Final Rule Issued on ACA Contraceptive Coverage Exemptions (Part 2)

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Under the Affordable Care Act (ACA), non-grandfathered health plans must cover certain preventive health services for women, including contraceptives, without imposing cost-sharing requirements for the services.

On July 10, 2015, the Departments of Labor (DOL), Health and Human Services (HHS) and the Treasury (Departments) released final regulations on the ACA’s women’s preventive care coverage requirement.

These regulations:

  • Finalize an accommodation for eligible nonprofit organizations and for-profit businesses with religious objections to providing contraceptive coverage, including related documentation standards.
  • Clarify general rules on the coverage of preventive services generally.

The regulations are applicable on the first day of the first plan or policy year beginning on or after Sept. 12, 2015.

Additional Clarifications on Coverage of Recommended Preventive Services

The final regulations also include the following clarifications related to the women’s preventive care coverage requirement:

  • Scope of recommended preventive services: The regulations finalize the requirement to provide coverage without cost sharing with respect to the following three categories of recommendations and guidelines (in addition to those provided for in the Health Resources and Services Administration (HRSA) guidelines for women):

o   Evidence-based items or services that have in effect a rating of “A” or “B” in the current recommendations of the U.S. Preventive Services Task Force;

o   Immunizations for routine use that have in effect a recommendation from the CDC’s Advisory Committee on Immunization Practices; and

o   Evidence-informed preventive care and screenings for infants, children and adolescents, provided for in guidelines supported by HRSA.

  • Office visits: The final regulations clarify that, when a recommended preventive service is not billed separately (or is not tracked as individual encounter data separately) from an office visit, plans and issuers must look to the primary purpose of the office visit when determining whether they may impose cost sharing with respect to the office visit. The Departments anticipate that the determination of the primary purpose of the visit will be resolved through normal billing and coding activities, as they are for other services.
  • Out-of-network providers: The final regulations do not require plans or issuers to provide coverage for recommended preventive services delivered by an out-of-network provider. However, the regulations clarify that a plan or issuer that does not have a provider in its network who can provide a particular recommended preventive service is required to cover the preventive service when performed by an out-of-network provider, and the plan or issuer may not impose cost sharing with respect to the preventive service.
  • Reasonable medical management: Plans and issuers may use reasonable medical management techniques to determine the frequency, method, treatment or setting for required preventive coverage items or services to the extent they are not specified in the relevant recommendation or guideline. A plan or issuer may rely on the relevant clinical evidence base and established reasonable medical management techniques to determine the frequency, method, treatment or setting for coverage of a recommended preventive health service.
  • Services not described: The final regulations clarify that a plan or issuer may cover preventive services in addition to those required to be covered under the ACA. For these additional preventive services, a plan or issuer may impose cost sharing at its discretion, consistent with applicable law. A plan or issuer may also impose cost sharing for a treatment that is not a recommended preventive service, even if the treatment results from a recommended preventive service.
  • Timing: The preventive coverage requirement took effect for plan years beginning on or after Sept. 23, 2010. Coverage pursuant to recommendations or guidelines issued after that date must be provided for plan years beginning one year after the date the recommendation or guideline is issued.

Also, required coverage must be provided through the end of the plan year, even if the recommendation or guideline changes during the plan year. This rule does not apply if a recommendation or guideline is downgraded to a “D” rating or if any related item or service is subject to a safety recall or is otherwise determined to pose a significant safety concern by an authorized federal agency.

More Information

Contact Clarke & Company Benefits, LLC if you would like more information on the ACA’s requirement to provide preventive care coverage or on the exemptions or accommodations available.

July 2015 Health Care Reform

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Penalties Increased for Section 6055 and Section 6056 Reporting Violations

Effective for returns and statements filed in 2016, the Trade Preferences Extension Act of 2015 significantly increases the penalties for violations of the Section 6055 or Section 6056 reporting requirements.

• Signed into law on June 29, 2015, the Trade Preferences Extension Act of 2015 increases the penalties for reporting entities that fail to comply with Section 6055 or 6056 reporting.
• The increased penalties take effect for returns and statements filed in 2016.
• Short-term relief from penalties is available in certain limited circumstances.

Click here to read the full legislative brief!

 

 

Final Rule Issued on ACA Contraceptive Coverage Exemptions

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Under the Affordable Care Act (ACA), non-grandfathered health plans must cover certain preventive health services for women, including contraceptives, without imposing cost-sharing requirements for the services.

On July 10, 2015, the Departments of Labor (DOL), Health and Human Services (HHS) and the Treasury (Departments) released final regulations on the ACA’s women’s preventive care coverage requirement.

These regulations:

  • Finalize an accommodation for eligible nonprofit organizations and for-profit businesses with religious objections to providing contraceptive coverage, including related documentation standards.
  • Clarify general rules on the coverage of preventive services generally.

The regulations are applicable on the first day of the first plan or policy year beginning on or after Sept. 12, 2015.

Accommodations for Religious Organizations

Churches and other houses of worship are exempt from the ACA’s requirement to cover contraceptives. Other church-affiliated institutions that object to providing contraceptive coverage on religious grounds, such as schools, charities, hospitals and universities, can be eligible for an accommodations approach.

Under these accommodations, eligible organizations are not directly involved with providing any contraceptive coverage to which they object on religious grounds. Payments for these contraceptive services will be provided by an independent third party, such as an insurance company or third-party administrator (TPA), directly and free of charge.

To be eligible for the accommodation, an organization or employer must meet specific requirements and was required to self-certify that it met the criteria (HHS has provided a self-certification form for this purpose).

A number of organizations challenged the self-certification requirement, arguing that it infringes on religious liberty because it makes the nonprofit organization complicit in the provision of birth control.

In response to these challenges, the Departments previously provided an alternative way for an eligible organization to provide notification of its objection to covering contraceptives: by notifying HHS in writing of its religious objection to providing contraceptive coverage instead of providing the self-certification to the plan’s issuer or TPA. This option has been confirmed in the final regulations.

Accommodation for Closely Held For-profit Businesses

On June 30, 2014, in Burwell v. Hobby Lobby Stores, Inc. et al., the U.S. Supreme Court created a narrow exception to the contraceptive mandate for closely held for-profit businesses that object to providing coverage for certain types of contraceptives based on their sincerely held religious beliefs.

In light of the Supreme Court’s decision in the Hobby Lobby case, the final regulations amend the definition of an “eligible organization” for purposes of the accommodations approach described above to include a closely held for-profit entity that has a religious objection to providing coverage for some or all of the contraceptive services otherwise required to be covered.

Under the final regulations, a qualifying closely held for-profit entity will not be required to contract, arrange, pay or refer for contraceptive coverage. Instead, payments for contraceptive services provided to participants and beneficiaries in the eligible organization’s plan would be provided or arranged separately by an issuer or a TPA.

The final rules define a qualifying closely held for-profit entity based on an existing definition in the Internal Revenue Code. For this purpose, a “closely held for-profit entity” is an entity that:

  • Is not a nonprofit entity;
  • Has no publicly traded ownership interests; and
  • Has more than 50 percent of the value of its ownership interest owned directly or indirectly by five or fewer individuals.

For purposes of this definition, all of the ownership interests held by members of a family are treated as being owned by a single individual. In addition, the rule provides that entities whose ownership structure is substantially similar to this definition can also qualify for the accommodation. An organization that is unsure about whether its ownership structure qualifies as “substantially similar” can seek guidance from HHS.

To be eligible for the accommodation, the for-profit entity’s highest governing body (such as its board of directors, board of trustees or owners, if managed directly by its owners) must adopt a resolution or similar action, under the organization’s applicable rules of governance and consistent with applicable state law, establishing that it objects to covering some or all of the contraceptive services on account of the owners’ sincerely held religious beliefs.

A qualifying closely held for-profit entity seeking the accommodation may use either of the two notification options available to qualifying nonprofit entities that seek the accommodation.

Disclosure of the Decision to Assert a Religious Objection to Contraceptive Services

A for-profit entity taking advantage of the accommodation must make its self-certification or notice of objection available for examination upon request by the first day of the plan year to which the accommodation applies. The self-certification or notice of objection must be maintained consistent with ERISA’s record retention requirements.

The final regulations do not establish any additional requirements to disclose the decision. The Departments believe that the current notice and disclosure standards for health plans provide individuals with an adequate opportunity to know that the employer has elected the accommodation for its group health plan and that they are entitled to separate payment for contraceptive services from another source without cost sharing.

The current standards require that, for each plan year to which the accommodation applies, a TPA that is required to provide or arrange payments for contraceptive services and a health insurance issuer required to provide payment for these services, provide to plan participants and beneficiaries written notice of the availability of separate payments for these services contemporaneous with (to the extent possible), but separate from, any application materials distributed in connection with enrollment or re-enrollment in health coverage.

Read more about the additional clarifications of coverage of recommended preventative services on Thursday’s blog.

Penalties Increased for Section 6055 and Section 6056 Reporting Violations

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The Affordable Care Act (ACA) created new reporting requirements under Internal Revenue Code (Code) Section 6055 and 6056. These new reporting rules require certain employers to report information to the Internal Revenue Service (IRS) on the health coverage offered during the year. Related statements must also be provided to individuals.

On June 29, 2015, President Barack Obama signed the Trade Preferences Extension Act of 2015 into law, which increases penalties for the failure to file correct information returns or to provide individual statements under either Section 6055 or Section 6056. These changes are effective for information returns and individual statements required to be filed or provided after Dec. 31, 2015.

Overview of Section 6055 & 6056 Reporting

Section 6055 applies to providers of minimum essential coverage (MEC), which generally includes health insurance issuers, self-insured plan sponsors and government-sponsored programs. Section 6055 reporting will be accomplished using Forms 1094-B and 1095-B.

Section 6056 applies to applicable large employers (ALEs) subject to the ACA’s employer shared responsibility rules.

Under Section 6056, ALEs will use Forms 1094-C and 1095-C to satisfy their reporting obligations.

Reporting Violations

A reporting entity that fails to comply with the Section 6055 or Section 6056 reporting requirements may be subject to the general reporting penalties under the tax code for:

  • Failure to file correct information returns (under Code Section 6721); and
  • Failure to furnish correct payee statements (under Code Section 6722).

Penalties may be reduced if the reporting entity corrects the failure within a certain period of time. In addition, lower annual maximums apply for reporting entities that have average annual gross receipts of up to $5 million for the three most recent taxable years.

Adjusted Penalty Amounts

Effective for returns and statements required to be filed in 2016, the Trade Preferences Extension Act of 2015 significantly increases the penalties for reporting entities that fail to comply with the Section 6055 or Section 6056 reporting requirements.

The increased penalty amounts are as follows:

  • General penalty amount: $250 for each return (increased from $100), up to an annual maximum of $3 million per calendar year (increased from $1.5 million). The annual maximum for employers with up to $5 million in annual gross receipts is $1 million (increased from $500,000).
  • Violations corrected within 30 days: $50 for each return (increased from $30), up to an annual maximum of $500,000 per calendar year (increased from $250,000). The annual maximum for employers with up to $5 million in annual gross receipts is $175,000 (increased from $75,000).
  • Violations corrected before Aug. 1: $100 for each return (increased from $60), up to an annual maximum of $1.5 million per calendar year (increased from $500,000). The annual maximum for employers with up to $5 million in annual gross receipts is $500,000 (increased from $200,000).
  • Violations due to intentional disregard: $500 for each return (or, if greater, 10 percent of the aggregate amount of the items required to be reported correctly) (increased from $250), with no annual maximum.

Short-term Relief from Penalties

Short-term relief from penalties is available, to allow additional time for developing appropriate procedures for data collection and compliance with these new reporting requirements.

For returns and statements filed and furnished in 2016 to report offers of coverage in 2015, the IRS will not impose penalties on reporting entities that can show they make good faith efforts to comply with the information reporting requirements.

This relief is provided only for incorrect or incomplete information reported on the return or statement, including Social Security numbers, taxpayer identification numbers or birthdates. No relief is provided for reporting entities that:

  • Do not make a good faith effort to comply with these reporting regulations; or
  • Fail to file an information return or provide an individual statement on time.

Action Items for Employers

The Section 6055 and Section 6056 requirements took effect for the 2015 calendar year. The first returns will be due in 2016, with information related to the coverage offered or provided in 2015.

Reporting under Section 6055 and Section 6056 is done on a calendar-year basis, regardless of whether the employer has a non-calendar year plan. Employers will need to have information for the full 2015 calendar year in order to file complete and accurate reports in 2016.

This means that employers will need to collect and record information in 2015 in order to prepare for the filing deadlines in 2016. Employers should begin tracking this information now to avoid penalties for failure to comply with these reporting requirements.

More Information

Please contact Clarke & Company Benefits, LLC for more information on Section 6055 and Section 6056 reporting.

U.S. Supreme Court Upholds ACA Subsidies in Federal Exchanges

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On June 25, 2015, the U.S. Supreme Court issued a final ruling in King v. Burwell. This case challenged the availability of health insurance Exchange subsidies in states with Exchanges run by the federal government.

In a 6-3 decision, the Court held that, in drafting the Affordable Care Act (ACA), Congress intended for the federal government to provide subsidies in all states—those that established their own Exchanges and those that have federally facilitated Exchanges, or FFEs.

According to the Supreme Court, without the availability of these subsidies in all states, several other key ACA provisions would not operate as intended (including the individual mandate and the employer shared responsibility rules). The Court’s ruling means that subsidies are available in all states, including those with FFEs.

Health Insurance Exchanges and Subsidies

The ACA requires each state to have an Exchange for individuals and small businesses to purchase private health insurance. The ACA delegated primary responsibility for establishing the Exchanges to each individual state. However, the Department of Health and Human Services (HHS) operates an FFE in any state that refuses or is unable to set up an Exchange. For 2015, only 13 states and the District of Columbia established their own Exchanges. HHS operates FFEs in the remaining states (with state assistance in some cases—but in most cases, with no state assistance).

The ACA also created health insurance subsidies to help eligible individuals and families purchase coverage through an Exchange. The subsidies are designed to make Exchange coverage more affordable by reducing out-of-pocket health care costs.

Of the approximately 11 million people who selected private health plans during the 2015 open enrollment period, nearly 9 million obtained coverage through an FFE. According to HHS, 87 percent of Exchange consumers have been determined to be eligible for subsidized insurance.

Overview of King v. Burwell

King v. Burwell is one of several lawsuits that were filed in response to an IRS rule authorizing subsidies in all states, including those with FFEs. These cases challenged the ability of the federal government to provide subsidies to individuals in states with FFEs.

This case was filed by four individuals who live in a state with an FFE. They argued that the IRS rule authorizing subsidies in all states conflicts with the text of the ACA. They asserted that, according to the law’s plain language, the ACA only authorized subsidies to be provided in states that have established their own Exchanges.

Although the Supreme Court agreed that text of the ACA is ambiguous, it noted that the ACA’s subsidy provision must be read in a manner “that is compatible with the rest of the law.”

If subsidies were not available in federal Exchanges, the Supreme Court concluded that “it would destabilize the individual insurance market in any State with a Federal Exchange, and likely create the very ‘death spirals’ that Congress designed the Act to avoid.” Also, if the federal government was unable to provide subsidies in states that have FFEs, the Court asserted that several other key ACA provisions would not operate as intended.

For example, the individual mandate “would not apply in a meaningful way, because so many individuals would be exempt from the requirement without the tax credits.” In addition, because the employer shared responsibility penalties are triggered only when an employee receives a premium tax credit, those penalties would not apply in any states where the subsidies were unavailable.

Therefore, according to the Supreme Court, it “stands to reason that Congress meant for those [subsidies] to apply in every state.”

A number of similar lawsuits are still pending in federal courts. These courts are required to follow the Supreme Court’s ruling when issuing their decisions. Therefore, it is expected that the decisions in other cases will be consistent with the Supreme Court’s ruling.

Impact on Employers

While the case was pending, the Obama Administration continued to make federal subsidies available to eligible individuals in all states, including those with FFEs.

On Nov. 7, 2014, the White House posted a statement, mirroring an earlier IRS statement, to confirm that nothing changed for individuals receiving advance payments of the premium tax credit and that tax credits remained available.

Because the Supreme Court ruled that ACA subsidies are available in all states, including those with FFEs, eligible individuals in all states may continue to receive subsidies for their Exchange coverage.

A ruling that struck down the availability of subsidies in FFEs would have had significant implications for employers as a result of the ACA’s employer mandate. Under the employer mandate, certain large employers may face penalties if they do not offer coverage to their full-time employees that meets certain requirements. These penalties apply only if an employee receives a subsidy to buy coverage through an Exchange.

If the subsidies were available only in state-based Exchanges, employers would not be subject to penalties for employees living in states with an FFE. However, because the subsidies remain available in all states, the employer shared responsibility penalties will still apply for employers in all states.

More Information

Please contact Clarke & Company Benefits, LLC for more information on the ACA’s federal subsidies or the employer mandate.