Why the Web Based Exchange is likely to blow up on Tuesday October 1st (A rant by Robert Slayton)

After spending weeks working with the Centers for Medicare and Medicaid Services (CMS.gov) to try to figure out whether I'm registered as an Agent on the Federally Facilitate Exchange, I had an epiphany of sorts. If they can't even get the training and registering part right for Insurance Agents, then how in the heck will they be able to get the web based Marketplace (Exchange) off the ground which will have tens of thousands more people trying to sign up for coverage?

Right now when you call CMS's help number for Insurance Agents, you receive a recording that the website has issues and that they are working on it. Ever since they opened up the website, (September 3rd), it hasn't worked correctly. When I talked to a CMS representative last week (30 minute wait, 15 minutes on the phone), they couldn't check my status or give me any information. They referred me to another website which just has general information. The worst part about that referral was the website had 98 characters (here it is: http://www.cms.gov/cciio/programs-and-initiatives/health-insurance-marketplaces/a-b-resources.html). Imaging trying to write down this website as they read it off to you.

Out of the hundreds of agents I track, only 2 have said they have gotten their FFM# (this allows them to write business within the exchange).

But wait, it gets better. Not only will you have no agents who can help until CMS resolves the registration issue, in Illinois, the Feds are saying rates and plans won't be released until October 1st, the very day the Marketplace opens.

How is ANYONE (Customer Service Reps working for the Exchange, Navigators, In Person Assisters, and Agents) going to be able to help people in the Marketplace if we don't have any time to review the plan designs and rates associated with the insurance before it goes live?

Maybe the government IS training their reps beforehand. Then they will be the ONLY ones who can answer questions on day 1, thereby increasing their call volume dramatically, thereby causing long wait times and unhappy customers.

Imagine if you ran a large corporation with thousands of sales people. Wouldn't you train them on the new product (plans available within the Marketplace) and give them pricing before launching? Doesn't this make sense? Apparently not for the Government.

In Politics, you can fudge a lot of things when it deals with people and paper. When it comes to technology, you can't fudge. Either it works or it doesn't work. Having worked for years for a technology company who has delivered "vaporware" to clients, I've been on the receiving end of the screaming and yelling when a product doesn't work.

It will be interesting to see whether the website works and can keep up with the traffic. If I were a betting person, I'd bet on the Exchange's portal not working smoothly the first day (and week).

Let's see whether my prognostication comes true. I sure hope not. . .

Explanation of Guidance on HRAs, Health FSAs and Certain Other Employer Healthcare Arrangement Options

Explanation of Guidance on HRAs, Health FSAs and Certain Other Employer Healthcare Arrangement Options

By Larry Grudzien

Attorney-At-Law

September 16, 2013 

On Friday, September 13, the Departments of Labor, Treasury and Health and Human Services provided guidance on the application of certain provisions of the Affordable Care Act (Act) on health reimbursement arrangements (HRAs), certain health flexible spending arrangements (Health FSAs) and employee assistance programs (EAPs).   The following reviews this guidance:

1. Since HRAs are group health plans under ERISA, they must meet the market reforms under the Act.

2. HRAs integrated with a group health plan will be treated as complying with both the annual dollar limit prohibition and the preventive services requirement if certain conditions are met, as explained below.

3. An HRA can be integrated with the group health plan of the employer or of another employer.

4. An HRA used to purchase individual market coverage is treated as not integrated for the annual dollar limit prohibition or the preventive services requirements. 

5. For an HRA to be except from these requirements it must qualify as either a retiree medical plan or an "excepted benefit" under HIPAA. 

6. Amounts made available under an HRA that is integrated with an eligible employer sponsored plan can be used for determining affordability or minimum value, but not both.

7. If an HRA is integrated with a plan offered by another employer for purposes of the market reforms, such an HRA cannot count toward the affordability or minimum value requirement of the plan offered by the other employer.

8. An HRA will be treated as integrated with another group health plan for purposes of the annual dollar limit prohibition and the preventive services requirements if the requirements of at least one of two integration methods, Minimum Value Not Required and Minimum Value Required, are met

Minimum Value Not Required:   This method is met if:

a)         the employer offers a group health plan (other than the HRA) to the employee that does not consist solely of excepted benefits;

b)         the employee receiving the HRA is actually enrolled in a group health plan (other than the HRA) that does not consist solely of excepted benefits, regardless of whether the employer sponsors the plan (non-HRA group coverage);

c)          the HRA is available only to employees who are enrolled in non-HRA group coverage, regardless of whether the employer sponsors the non-HRA group coverage (for example, the HRA may be offered only to employees who do not enroll in the employer's group health plan but are enrolled in other non-HRA group coverage, such as a plan maintained by the employer of the employee's spouse);

d)    the HRA is limited to reimbursement of one or more of the following-co-payments, co-insurance, deductibles, and premiums under the non-HRA group coverage, as well as medical care (as defined under Code Section 213(d)) that does not constitute essential health benefits; and

e)    under the terms of the HRA, an employee (or former employee) is permitted to permanently opt out of and waive future reimbursements from the HRA at least annually and, upon termination of employment, either the remaining amounts in the HRA are forfeited or the employee is permitted to permanently opt out of and waive future reimbursements from the HRA.

This opt-out feature is required because the benefits provided by the HRA generally will constitute minimum essential coverage and will therefore preclude the individual from claiming a premium tax credit.

 

Minimum Value Required. This method is met if:

a)    the employer offers a group health plan to the employee that provides minimum value;

b)    the employee receiving the HRA is actually enrolled in a group health plan that provides minimum value, regardless of whether the employer sponsors the plan (non-HRA MV group coverage);

c)     the HRA is available only to employees who are actually enrolled in non-HRA MV group coverage, regardless of whether the employer sponsors the non-HRA MV group coverage (for example, the HRA may be offered only to employees who do not enroll in the employer's group health plan but are enrolled in other non-HRA MV group coverage, such as a plan maintained by an employer of the employee's spouse); and

d)    under the terms of the HRA, an employee (or former employee) is permitted to permanently opt out of and waive future reimbursements from the HRA at least annually, and, upon termination of employment, either the remaining amounts in the HRA are forfeited or the employee is permitted to permanently opt out of and waive future reimbursements from the HRA.

9. An employee who ceases participation in a group health plan may use any remaining amounts credited in the HRA while integrated after being covered without causing the HRA to fail to comply with the market reforms.

10. If the requirements of Minimum Value Required Integration Method are met, an HRA integrated with that group health plan will not be treated as imposing an annual limit in violation of the annual dollar limit prohibition, even if that group health plan does not cover a category of essential health benefit and the HRA is available to cover that category of essential health benefits and limits the coverage to the HRA maximum benefit.

11. If a Health FSA offered by an employer does not qualify as excepted benefits, the Health FSA generally is subject to the market reforms. If they are not integrated with a group health plan, they will fail the preventive care requirements. There will be an exception for Health FSAs from the annual dollar limit prohibition that is offered under a cafeteria plan.

12.The above exception will not apply to HRAs that could be treated as Health FSAs.

13. An Employee assistance program will be considered to be an excepted benefit, but only if the program does not provide significant benefits in the nature of medical care or treatment. Since this term is not defined in the guidance, employers may use a reasonable, good faith interpretation of whether an EAP provides such care or treatment, until further guidance is released.

14. Premiums for coverage purchased on the marketplace cannot be reimbursed under a premium only plan under Code Section 125 for tax years beginning after December 31, 2013. For any premium only plans that have a noncalendar plan years as of September 13, 2013, this restriction will not apply before the first plan year beginning after December 31, 2013. Because of this, any individual may not claim a premium tax credit for any month in which he or she was covered by a qualified health plan purchased though a state marketplace and reimbursed under a premium only plan under Code Section 125.

This provision was added because several state marketplaces established before 2013 allowed individuals to be reimbursed for individual health insurance premiums purchased through a state marketplaces from premium only plan under Code Section 125.

These provisions apply for plan years beginning on or after January 1, 2014, but may be applied for all prior periods.

 

For More Information:

If you have any comments or questions regarding any of above information, please do not hesitate to call Robert Slayton at 630-779-1144 or Larry Grudzien at (708) 717-9638 

Update on Providing Notice to Employees about the Exchange

According to the Department of Labor, there is no penalty for not providing notice. This is opposite to what we have been led to believe.

Here's a link to the FAQ:

http://www.dol.gov/ebsa/faqs/faq-noticeofcoverageoptions.html

Model Exchange Notices are Required of ALL Companies who must comply with the Fair Labor Standards Act (FLSA) by 10/01/2013

Model Notices are Required of ALL Companies who must comply with the Fair Labor Standards Act (FLSA) by 10/01/2013

This document is for educational purposes only and is not intended, and should not be relied upon, as tax or legal advice. Recipients of this document should seek advice based on their particular circumstances from an independent tax advisor or legal counsel.  

Am I required to comply with the FLSA?

In general, employers who are engaged in interstate commerce OR engaged in the production of goods for commerce OR have $500,000 or greater GROSS revenues annually must comply REGARDLESS OF WHETHER YOU OFFER HEALTH INSURANCE.

What do I do if I offer Health Insurance?

Fill out and provide the following Model Notice. My strong recommendation is to work with your Insurance Broker on this. You should include the first 2 pages. The third page is optional and I usually recommend that employers not include it.

Page 1 – Fill out the contact information in the box at the bottom of the form.

Page 2 – Fill out the requested information. As for eligibility, my recommendation is to take the language directly from your Certificate of Coverage. DO NOT check the box stating that your plan meets both minimum value and affordability for EVERYONE unless it really does. It is okay not to check the box.

http://www.dol.gov/ebsa/pdf/FLSAwithplans.pdf

What do I do if I DO NOT offer Health Insurance?

Fill out and provide the following Model Notice. My strong recommendation is to work with your Insurance Broker on this. You should include the first 2 pages. The third page is optional and I usually recommend that employers not include it.

Fill out page 2.

http://www.dol.gov/ebsa/pdf/FLSAwithoutplans.pdf

Who do I give it to?

All of your employees (full time, part time, seasonal, student, mentally challenged, etc.). Interns, 1099 employees are not considered employees.

How do I distribute it?

It is best if you can attach it to a person’s paycheck. Other avenues are handing it out, mailing it, or providing it electronically (such as emailing it) PROVIDED you follow the Department of Labor’s electronic disclosure safe harbor.

Keep track of the date of distribution and a list of the people you distributed it to. If you are audited, this will be your lifesaver.

What about going forward?

You must provide this notice to ALL newly hired employees.

What else?

These model notices are only good through 11/30/2013. New notices should come out beforehand. 

Are there Penalties for not complying?

Yes, we guess it is $100/employee/day (nothing specific was mentioned, so we are using the general penalty).

What if I Need More Help?

Feel free to contact me.

Robert Slayton

630-779-1144

Robert@robertslayton.com

Pediatric Dental with the Affordable Care Act – What does this mean? Do I need to Buy it?

Pediatric Dental with the Affordable Care Act – What does this mean?

Today I will be talking about State Federal and Federally Facilitated Exchanges (also known as Marketplaces). State Based Exchanges will come up with their own rules so are not included here.

Pediatric Dental is one of the 10 Essential Health Benefits required to be on a health insurance plan starting in 2014. Below is what I've been able to figure out so far. As changes happen, this will be changing.

What is Pediatric Dental?

It simply means that all children under the age of 19 will have coverage for preventative, basic, major/restorative, and most will include “medically necessary” orthodontics. Picture your current dental plan. It usually looks like the following (this would be considered a “high plan” under the new rules):

Network		e.g. Delta Dental
Deductible Individual/ Family		$50/$150
In Network/Out Network %
Preventative Care		100%/100%
Basic Care		80%/80%
Major Care		50%/50%
Orthodontia		50%
Annual Maximum		$1,000.00
Lifetime Orthodontia  Max		$2,000.00

Pediatric dental plans can be offered both as a standalone product (similar to the above) within the exchange or embedded within the medical plan.

Stand Alone

If the plan is offered as a standalone product, it will look similar to the above plan (with different percentages). The big difference is that the annual out of pocket maximum will be $700 for one child and $1400 for 2+ children. This means that if orthodontia is deemed as medically necessary, the most someone would pay in one year would be $700. Furthermore, there is NO ANNUAL MAXIMUM for children (not adults). So if a child needs $4000 of covered work done, then the child’s family would pay only $700 within that year.

Embedded within a Medical Plan

We are still waiting to see how this may look. A health insurance company can have pediatric dental’s deductible be the same as the medical deductible or have it be separate.

Do I need to buy Pediatric Dental?

Technically yes. Some states will be including it with all plans. Most states will offer a standalone dental benefit that can be combined with a separate medical plan. They will also be offering medical plans with dental included within the medical plan.

Technically, all states will require “reasonable assurance” that you own a dental plan that covers children. If you are on a Federally Facilitated Marketplace (Exchange) website, it will allow you select a medical only plan and check out without selecting a separate dental plan. It will ask you whether you have other dental and if you say yes, then you can continue. Currently there is no verification as to whether you actually have a pediatric dental plan.

If I don’t have Pediatric Dental, but do have Medical, will I be subject to the Individual Mandate?

Probably not as I believe the question on the tax return will be whether you have been covered by a health insurance plan and not ask whether your plan includes pediatric dental. Furthermore, people on grandfathered plans will not be required to have pediatric dental and will not be subject to the Mandate.

What if my company offers dental already?

Chances are that pediatric dental will NOT be part of your company’s medical plan in 2014 as the requirement states that if a company offers a standalone dental plan that covers children, then they do not need to include pediatric dental within their medical plan.

Why the Individual Mandate won't work for Health Reform

We've heard a lot about the individual mandate in the Affordable Care Act. The first year it will be 1% or $95 (whichever is more). It then goes up to 2.5% or equal to the lowest cost Bronze Level plan (whichever is more). Refer to page 12 of the following: http://www.irs.gov/PUP/newsroom/REG-148500-12%20FR.pdf.

There are a number of exemptions available which people haven't talked about, but are very important. Here they are (taken from http://www.irs.gov/uac/Questions-and-Answers-on-the-Individual-Shared-Responsibility-Provision):
-----

6. What are the statutory exemptions from the requirement to obtain minimum essential coverage?

1. Religious conscience: You are a member of a religious sect that is recognized as conscientiously opposed to accepting any insurance benefits. The Social Security Administration administers the process for recognizing these sects according to the criteria in the law.
2. Health care sharing ministry: You are a member of a recognized health care sharing ministry.
3. Indian tribes: You are a member of a federally recognized Indian tribe.
4. No filing requirement: Your household income is below the minimum threshold for filing a tax return. The requirement to file a federal tax return depends on your filing status, age, and types and amounts of income. To find out if you are required to file a federal tax return, use the IRSInteractive Tax Assistant (ITA).
5. Short coverage gap: You went without coverage for less than three consecutive months during the year. For more information see question 22.
6. Hardship: A Health Insurance Marketplace, also known as an Affordable Insurance Exchange, has certified that you have suffered a hardship that makes you unable to obtain coverage.
7. Unaffordable coverage options: You can’t afford coverage because the minimum amount you must pay for the premiums is more than eight percent of your household income.
8. Incarceration: You are in a jail, prison, or similar penal institution or correctional facility after the disposition of charges against you.
9. Not lawfully present: You are neither a U.S. citizen, a U.S. national, nor an alien lawfully present in the U.S.

-----

Unaffordable Coverage Option (#7)

I'd like to focus on just one of the 9 exemptions, the Unaffordable coverage option (#7). If you surf out to the Kaiser Family Foundation's subsidy calculator (http://kff.org/interactive/subsidy-calculator/) and plug in a family of 4. The projected premium is $12,887/year for the second lowest Silver Plan. The projected premium for a Bronze level plan is $10,681/year.

If you divide $10,681 by 0.08, you'd need to make more than $133,512.50/year to receive a penalty if you decide to forego coverage (8% of $133,512.50 equals $10,681). That means there are a lot of people who will NEVER be faced with a penalty. Of course if you were, you'd just have to fill out the religious exemption section listing something like being a Christian Scientist or other religious organization that does not believe in traditional medicine.

How the IRS Collects the Penalty

Furthermore, the only way the IRS can collect this penalty is via your income tax return. If you don't pay income tax, then it's pretty hard for them to come after you as they are not allowed to garnish wages or freeze bank accounts. The last statistic I heard about the percentage of Americans who don't pay income tax was 47% (see http://abcnews.go.com/Politics/OTUS/mitt-romneys-47-percent-pay-income-taxes/story?id=17263629). So this mandate won't impact almost 1/2 the country.

So, whatever the CBO scores say about the number of people who will pay a penalty, my guess is that it will be much lower than expected.

Heck, if I were a young invincible, I'd happily pay the $95/year to save $2000/year in premium. That would be extra beer money. As I didn't have any assets and low income, there really is nothing for the doctors and hospitals to take from me if I had an illness (BTW, it's already a law that if you show up at the Emergency Room, they must treat you). The challenging part would be if I had expensive medications, but that's easily remedied through programs with the major pharmaceutical companies to supplement the cost to low income people. Then at open enrollment time, I'd sign up for a plan that starts January 1st of the following year. As there are no pre-existing conditions anymore, my conditions would be covered.

Of course if I wanted insurance sooner, I could just marry someone. This is considered a qualified reason (gaining a dependent) which allows me to get the insurance sooner. Once I had the insurance, we could get the marriage annulled (yet another qualified reason).

So why buy health insurance?

Health insurance is important because of the potential of taking your life savings on a major illness (I've seen it numerous times). It also helps give access to the top doctors and hospitals. If the government wants people to buy health insurance, they must focus on the reasons to buy and not on the penalties.

Frankly, there are three kinds of personal insurance coverage needed to protect against catastrophic loss due to health/death. The first is health insurance, the second is life insurance (to keep your beneficiaries living in the same lifestyle instead of having to sell everything), and disability insurance. The most overlooked is disability insurance.

Cash Machine

Imagine you had a cash machine in your home. It legally produced $1,000 -- $10,000/week every week of the year. My question is how much would you spend to make sure that income came in every week for the next 10 - 40 years? Would you spend $50/week?, $500/week?, or more to assure it keeps coming in?

If you would spend the money to protect the machine, then disability insurance makes sense. You are that cash machine. If you can't work, the money won't come in and you'll have nothing to live on.

The reason why people go into bankruptcy due to medical debt is because they have no income coming in during the illness. If you don't have money to pay for your premiums (because you are buying food or paying rent), then the policy lapses. Once the policy lapses, you are on the hook for all subsequent expenses. 

Questions

If you have questions on health reform, need a help with any of the above insurance products (for both individuals and businesses), please give me a call or shoot me an email.

Employer Mandate Delayed. Many Questions Remain

Employer Play-or-Pay Mandate Penalties and Certain Employer Reporting Requirements Delayed Until 2015

Posted: 11 Jul 2013 09:27 AM PDT

Copyright ©2013 Towers Watson. All Rights Reserved

Treasury Says No Impact on Any Other Provisions of the PPACA in 2014

The Obama Administration unexpectedly announced on July 2 that employers will be provided an additional year, until 2015, before any penalties are assessed under the employer play-or-pay mandate in the Patient Protection and Affordable Care Act (PPACA) (i.e., both the $2,000- and $3,000-per-year employer penalties are delayed until 2015).

In addition, the mandatory employer and insurer reporting requirements (including identification of full-time employees and their months of coverage) under Internal Revenue Code (IRC) Sections 6055 and 6056 are also delayed for a year. Thus, employers will not incur penalties for failing to provide affordable, minimum-value health coverage to their full-time employees in 2014, nor will insurers or employers be required to comply with the extensive information reporting requirements under those code sections for the 2014 calendar year.

In an unusual fashion, the Obama Administration announced the delay only via postings on the Treasury Department and White House websites. Mark Mazur, assistant secretary for tax policy at the Treasury wrote in a blog post, “We have heard concerns about the complexity of the requirements and the need for more time to implement them effectively.” Mazur went on to write that “our actions today do not affect employees’ access to the premium tax credits available under the ACA (nor any other provision of the ACA).”

The Administration stated that the goals of the one-year delay are twofold. First, it will allow the government to consider ways to simplify the new reporting requirements, and second, it will provide time for employers to adapt health coverage and reporting systems. It is important to note that the delay also takes a controversial piece of the law off the table before the midterm congressional elections.

According to the Treasury, rules regarding the delay will be proposed this summer. Employers will be encouraged but not required to adopt and follow those reporting requirements in 2014. The full text of the announcement by the Treasury can be found at treasury.gov.

What Does This Mean?

Aside from the delay in employer reporting under IRC Sections 6055 and 6056, and the delay in the play-or-pay penalties, the Treasury says the delays will not affect employees’ access to the premium tax credits nor any other provision of the PPACA. Even if one accepts that statement at face value, employers need to begin considering the potential impact of the delay as we await details from the government that will provide answers to the following questions:

§ What is the practical impact of the delay in play-or-pay penalties on counting employee hours in 2014 (i.e., will employers be required to identify full-time employees in 2014 for any other reasons, aside from play-or-pay, such as inquiries from public health insurance exchanges)?

§ Will employers still need to distribute the mandatory notice to employees regarding public health insurance exchanges by October 1, 2013? If so, should that notice be modified to reflect the delay in the employer play-or-pay mandate? Similarly, what is the relevance of information in the government’s model notice regarding details of the employer’s group health plan in view of the delay in the play-or-pay mandate?

§ If employers will not be subject to the play-or-pay mandate in 2014, how will public health insurance exchanges determine eligibility for the premium tax credit (recalling that individuals are ineligible for the credit if they have been offered minimum essential coverage that is affordable and of minimum value)?

§ Will the public health insurance exchanges still be contacting employers in 2014 to verify employee information (in some cases) on employees’ full-time status and health coverage contributions (for purposes of the premium tax credit) — even though employers will not be subject to penalties under the play-or-pay mandate? If so, will the affordability and minimum value of employer coverage still need to be determined in 2014 for purposes of the premium tax credit if those same elements of the play-or-pay requirements are waived for employers in 2014?

§ How will the individual mandate be affected by the delay in the employer play-or-pay mandate? Will there now be political pressure to delay the individual mandate if the employer play-or-pay mandate has effectively been deferred to 2015?

Meanwhile, it seems relatively clear that other provisions of the PPACA that become effective in 2014 can proceed without being affected by the one-year delay in the employer play-or-pay mandate. For example, the annual distribution of Summaries of Benefits and Coverage (SBCs), compliance with the new out-of-pocket maximum limits and 90-day waiting period limit on group health plans, as well as the annual $63-per-covered-life, transitional-reinsurance fee do not appear to be affected by the delay.

Employers should anticipate questions and concerns from stakeholders about this latest development. Employees, vendors, line supervisors, senior management, board members and others will all react to media coverage of the delay, and some confusion should be expected. Employers should begin to consider some thoughtful messaging about this development even as we await details from the Treasury.

Conclusion

The main elements of the PPACA were designed to take effect in 2014 in a sort of health care reform grand opening. The announcement of the delay by the Treasury on July 2 appears to set the stage for a “soft opening” for health care reform in 2014. For employers, most of the implications will flow from the one-year delay in enforcement of the play-or-pay penalties and the delay in information reporting under IRC Sections 6055 and 6056. While nothing in this latest bit of drama suggests that health care reform is going away, further guidance will be needed from the government to understand the full implications of the delay for employers. That guidance is promised by the Treasury this summer, and Towers Watson will be following those developments closely in order to assist plan sponsors through this period.