Penalties For Employers Not Offering Coverage Under The Affordable Care Act During 2015 and 2016
The MBPA has updated our one-page reference sheet on penalties for employers NOT offering health coverage.
The MBPA has updated our one-page reference sheet on penalties for employers NOT offering health coverage.
We wanted to share some important information that may help certain individuals avoid the Insurance Marketplace Fee. We don’t want you to miss this!!
The U.S. Department of Health and Human Services has compiled a list of “exemptions” that are worth taking a look at.
Exemptions from the Health Insurance Marketplace Fee
If you don’t already have health coverage, the Health Insurance Marketplace offers a way to find and buy health coverage. Starting in 2014, every person in the United States must have minimum health coverage or must pay a fee on their federal tax return. This fee is sometimes called the “individual shared responsibility payment.” In some cases, you may be able to get an exemption from the fee. An exemption means you wouldn’t have to pay the fee.
How much is the fee?
In 2014, the yearly fee is 1% of your income for the year or $95 per person in your household, whichever is higher. The payment for uninsured children under 18 is $47.50 per child. Regardless of the number of people in your household, the most a family would have to pay in 2014 is $285. You make the payment when you file your 2014 taxes, which are due in April 2015.
The fee increases every year. In 2015, it will be 2% of income or $325 per person in your household, whichever is higher. The payment for uninsured children under 18 will be $162.50 per child. In 2016, it will be 2.5% of income or $695 per person, whichever is higher.
Who can get an exemption?
You may not have to pay the fee (qualify for an exemption) if:
• You’re uninsured for less than 3 months of the year.
• The lowest-priced coverage available to you would cost more than 8% of your household income.
• You don’t have to file a tax return because your income is too low.
• You’re a member of a federally recognized American Indian tribe or eligible for services through an Indian Health Services provider.
• You’re a member of a recognized health care sharing ministry.
• You’re a member of a recognized religious sect with religious objections to insurance, including Social Security and Medicare.
• You’re incarcerated, and not awaiting the disposition of charges against you.
• You’re not lawfully present in the U.S.
You may qualify for a “hardship” exemption if:
• You were homeless.
• You were evicted in the past 6 months or were facing eviction or foreclosure.
• You received a shut-off notice from a utility company.
• You recently experienced domestic violence.
• You recently experienced the death of a close family member.
• You experienced a fire, flood, or other natural or human-caused disaster that caused substantial damage to your property.
• You filed for bankruptcy in the last 6 months.
• You had medical expenses you couldn’t pay in the last 24 months.
• You experienced unexpected increases in necessary expenses due to caring for an ill, disabled, or aging family member.
• You expect to claim a child as a tax dependent who’s been denied coverage in Medicaid and the Children’s Health Insurance Program (CHIP), and another person is required by court order to give medical support to the child. In this case, you don’t have to pay the penalty for the child.
• As a result of an eligibility appeals decision, you’re eligible for enrollment in a qualified health plan (QHP) through the Marketplace, or lower costs on your monthly premiums, or cost-sharing reductions, for a time period when you weren’t enrolled in a QHP through the Marketplace.
• You were found not to be eligible for Medicaid because your state didn’t expand its Medicaid program.
How do I apply for an exemption?
How you apply—and even if you need to apply—depends on which exemption fits your situation.
For an exemption based on coverage being unaffordable, membership in a health care sharing ministry, membership in a federally-recognized tribe, or being incarcerated, you have 2 options to apply:
• Claim these exemptions when you fill out your 2014 federal tax return, which is due by April 15, 2015
• Fill out an exemption application in the Health Insurance Marketplace
Note: If you get an exemption because coverage is unaffordable based on your expected income, you also may qualify to buy catastrophic coverage through the Marketplace. This may be more affordable than your other options.
How do I apply for an exemption? (continued)
For an exemption based on membership in a recognized religious sect whose members object to insurance, eligibility for services through an Indian health care provider, or one of the “hardship” exemptions:
• Fill out an exemption application in the Health Insurance Marketplace
For an exemption if your income will be low enough that you won’t be required to file taxes:
• You don’t need to apply for an exemption. This is true even if you file a federal tax return to get a refund of money withheld from your paycheck. You won’t have to pay this fee.
For an exemption if you have a gap in coverage of less than 3 months, or if you’re not lawfully present in the U.S.:
• You don’t need to apply for an exemption. The Internal Revenue Service will handle this when you file your taxes.
Where can I get more information?
Visit HealthCare.gov, or call the Health Insurance Marketplace call center at 1-800-318-2596 for more information. TTY users should call 1-855-889-4325.
Source: Department of Health and Human Services, Health Insurance Marketplace
By Juliette Meunier
LifeHealthPro.com
More Patient Protection and Affordable Care Act (PPACA) group health provisions are supposed to begin taking effect in 2015.
The current schedule calls for a transitional version of the PPACA “play or pay” employer coverage mandate to apply to employers with 100 or more full-time employers, and to some employers with 50 to 99 employees.
Employers will have to keep track of which employees were offered health coverage in any given month, and large employers will have to put the employee count data they collected in 2014 into Internal Revenue Code Section (IRC) 4980H “employer shared responsibility” reports.
Meanwhile, some of your employee clients may still be scrambling to create, and understand, their PPACA compliance checklists. What should those clients be doing to make sure they’re ready for 2015?
For a list of five action items your clients should focus on now, read on.
1. Review existing measurement systems.
Are your clients equipped to determine employee status, while considering measurement and stability periods, to provide coverage as soon as an employee becomes eligible?
2. Determine excise tax penalty risk by entity.
Your clients should identify potential full-time employees not offered coverage.
3. Assess reporting systems.
Are your clients’ reporting systems capable of gathering and aggregating the required information for IRS reporting – by employee, on a by-month and by-entity basis? Reports are due to the IRS in 2016, but data collections begin January 1, 2015. How do companies manage data residing in multiple locations? This is especially difficult for employers with a contingent or variable workforce.
4. Prepare for Marketplace/Exchange notices.
In November, open enrollment begins and even businesses offering affordable care to employees are likely to receive Marketplace notices. Notices must be analyzed for accuracy and any erroneously issued notices must be appealed within the designated timeframe – which can vary by state (typically 90 days).
5. Develop a plan for IRS assessments.
Will your clients be able to provide supporting analysis and documentation to defend against erroneous assessments?
BCBS & BCN:
Follow this process for requesting a plan year and renewal date change
To request a change in a group’s renewal date and plan year, customers must submit the documents listed below. This process applies to both Blue Cross Blue Shield of Michigan and Blue Care Network groups — no matter which segment they are in.
Here are the two required documents:
* A signed Customer Plan Year Change Certification form.
* A Summary Plan Description or a letter from their legal counsel if it’s a small groups)
To begin the change process, you must submit the required documents to your Blues sales representative or managing agent.
For Blue Cross customers, the change to the group’s plan year and renewal date will result in a groupwide change. Do not submit additional groupwide changes until the plan year and renewal date change process is complete.
Keep in mind that the customer’s plan year and renewal date must be aligned. And, if a customer has both a Blue Cross Blue Shield of Michigan and Blue Care Network plan, the plans must have the same plan year and renewal date.
October 30, 2014
Today, the Internal Revenue Service announced in Revenue Procedure 2014-61 the annual inflation adjustments for more than 40 tax provisions for 2015, including the tax rate schedules, and other tax changes. This Revenue Procedure provides details about these annual adjustments.
There are several benefit limitations for 2015 included:
* The annual dollar limit on employee contributions to employer-sponsored healthcare flexible spending arrangements (FSA) is increased to $2,550.
*The amount for the adoption credit or the amount excluded for adoption assistance allowed for an adoption of a child with special needs is $13,400.
*The dollar amount for employee health Insurance expense of small employers is $25,480.
*The monthly limitation for qualified transportation fringe benefit regarding the aggregate fringe benefit exclusion amount for transportation in a commuter highway vehicle and any transit pass is $130. The monthly limitation regarding the fringe benefit exclusion amount for qualified parking is $250.
*The limitations regarding eligible long-term care premiums includible in the term “medical care,” are as follows:
Attained Age Before the Close of the Taxable Year Limitation on Premiums
40 or less $380
More than 40 but not more than 50 $710
More than 50 but not more than 60 $1,430
More than 60 but not more than 70 $3,800
More than 70 $4,750
*For Medical Savings Accounts, the term “high deductible health plan” means, for self-only coverage, a health plan that has an annual deductible that is not less than $2,200 and not more than $3,300, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $4,450.
*For Medical Savings Accounts, the term “high deductible health plan” means, for family coverage, a health plan that has an annual deductible that is not less than $4,450 and not more than $6,650, and under which the annual out-of-pocket expenses required to be paid (other than for premiums) for covered benefits do not exceed $8,150.
For a copy of Revenue Ruling 2014-61, please click on the link below:
http://www.irs.gov/pub/irs-drop/rp-14-61.pdf
For More Information: If you have any comments or questions regarding any of above information, please do not hesitate to call me at (708) 717-9638 or e-mail me at larry@clarrygrudzien.com
Thank-You, Larry Grudzien -Attorney-At-Law
The maximum annual employee contribution to a health flexible spending account plan is increasing to $2,550 for 2015 (up $50 from the $2,500 limit that has applied since 2013).
Employers that sponsor health flexible spending accounts should consider whether they wish to adopt this higher limit for 2015. If so, the increased amount should be communicated to employees in open enrollment or other materials. In addition, the cafeteria plan document may require an amendment.
If you have any questions about the subject matter of this e-alert, please contact Nancy Farnam at nfarnam@clarkhill.com or (248) 530-6333; Kristi Gauthier at kgauthier@clarkhill.com or (480) 684-1300; Ed Hammond at ehammond@clarkhill.com or (248) 988-1821; or Doug Ellis at dellis@clarkhill.com or (412) 394-2367.
October 31, 2014
Statement of Enforcement Discretion regarding 45 CFR 162 Subpart E – Standard Unique Health Identifier for Health Plans
Effective October 31, 2014, the Centers for Medicare & Medicaid Services (CMS) Office of e-Health Standards and Services (OESS), the division of the Department of Health & Human Services (HHS) that is responsible for enforcement of compliance with the Health Insurance Portability and Accountability Act of 1996 (HIPAA) standard transactions, code sets, unique identifiers and operating rules, announces a delay, until further notice, in enforcement of 45 CFR 162, Subpart E, the regulations pertaining to health plan enumeration and use of the Health Plan Identifier (HPID) in HIPAA transactions adopted in the HPID final rule (CMS-0040-F).
This enforcement delay applies to all HIPAA covered entities, including healthcare providers, health plans, and healthcare clearinghouses.
On September 23, 2014, the National Committee on Vital and Health Statistics (NCVHS), an advisory body to HHS, recommended that HHS rectify in rulemaking that all covered entities (health plans, healthcare providers and clearinghouses, and their business associates) not use the HPID in the HIPAA transactions (see http://ncvhs.us/wp-content/uploads/2014/10/140923lt5.pdf). This enforcement discretion will allow HHS to review the NCVHS’s recommendation and consider any appropriate next steps.
For More Information: If you like more information, please do not hesitate to call me at (708) 717-9638 or e-mail me at larry@larrygrudzien.com
Thank-You, Larry Grudzien – Attorney-At-Law
The IRS issued a notice on November 4, 2014 concluding that a health plan that does not provide substantial coverage for inpatient hospitalization and/or physician services will not qualify as a “minimum value” plan under the Affordable Care Act. Therefore, large employers that adopt such plans are subject to penalties under the Affordable Care Act for failure to offer a plan that provides minimum value. The IRS expects to issue additional guidance on this issue next year.
Beginning in 2015, “large employers” are required to offer health coverage to their full-time employees, and dependents, or be subject to a penalty. There are two potential penalties:
• First, a penalty applies if a large employer fails to offer “minimum essential coverage” and at least one employee purchases coverage through the exchange/marketplace and receives a premium tax credit.
• Second, a separate penalty applies if a large employer offers “minimum essential coverage,” but the coverage does not provide “minimum value” and/or is not “affordable,” and at least one employee purchases coverage through the exchange/marketplace and receives a premium tax credit.
The recent IRS guidance focuses on the “minimum value” requirement. A plan provides “minimum value” if it is designed to pay at least 60% of the total cost of medical services under the plan. The IRS has proposed four approaches for determining if a plan provides minimum value, including the use of a minimum value calculator or an actuarial certification.
Some employers have considered adopting a health plan that does not provide benefits for inpatient hospitalization and/or physician services. These types of plans may technically satisfy the “minimum value” requirement by use of the calculator or actuarial certification. The IRS announcement provides that even though these plans may pass the 60% test, they are not the type of coverage contemplated by the minimum value requirement. Therefore, according to the IRS, a plan that does not provide substantial coverage for inpatient hospitalization and/or physician services will not be considered to provide minimum value.
Employers that adopt this type of plan will still be considered to provide minimum essential coverage, and will therefore avoid the first penalty for failure to offer coverage. However, the employer will be subject to the second penalty for failure to provide coverage that provides minimum value.
Employers that have entered into a written contract to provide a non-inpatient hospital and/or physician services plan prior to November 4, 2014 will not be subject to penalty for failure to provide minimum value through the end of the plan year that begins on or before March 1, 2015. However, such employers must be careful how they communicate the plan to employees. Employee communications must advise employees that the plan does not preclude the employee from being eligible for a premium tax credit if the employee purchases health coverage through the exchange/marketplace, if otherwise eligible.
If you have any questions about the subject matter of this e-alert, please contact Nancy Farnam at nfarnam@clarkhill.com or (248) 530-6333; Doug Ellis at dellis@clarkhill.com or (412) 394-2367; Kristi Gauthier at kgauthier@clarkhill.com or (480) 684-1300; or Ed Hammond at ehammond@clarkhill.com or (248) 988-1821.
By Larry Grudzien
Attorney-At-Law
November 17, 2014
Question: One of my clients has 75 employees and has never offered health coverage to its employees and it does not plan do so in the future. When would it have to comply with the employer mandate, 2015 or 2016?
Answer: January 1, 2016 For employers eligible for the transition relief described below, no subsection (a) or subsection (b) penalty will apply for any calendar month during 2015 or any calendar month during the portion of the 2015 plan year that falls in 2016.
An employer is eligible for this transition relief if it satisfies the following conditions:
i. Limited Workforce Size
The employer employs on average at least 50 full-time employees (including full-time equivalent employees) but fewer than 100 full-time employees (including full-time equivalent employees) on business days during 2014.
ii. Maintenance of Workforce and Aggregate Hours of Service
During the period beginning on February 9, 2014 (the date of the issuance of the final regulations) and ending on December 31, 2014, the employer does not reduce the size of its workforce or the overall hours of service of its employees in order to satisfy the workforce size condition set forth above. A reduction in workforce size or overall hours of service for bona fide business reasons will not be considered to have been made in order to satisfy the workforce size condition.
iii. Maintenance of Previously Offered Health Coverage
Except as otherwise provided herein, during the coverage maintenance period the employer does not eliminate or materially reduce the health coverage, if any, it offered as of February 9, 2014. An employer will not be treated as eliminating or materially reducing health coverage if (a) it continues to offer each employee who is eligible for coverage during the coverage maintenance period an employer contribution toward the cost of employee-only coverage that either (1) is at least 95% of the dollar amount of the contribution toward such coverage that the employer was offering on February 9, 2014, or (2) is the same (or a higher) percentage of the cost of coverage that the employer was offering to contribute toward coverage on February 9, 2014; (b) in the event there is a change in benefits under the employee-only coverage offered, that coverage provides minimum value after the change; and (c) the employer does not alter the terms of its group health plans to narrow or reduce the class or classes of employees (or the employees’ dependents) to whom coverage under those plans was offered on February 9, 2014.
iv. Certification of Eligibility for Transition Relief
The ALE certifies on a prescribed form that it meets the eligibility requirements set forth above. The final regulations under Code § 6056 provide that an ALE, or an ALE member, that otherwise qualifies for this relief must provide this certification as part of the transmittal form it is required to file with the IRS under the Code § 6056 regulations, in accordance with the instructions to that transmittal form.
IRS Position:
In conversations with the IRS, Mr. Thomas Reeder, Health Care Counsel in the IRS Office of Chief Counsel, indicated that if the employer didn’t manipulate its workforce size and health coverage just to get into the transition relief, it would be able to use the transition rule for 2015 and will not be subject to the employer shared responsibility requirement until 2016. Note that the employer will still have to report for 2015 (and on the Form 1095-C they have to indicate they are eligible for this relief).
If you need more information regarding the above, please do not hesitate to call me at (708) 717-9638 or e-mail me at larry@larrygrudzien.com
The Department of Health & Human Services (“HHS”) announced that the requirement for “controlling health plans” (generally speaking, large self-insured health plans) to obtain and begin using an HPID by November 5, 2014 has been delayed until further notice.
This delay is the result of a recommendation by the National Committee on Vital and Health Statistics to HHS that HPIDs not be used in HIPAA transactions. Administrators of “controlling health plans” should discontinue the HPID application process and await further word from HHS. For those “controlling health plans” that have already obtained an HPID, they should maintain a record of the obtained HPID, but refrain from using the HPID until further guidance is issued.
If you have any questions about the subject matter of this e-alert or about health care reform in general, please contact Kristi Gauthier at kgauthier@clarkhill.com | (480) 684-1300; Ed Hammond at ehammond@clarkhill.com | (248) 988-1821; Nancy Farnam at nfarnam@clarkhill.com | (248) 530-6333; or Doug Ellis at dellis@clarkhill.com | (412) 394-2367.
By Larry Grudzien
Attorney-At-Law
Q. Each year, my client gives its employees a choice of health coverage or a cash payment of $3,000. If my client does not adopt a cafeteria plan, will any portion of the health coverage elected by the employee be taxable?
A. Yes. An employee will be taxed up to the amount of cash that he or she could have received.
In Private Letter Ruling 9406002, IRS indicates that a cafeteria plan must be in place in order to be a qualified cash-out option. If the cash-out option plan is not set up under cafeteria plans, employees who elect coverage under the health plan will be taxed on an amount equal to the amount of cash they could have received for waiving coverage.
IRS provided that when an option is available to either elect the health plan, or to receive a cash-out incentive, then the premium payment becomes wages. Employees who elected health insurance received less compensation than employees who declined health insurance. The amount of compensation to be paid was determined before services were rendered by the employees; the difference in compensation did not necessarily correspond to the actual cost of the health insurance elected.
The IRS concluded that the difference between the compensation paid to an employee who elected health insurance and the greater amount that the employee would have received if he or she had not elected health insurance was includible in the employee’s gross income and was wages for employment tax purposes.
It is important to note that, although the cafeteria plan protects the employees electing coverage from taxation, the cash-out incentive is an after-tax benefit.
Another thing to consider when setting up a cash-out incentive plan is proper documentation. An employee should only be allowed to waive coverage when there is another plan available and proof of enrollment is provided. If there is a subsequent loss of that coverage, HIPAA Special Enrollment Rights will allow entry onto the plan, and the cash-out incentive will cease.
If you have any comments or questions regarding any of above information, please do not hesitate to call me at (708) 717-9638 or e-mail me at larry@larrygrudzien.com.
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Detroit, MI 48226