We experienced an Affordable Care Act (ACA) regulatory blizzard from November 2012 through February 2013. We forecast the same for this winter. Everyone is braced for IRS release of the final Employer Shared Responsibility Cost – “play or pay” - rules, which we hope will clarify responsibility for leased employees, among other ambiguities in the proposed rules. Here is our review of what has fallen so far.
Employers Beware: IRS Issues New Rules on Excise Tax Payments, Reporting Requirements
In November 2013, the IRS issued final rules implementing provisions of the ACA that require organizations that provided health insurance in 2013 to pay excise taxes. According to the final rules, the payments will be due September 30, 2014 and are not deductible. The insurer’s payment will be based on its net health insurance premiums received in 2013, as reported to the IRS by April 15, on Form 8963. Issuers with net 2013 receipts of less than $25,000,000 must report, but will owe no tax. Issuers that totally exit the market by the end of 2013 need not report or pay the tax. A covered entity that fails to report will owe a penalty equal to $10,000, plus the lesser of $1,000 per day of delay or the total tax owed.
Employers with fully insured plans will pay only the tiny fraction of their insurer’s payment that is passed through to them. Genuinely self-insuring, single employers are not considered to be covered by this tax, but the rules warn that the tax may be imposed on their stop-loss carriers in low-threshold situations where excess coverage is functionally group health coverage.
Some employers are unaware that, under these final rules, they are subject to reporting duties and penalties, even if their plans are small. For example:
• Multiple, unrelated employers participating in a self-insured group are involved in a “MEWA” – i.e., a Multiple Employer Welfare Arrangement – that the IRS treats as an issuer of health insurance;
• A MEWA that also is a “VEBA” – i.e., a Voluntary Employee Beneficiary Association – will be treated like a MEWA, but a VEBA serving multiple employers under a union contract, administered by joint trustees, will be exempt;
• Non-governmental educational institutions that provide self-funded student health insurance will have reporting responsibilities.
In addition, the final regulations cover limited scope, stand-alone dental and vision benefits, even though they are considered ”excepted benefits” for other ACA purposes. Issuers of these benefits may be surprised by the reporting requirement.
Employers have until April 15, 2014 to determine their status and file the required report.
Blue Cross Blue Shield Rejects Obama Reinstatement Option; Health Exchange Enrollment in Alabama Grows in November
On November 14, 2013, President Obama announced that insurers would be permitted to renew non-qualifying individual plans that were in force in 2013 for one year, and only for consumers that were enrolled in the plans as of October 1, 2013. President Obama left the decision to reinstate noncompliant plans to state insurance commissioners, who are responsible for deciding which policies can and cannot be sold in their respective states.
Alabama Insurance Commissioner Jim Ridling decided to permit insurers to renew noncompliant plans stating that "Alabama does not have the legal authority to require any insurance company to comply or not to comply with federal law."
In response to President Obama’s announcement, Blue Cross Blue Shield of Alabama stated that it would not reinstate noncompliant plans. Blue Cross had previously sent cancellation notices to 87,000 plan subscribers in October. With respect to its decision, Blue Cross issued a statement in which it opined that “the temporary reinstatement of policies that are non-ACA compliant would create dual classes of policyholders and destabilize the state’s insurance market and the risk pools associated with these health plans.”
Though perhaps not in direct response to the Blue Cross announcement, the U.S. Department of Health and Human Services reported that the number of Alabamians applying for health insurance through healthcare.gov increased 39 percent from October to November. Approximately 14,709 applications, covering 28,076 people, were received through the federal health insurance exchange in November, compared to 10,573 received in October, according to HHS.
HHS Proposes to Exempt Reinsurance for Union Plans, Delay Implementation of ACA Patient Safety Requirements for Large Hospitals
On November 25, 2013, HHS quietly released a 255-page document titled “Notice of Benefit and Payment Parameters for 2015” (“Notice”). In the Notice, HHS proposes to exempt union health and welfare trust funds from some or all of their responsibilities to pay reinsurance fees, currently pegged at $63 per year per covered life for 2014. While union funds will bear the full reinsurance fees for 2014, the proposed regulations exempt them for 2015 and 2016 and spread the amounts that they would have paid around all other “contributing entities.”
Importantly, in the Notice HHS also proposed regulations implementing Section 1311(h) of the ACA, which allows qualified health plans to contract with larger (50+ bed) hospitals provided the hospital utilizes patient safety evaluation systems and implements hospital discharge protocols. As set forth in the notice, HHS proposes to delay this requirement and phase it in after January 1, 2015. Beginning then, QHPs may only contract with hospitals of more than 50 beds that if they are Medicare-certified or have been issued a Medicaid-only CCN and meet conditions of participation for quality assessment and performance improvement (QAPI) programs and discharge planning requirements.
Pepper Crutcher is the leader of Balch & Bingham’s Affordable Care Act compliance group and is located in its Jackson, Mississippi office. Dan Silverboard is also a member of the ACA compliance group and is located in the Atlanta office of Balch & Bingham.