Health Care Reform: Compliance Corner
IRS Issues Individual Mandate Fact Sheet
On May 27, 2014, the IRS posted to its website Publication 5156, entitled “Facts About the Individual Shared Responsibility Provision.” The individual shared responsibility provision, also known as the individual mandate, went into effect Jan. 1, 2014. The fact sheet explains that, unless they qualify for an exemption, U.S. residents must have qualifying health coverage, called “minimum essential coverage,” in 2014. Those individuals who do not comply are subject to a shared responsibility payment when filing their federal income tax return. The fact sheet provides examples of minimum essential coverage and exemptions.
If an individual is subject to a shared responsibility payment, the amount is the greater of 1 percent of that individual’s household income above the tax return filing threshold, or $95 per adult and $47.50 per child (up to a family maximum of $285). Employers may find the fact sheet a helpful resource in understanding PPACA’s provisions generally and in helping employees understand their individual mandate obligations.
CMS Issues FAQs on Small Group Health Plan Market Reform Implementation
On May 16, 2014, CMS issued FAQs on market reform implementation in the individual and small group health plan market. The FAQs include guidance on:
- Essential health benefits (EHB)
- Actuarial value (AV)
- Guaranteed availability
- Minimum essential coverage (MEC)
- Transitional policy extensions for non-PPACA-compliant health plans
Although the FAQ guidance applies to insurers, it is also relevant for employers with small group plans.
- EHB: For plans that must provide EHB coverage, the FAQs clarify that insurers are prohibited from imposing benefit-specific waiting periods (except for pediatric orthodontia), since such waiting periods discriminate against individuals with significant health needs.
- AV: The FAQs provide guidance on inputting plan provisions, including information on student health plans, into the 2015 HHS AV calculator. Alternative methods are described for plan designs that are not compatible with the AV calculator.
- Guaranteed availability: The guidance reminds insurers that plans sold through the SHOP are subject to PPACA’s guaranteed availability rules; therefore insurers must accept every employer in the state that applies for coverage. Insurers must be prepared to make their SHOP plans available outside the SHOP (since employers could be ineligible or decline to enroll through the SHOP).
- MEC: The guidance states that conversion policies (those offered to individuals who lose group coverage) are generally considered MEC, and therefore will satisfy the individual mandate requirement to maintain MEC.
Finally, CMS previously announced that for policy years beginning on or after Jan. 1, 2014, and before Oct. 1, 2016, there will be no penalty for insurers that continue non-PPACA-compliant individual and small group (defined as those with 50 or fewer employees) health insurance policies. The new guidance explains how the transitional rule applies to employers with 51 – 100 employees after PPACA changes the definition of “small group” (effective Jan. 1, 2016, “small group” includes employers with 51 – 100 employees).
Beginning Jan. 1, 2016, an employer with 51 – 100 employees is covered by the transition rule (i.e., non-enforcement provision) with respect to a large group policy purchased before Jan. 1, 2016 (and that does not conform to small group rules), so long as the policy is renewed for a plan year beginning on or after Jan. 1, 2016, and on or before Oct. 1, 2016.
Reinsurance Contribution FAQ Describes Process for Submitting Payment
On May 22, 2014, CMS released an FAQ providing details about the submission process for the collection of reinsurance contributions. The FAQ states that HHS will implement a streamlined process for the collection of reinsurance contributions.
As a reminder, contributing entities responsible for making reinsurance contributions include insurers, employers that sponsor self-insured plans and third-party administrators that pay contributions on behalf of self-insured plans. Self-insured plans that self-administer claims processing or adjudication are exempt from the reinsurance rate for 2015 and 2016. Such entities are required to provide basic company and contact information via a form available at www.pay.gov no later than Nov. 15.
HHS anticipates offering training beginning in late June. Registration on www.regtap.info is encouraged in order to receive notice regarding upcoming training opportunities.