief. Coverage under an MV-lite plan will be reported as not providing minimum value, thereby overstating penalties under Internal Revenue Code § 4980H(b) in many, if not most, instances. This will require sponsors of MV-lite plans to engage with the IRS in the assessment process in order to establish that they qualify for the relief.

Continue Reading The Affordable Care Act’s Reporting Requirements for Carriers and Employers (Part 11 of 24): Reporting 2015 Coverage of “MV-Lite” Plans on Form 1095-C

Under a common strategy for controlling group health care plan costs, employers sometimes adopt arrangements under which an employee is offered cash as an incentive to waive coverage. These arrangements are colloquially referred to as “opt-out plans” or “opt-out arrangements.” Amounts offered under opt-out arrangements—we will call them “opt-out credits”—are in some instances paid as unrestricted, taxable cash. Other opt-out arrangements might impose a requirement that, to qualify for the opt-out credit, the employee must have other group health plan coverage. And still others might offer only a choice between group health plan participation and an opt-out credit that consists of a contribution to the employee’s health flexible spending account. This post examines how opt-out credits affect an applicable large employer’s determination of affordability for purposes of complying with the Affordable Care Act’s (ACA) employer shared responsibility rules, and it explains how opt-out credits are reported. Continue Reading The Affordable Care Act’s Reporting Requirements for Carriers and Employers (Part 6 of 24): Reporting Group Health Plan Opt-Out Arrangements under Code § 6055

As we reported last week, the IRS recently issued draft 2015 Instructions for Forms 1094-C and 1095-C. These instructions are of interest to applicable large employers who must report their compliance with the Affordable Care Act’s (ACA) rules governing employer shared responsibility. At the same time, the IRS also issued draft 2015 Instructions for Forms 1094-B and 1095-B (“Draft 2015 Instructions”). Forms 1094-B and 1095-B are used to report certain information to the IRS and to taxpayers about individuals who are covered by minimum essential coverage and therefore are not liable for the individual shared responsibility payment. The Draft 2015 Instructions contain an unpleasant clarification on the subject of Health Reimbursement Arrangements, saying essentially that an employer that maintains an insured group plan and a self-funded Health Reimbursement Arrangement (HRA) must separately report the HRA coverage.

Continue Reading The Affordable Care Act’s Reporting Requirements for Carriers and Employers (Part 5 of 24): Reporting of Health Reimbursement Arrangements under Code § 6055 (Spoiler Alert: You Are Not Going to Like This One)