The Affordable Care Act (ACA) directed the Department of Health and Human Services (HHS) to provide detail as to which items and services are considered essential health benefits (EHBs). In December of 2011, HHS released a new bulletin regarding this request however they decided to give the individual states the authority to decide their own benchmarks for defining EHBs. They released a final rule in 2013 confirming this guidance.
In the beginning of 2014, the ACA began to require non-grandfathered plans in small group and individual markets to offer a package of EHBs. Excluded from this requirement are self-insured group health plans, health insurance coverage offered in the large group market and grandfathered plans. The non-excluded plans are required to include EHBs that reflect the benefits covered by an average employer and must cover at least ten general categories of items and services. However, the HHS finalized their benchmark approach with their final rule. Therefore each state selects a benchmark insurance plan that reflects what they believe offers the services provided by a typical employer in the state. There are four different options states can select their benchmark plans from, but if they do not select one a default plan, small group plan with the largest enrollment in the state, is selected by the HHS.
Referring back to the final rule released by the HHS, the benefits offered by the health plans must be significantly equal to the applicable benchmark plan. The benefits can be modified if necessary to include the ten categories listed by the ACA. The final rule also includes many guidelines to protect consumers from discrimination and guarantee the plans offer several EHBs. This way benefit designs that could discriminate against enrollees will be prohibited, special standards for benefits will be included that may not be covered by individual and small group plans, and it assures access to needed prescription medications.
States typically have benefit mandates requiring health insurance issuers to provide coverage for certain items and services. However, for 2014 and 2015 if a state chooses a benchmark subject to state mandates the benchmark must include those mandates in the state’s EHBs package. The HHS final rule declares any state-mandated benefits enacted on or before December 31, 2011 will be included in the EHBs package for at least 2014 and 2015.
The Affordable Care Act (ACA) created subsidies in order to help eligible individuals and families purchase insurance through an exchange by reducing their out-of-pocket premium. There are two federal health insurance subsidies available when accessing coverage through an exchange. First, there are premium tax credits which reduce out-of-pocket premiums costs for the tax payer. These are typically available to people with higher incomes. The other type of subsidy is cost-sharing reduction which allows eligible individuals, typically those with lower incomes, to enroll in plans with higher actuarial values. So therefore there are lower out-of-pocket costs at the point of service.
The ACA requires each state to now have their own Exchange for individuals and small businesses. This became effective as of 2014. The ACA left the responsibility of creating these Exchanges up to the individual states. However, since the U.S. Congress cannot require states to implement federal laws, if the states do not create their own Exchange then Federally-Facilitated Exchanges (FFEs) will remain in place. So far though only 16 states have set up an Exchange and the other 34 states are operating on FFEs.
While the ACA is requesting states to set up Exchanges, it also states that subsidies will be restricted and applied only to those individuals and small businesses that reside in states with their own Exchange only. This conflicts with a rule established by the Internal Revenue Service (IRS) though. The IRS rule states that subsidies will be authorized in all states, those with their own Exchanges and those with FFEs. These contracting texts have caused some issued in federal court.
Several lawsuits have been filed by individuals and small business employers challenging the Federal Government for providing subsidies under the ACA to people in states that did not set up their own Exchange and are still under FFEs. The lawsuits have been filed in response to the IRS rule that states subsidies can be given in all states. On July 22, 2014 two federal courts issued contradicting rulings on the availability of subsidies. The District of Columbia Circuit Court over the Halbig v. Burwell case ruled that the IRS rule was invalid. They based their decision on the ACA text and restricted subsidies to individuals and businesses in states with Exchanges. However, the 4th Circuit Court over the King v. Burwell case unanimously upheld the IRS rule allowing subsidies to all states. Both lawsuits were filed by individuals and employers in states that have FFEs instead of a state Exchange.
The Obama administration has stepped in stating they disagree with the ruling of the D.C. Circuit Court and will be requesting further review on the lawsuit. In the meantime, subsidies will continue to remain available in all states. Other lawsuits challenging the subsidies in states with FFEs are still pending in federal courts.
Administrators of ERISA employee benefit plans are required to file an annual Form 5500 or 5500-SF, unless a reporting exemption applies. More specifically, if you are the administrator of a profit sharing plan, stock bonus plan, money purchase plan, 401(k) plan, defined benefit plan, certain 403(b) plans or a welfare benefit plan, generally you must file a Form 5500 or 5500-SF for the plan each year.
Certain welfare benefit plans are exempt from all or part of the Form 5500 series reporting requirements. For example, there is an exemption from Form 5500 series reporting for small welfare benefit plans (fewer than 100 participants at the beginning of the plan year) that are unfunded, fully insured or a combination of unfunded and fully insured. More information on which welfare benefit plans are exempt from the Form 5500 series filing requirement is provided below.
In 2002, the IRS suspended the Form 5500 filing requirement for cafeteria plans based on the rationale that cafeteria plans are merely funding vehicles. However, a Form 5500 or 5500-SF is required for any component benefit plan that is an ERISA welfare plan (for example, health FSAs, dental, long-term disability, AD&D and group term life plans) unless an exemption applies.
For example, assume an employer maintains a cafeteria plan to allow employees to pay their health insurance premiums with pre-tax dollars. All ten of the employer’s employees participate in the cafeteria plan and the underlying fully insured health plan. Under this example, the employer does not need to file a Form 5500 for the cafeteria plan and no reporting is required for the health plan because it falls under the Form 5500 filing exemption for small and fully insured welfare benefit plans.
As another example, assume the same facts, except that there are 250 employees participating in the cafeteria plan and underlying fully insured health plan. Under this scenario, a Form 5500 is not required for the cafeteria plan, but the employer must annually file a Form 5500, with all required schedules and attachments, to satisfy the ERISA reporting requirement for the health plan.
Which welfare plans must file a Form 5500 or 5500-SF?
- Large funded plans
- Large unfunded plans
- Large insured plans
- Large combination unfunded/insured plans
- Small funded plans
Exempt from filing:
- Small unfunded plans
- Small insured plans
- Small combination unfunded/insured plans
- Unfunded or insured plans for certain select employees (management or highly compensated employees)
- Employer-sponsored day care centers
- Certain apprenticeship and training plans
- Plans not subject to ERISA
Beginning in 2014, the Affordable Care Act (ACA) establishes the following three risk-spreading programs to provide payments to health insurance issuers that cover higher-risk populations and to more evenly spread the financial risk carried by issuers: a transitional reinsurance program, a temporary risk corridor program and a permanent risk adjustment program.
The transitional reinsurance program is intended to help stabilize premiums for coverage in the individual market during the first three years of Exchange operation (2014 through 2016) when individuals with higher-cost medical needs gain insurance coverage. This program will impose a fee on health insurance issuers and self-insured group health plans. Most health insurers will pass the reinsurance fee to employers who have fully insured health plans. The Clarke & Company Monthly Newsletter covers the compliance and cost impact to employers associated with the Reinsurance Fee.
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For the first time in over thirty years, the Equal Employment Opportunity Commission (EEOC) has provided an update on the subject of pregnancy discrimination by issuing new guidelines under the Pregnancy Discrimination Act (PDA) and the Americans with Disabilities Act (ADA). These guidelines come at a time when there has been an increase in awareness about pregnancy related discrimination issues. In fact pregnancy discriminations claims have increased by 46% between 1997 and 2011. The EEOC has claimed their position on a number of items and the guidance is effective immediately.
First off, the EEOC states that there should be no discrimination between past, present, or future pregnancies. All of these are covered by the PDA which covers all aspects of employment including hiring, firing, promotions, benefits, and treatment. Regarding pregnancy- related medical conditions, the EEOC states that the PDA disapproves the discrimination against women with medical conditions related to pregnancy from those who also have medical conditions unrelated to pregnancy. Furthermore, lactation and breastfeeding are now considered pregnancy related medical conditions under the PDA and employers must allow their employees with these conditions the freedom to address these issues in the same way employees with other medical conditions do.
EEOC’s interpretation of PDA doesn’t allow preferential treatment for pregnant people and workplace conditions should be applied equally to all those who are also unable to work. For example, light duty working conditions should be applied to those with pregnancy related conditions as well as other employees with conditions that make them unable to perform their full duties. The ADA doesn’t categorize pregnancy as a disability but if a worker has impairments from their pregnancy then they may apply. In this circumstance, employers cannot discriminate against women with disability resulting from a pregnancy from others with disabling factors. Employers must provide equal accommodations such as altering job functions, modifying workplace policies, and additional leave.
Employers cannot force an employee to take leave as long as they are able to perform their job. This would violate PDA. In addition, employers must allow women with physical limitations from pregnancy to leave on the same terms as others who are similar in their ability to work. The EEOC also points out PDA doesn’t allow the discrimination between men and women for parental leave which includes bonding or providing care for a new born child. Employers must provide equal leave to new fathers and mothers beyond the period of recuperation from childbirth.
The EEOC has suggested the best practices to avoid violations regarding pregnancy related discrimination under PDA and ADA. They suggest employers review their policies to make sure they are addressing conditions appropriately.