Viewing posts from: January 2013

Individual Shared Responsibility for Health Insurance Coverage and Minimum Essential Coverage Proposed Rules

Posted January 31, 2013 by PHaynes

Under the Affordable Care Act, the Federal government, State governments, insurers, employers, and individuals are given shared responsibility to reform and improve the availability, quality, and affordability of health insurance coverage in the United States.  Starting in 2014, the individual shared responsibility provision calls for each individual to have basic health insurance coverage (known as minimum essential coverage), qualify for an exemption, or make a shared responsibility payment when filing a federal income tax return.  Individuals will not have to make a payment if coverage is unaffordable, if they spend less than three consecutive months without coverage, or if they qualify for an exemption for several other reasons, including hardship and religious beliefs. 

Yesterday, the Treasury Department and Internal Revenue Service (IRS), as well as the Centers for Medicare & Medicaid Services at the Department of Health and Human Services (HHS), issued two sets of proposed regulations.  The regulations explain the shared responsibility provision and lay out the eligibility rules for receiving an exemption and the process by which individuals can receive certificates of exemption.  Both agencies’ proposed regulations include rules that will ease implementation and help to ensure that the payment applies only to the limited group of taxpayers who choose to spend a substantial period of time without coverage despite having ready access to affordable coverage.

According to the Congressional Budget Office, less than two percent of Americans will owe a shared responsibility payment.

Highlights of the Proposed Regulations

A principle in implementing the individual shared responsibility provision is that the shared responsibility payment should not apply to any taxpayer for whom coverage is unaffordable, who has other good cause for going without coverage, or who goes without coverage for only a short time.  The proposed regulations include several rules to implement this principle.  For example:

  • Hardship Exemption Clarified to Protect Taxpayers, Address Key Concerns. The statute gives HHS authority to exempt individuals determined to “have suffered a hardship with respect to the capability to obtain coverage.”  In developing these proposed regulations, HHS considered several particular circumstances that provide good cause to go without coverage.  To provide clarity for taxpayers facing these circumstances, the HHS proposed regulations enumerate several situations that will always be treated as constituting a hardship and therefore allow for an exemption.  Hardship exemptions include:
    • Individuals whom an Exchange projects will have no offer of affordable coverage (even if, due to a change in circumstance during the year, it turns out that the coverage would have been affordable).  This rule will protect individuals who turn down coverage because the Exchange projects it will be unaffordable but whose actual income for the year turns out to be higher so they are not eligible for the affordability exemption;
    • Certain individuals who are not required to file an income tax return but who technically fall outside the statutory exemption for those with household income below the filing threshold; and
    • Individuals who would be eligible for Medicaid but for a state’s choice not to expand Medicaid eligibility.  This rule will protect individuals in states that, pursuant to the Supreme Court decision, choose not to expand Medicaid eligibility;

The HHS regulations also provide that the hardship exemption will be available on a case-by-case basis for individuals who face other unexpected personal or financial circumstances that prevent them from obtaining coverage.

  • Partial-Month Coverage Counts for the Month. The Treasury regulations provide that an individual is treated as having coverage for a month so long as he or she has coverage for any one day of that month.  For example, an individual who starts a new job on March 27 and is enrolled in employer-sponsored coverage on that day is treated as having coverage for the month of March.  Similarly, an individual who is eligible for an exemption for any one day of a month is treated as exempt for the entire month.
  • Payment Waived for First Part of Coverage Gap Spanning Multiple Years. The statute provides an exemption for gaps in coverage of less than three months.  It generally specifies that such gaps be measured without regard to the calendar years in which the gap occurs.  For example, a gap lasting from November through February lasts four months and therefore generally would not qualify for the exemption.  However, recognizing that many individuals file their tax returns as early as January, before the length of an ongoing gap may be known, the Treasury regulations provide that if the part of a gap in the first tax year is less than three months, then no shared responsibility payment is due for the part of the gap that occurs during the first calendar year, regardless of the eventual length of the gap.  For example, for a gap lasting from November through February, no payment would be due for November and December.

Additional Details about the Proposed Regulations

The proposed regulations explain that minimum essential coverage includes, at a minimum, all of the following statutory categories:

  • Employer-sponsored coverage (including COBRA coverage and retiree coverage)
  • Coverage purchased in the individual market
  • Medicare Part A coverage
  • Medicaid coverage
  • Children’s Health Insurance Program (CHIP) coverage
  • Certain types of Veterans health coverage

Minimum essential coverage does not include certain specialized coverage, such as coverage only for vision care or dental care, workers’ compensation, or coverage only for a specific disease or condition. Under the law, minimum essential coverage also includes any additional types of coverage that are designated by the Department of Health and Human Services(HHS) or, as detailed by the proposed regulation, when the sponsor of the coverage follows a process outlined in the regulations to be recognized as minimum essential coverage.

Specific Rules and Process for Receiving an Exemption

The proposed regulations also codify the statute’s nine categories of individuals who are exempt from the shared responsibility payment. These categories are as follows:

  • Individuals who cannot afford coverage;
  • Taxpayers with income below the filing threshold;
  • Members of Indian tribes;
  • Hardship;
  • Individuals who experience short coverage gaps.
  • Religious conscience;
  • Members of a health care sharing ministry;
  • Incarcerated individuals; and
  • Individuals who are not lawfully present;

The statute specifies that the religious conscience exemption and the hardship exemption are available exclusively through a Health Insurance Marketplace or Exchange. Four categories of exemptions are proposed to be available exclusively from the IRS through the filing process – the exemptions for individuals who are not lawfully present, taxpayers with household income below the filing threshold, individuals who cannot afford coverage, and individuals who experience short coverage gaps. The rule provides a choice to individuals for the exemptions in the three remaining categories – members of a health care sharing ministry, individuals who are incarcerated, and members of Indian tribes.  Such exemptions could be provided either through a Heath Insurance Marketplace or through the tax filing process.

Starting in 2015, individuals filing a tax return for the previous tax year will indicate which members of their family (including themselves) are exempt from the provision. For family members who are not exempt, the taxpayer will indicate whether they had insurance coverage.  For each non-exempt family member who doesn’t have coverage, the taxpayer will owe a payment.

HHS and IRS are seeking comments on these proposals

Comments on the Treasury proposed regulations are due by May 2, 2013, and a public hearing will be held May 29, 2013.  Comments on the HHS proposed regulations are due by March 18, 2013.


  • Read the HHS rule here.
  • Read the IRS rule here.

Health Insurance with Vision Care Leads to Better Results

Posted January 30, 2013 by Megan DiMartino

by Julie Campbell

Research has shown that the overall wellbeing of eyes is improved with additional coverage.

The results of recent research have now been released, and they have revealed that adults who do not have vision coverage as a part of their health insurance may suffer irreparable damage to their eyesight.

The study argues that eye coverage should be a required element of standard medical policies.

What the researchers determined was that individuals between the ages of 40 and 65 years old and who are covered with health insurance that includes vision care, had a likelihood that was twice as great of seeing an eye doctor within the last year as those who were not covered. Those who had seen an optometrist were more likely to be capable of reading printed text, and were also more likely to be able to recognize someone from a distance equivalent to across a normal street.

The health insurance vision care study was published in the Archives of Ophthalmology.

What the researchers explained within that paper was that “The study finds that having vision insurance increases the likelihood of an eye care visit, and that a prior-year eye care visit is associated with better vision status.”

The team of researchers, from the University of South Carolina in Columbia, was led by Yi-Jhen Li. That team estimated that by 2020, there would be more than 5.6 million Americans who have diseases related to the eye and that could cause vision loss.

However, the researchers also mentioned that it is possible to prevent – or delay – some of the permanent vision loss that could be caused by those ocular diseases (such as cataracts and glaucoma), simply by detecting them early and treating them properly.

According to a U.S. Centers for Disease Control and Prevention in Atlanta health scientist, John Crews, “We want to get them in the door. If they get in the door, they’re likely get what they need.” Crews was not connected with the research study, but agreed that vision care is very important. He explained that from the point of view of the public, the main problem is the issues that are stopping them from obtaining proper care.

This study indicates that, for many, these issues involve a lack of health insurance that includes coverage for vision care.

PPACA FAQs & Implementation Part 11

Posted January 25, 2013 by PHaynes

If you’ve been following along with our PPACA-timelines you’ve seen on the 2013 Timeline the blurb that Employer/Plan Sponsors are required to “Provide employees with HHS information notices about 2014 exchanges and subsidies.”  You may also recall that this was supposed to be accomplished by March 1st  of this year.

Well, the DOL is not ready to put these notices together and they wish to coordinate efforts with Health and Human Services (HHS) and the Treasury Department (IRS).  (See Question/Answer number 1).  Accordingly, they have moved that deadline back to this summer.

The DOL’s FAQs also offer some guidance on these topics:

  • Questions 2, 3 and 4 deal with HRAs:   Can an HRA be used to purchase coverage on the individual market and satisfy the PPACA mandate that employers offer coverage?  Can an employer offer an “integrated HRA” and let employees take the HRA without taking the medical plan?   How will unused HRA amounts credited before 1/1/2014 be applied?
  • Question 5 asks whether the Public Health Service Act restricts communications between health care professionals and their patients concerning firearms and ammunition.
  • Question 6 offers limited guidance for self-funded drug plans that offer retiree coverage and Medicare D supplements.
  • Question 7 deals with fixed indemnity coverage and when they are “excepted benefits”.
  • Finally the FAQs round out their guidance on the topic of the PCORI fees (the Patient Centered Outcomes Research Institute) the $1 times the average number of covered lives fee, which jumps to $2 in the 2nd year and remains at $2 until it sunsets after 2019’s payments.  See timeline, 2013 (entry “d”) and 2020. 


2013 Revised Healthcare Reform Timelines, Version 8.0

Posted January 25, 2013 by PHaynes

If you want to see 10 pages of health reform in a 1 page timeline (well, 1 page for Employers and 1 page for Employees) then please visit our website (

But, if you are looking for details specific to just a certain year or plan, then you can’t do better than this implementation timeline from The Kaiser Family Foundation.

AP Benefit Advisors’ Timelines

Kaiser Family Foundation Implementation Timeline

Finally Final! HIPAA Privacy and Security Regulations Released

Posted January 24, 2013 by PHaynes

The Department of Health and Human Services (HHS) released some long-awaited (and long over-due) final regulations under HIPAA (the Health Insurance Portability and Accountability Act).

The release updated various HIPAA requirements including privacy, security, enforcement and breach notification. Employers, Plan Sponsors as well as Covered Entities, will likely require a great deal of time to analyze and digest the 500+ pages (3 columned final printing reduced to 138 pages, linked here). Meanwhile, these Covered Entities, including self-funded group health plans, should prepare for changes that will be necessary as a result of these new rules. The changes will result in updating HIPAA policies and procedures, Business Associate Agreements (BAAs), privacy notices and workforce training.

Effective March 26, 2013, Covered Entities must generally comply with the new rules by September 23, 2013 – which is the maximum 180 day compliance period. Transition rules are included that allow valid BAAs in place on or before January 25, 2013 to be compliant.


HIPAA’s administrative simplification rules have evolved since their initial release in 1996 and several rounds of governmental guidance have addressed how HIPAA protects individual’s personal health information (PHI).  Including:

  • The privacy and security rules became effective for most Covered Entities (including health providers, health plans and health data clearinghouses) in 2003 and 2005, depending on how large the plan was). These foundational rules provide the basic structure of how Covered Entities must treat and protect PHI, in all formats.
  • The Health Information Technology for Economic and Clinical Health Act (HITECH) extended certain HIPAA provisions and penalties to Covered Entities’ business associates directly just as they would apply to the Covered Entity. Included in this category are third party administrators, contractors and subcontractors as well as other vendors. HITECH also added new breach notification requirements and individual policy rights, and it strengthened enforcement with significantly increased penalties for HIPAA violations. (AP Benefit Advisors’ client’s HIPAA BAAs were updated in January/February of 2010 to account for this.)
  • The Genetic Information Nondiscrimination Act (GINA) imposed specific privacy requirements in connection with the use of genetic information. For a full background on GINA, see our March 2009 Compliance Chronicle.
  • Proposed regulations released in 2011 regarding the accounting and disclosure rules would change the time frames allotted to provide accounting of disclosures and allow individuals to receive reports showing who accessed their PHI.

Highlights from the Final Regulations

  • The new regulations require compliance by September 23, 2013.
  • BAAs will need to be updated to reflect the new liability, with the exception of the aforementioned valid BAAs in effect before January 25, 2013 (which must be revised by 09/22/2014).
  • The sale of PHI without an individual’s permission will be prohibited, with the exception of some applicable circumstances.
  • Additional limits on the use of PHI will be imposed for marketing and fundraising purposes.
  • Permission to give a child’s immunization proof to a school will be made easier.
  • The ability for certain family members to access a descendant’s PHI will be expanded.
  • Changes to the analysis for determining whether a HIPAA breach must be reported.
  • GINA standards prohibiting the use or disclosure of genetic information for underwriting purposes must be adopted.
  • Individual rights will be expanded.
  • Adoption of the increased and tiered civil monetary penalties provided by the HITECH Act.

Notably, these rules do not appear to include 2011 proposed regulations on accounting of disclosures and an individual’s right to receive an access report.

What’s next for employer plan sponsors?

These regulations are detailed and affect a broad range of HIPAA issues. HHS has characterized these rules as “the most sweeping changes to the HIPAA Privacy and Security Rules since they were first implemented.”

Accordingly, employers and plan sponsors must review, and possibly update, their HIPAA policies and procedures, BAAs and Privacy Notices to confirm that they meet the new mandates by the (absolute) deadline – September 23, 2013. In addition, plan sponsors should conduct workforce training to update individuals with access to PHI on the new rules.

Research: 31 Million Receive Care Coverage in ACOs

Posted January 23, 2013 by Megan DiMartino

Chris Anderson,

As many as 31 million Americans now receive healthcare through an accountable care organization (ACO) according to a recent report from industry consulting company Oliver Wyman.

The report “The ACO Surprise” contends that while many believe that ACOs have had little impact on the market to date, the sheer numbers of patients getting healthcare via an ACO tells a different story.

In its analysis, Oliver Wyman researchers determined that about 2.4 million Medicare beneficiaries were receiving care via the different Medicare ACO programs run by the Centers for Medicare & Medicaid Services; another 15 million non-Medicare patients received care at these Medicare ACOs; and 8 million to 14 million are part of ACOs run by large national and regional insurers for their non-Medicare populations.

In total, the research indicates that nearly 45 percent of the population live in a primary care service area (PCSA) served by at least one ACO and 17 percent live in a PCSA that is served by two or more, a number that is likely to rapidly increase in the coming years, according Richard Weil, co-author of the report.

“What we found is that when an ACO shows up in a market it changes the way other providers in the market think about their ACO strategy,” Weil said. “In a competitive market, when an ACO shows up other competitors feel like they need to become ACOs as well.”

And, Weil noted, the competition for primary care doctors that has been occurring for the past few years is likely to intensify as more PCSAs have multiple ACO competitors.

“Patients are going to be attributed to primary care physicians and primary care physicians have to choose one, and only one, ACO – they can’t be a part of more than one ACO,” Weil said.

Oliver Wyman researchers found a significant number of patients in ACOs, even when eliminating for the purposes of this study organizations that are doing such things as piloting bundled payments since they are not population-based programs, or those that receive pay-for-performance and care coordination payments since they are not value-based programs. That said, they still provide a significant caveat to the state of the ACO market. Namely, even those included in the study still fall short of being a “true” ACO, one that shares both upside and downside risk.

“Of the 89 providers approved as ACOs in the most recent round, only five are taking on both upside and downside risk. The remaining 84 could simply tweak their current models, run as predominantly fee-for-service enterprises, and hope for the best,” the report stated. “If they create any savings, they get to share in them; if not, there’s no penalty. And it has to be acknowledged that though many ACOs have made progress in transforming their clinical processes, incentive models, and data tools and infrastructure, almost none have transformed all of them.”

But that shouldn’t be a surprise Weil added, as organizations that have embarked on this path have found the process of transforming their current delivery systems to be a much larger task than many have anticipated.

“The actual costs to get these programs up and running and to be successful are bigger than people think – and it’s not just technology,” Weil said. “Yes, you are going to spend a lot of money on technology, but when you talk about this being a transformative change to the way that your clinical enterprise works, as well as how you are paid and how your business works, means there is this one-time outlay of change management and business process changes. People are underestimating how much work there is there and how critical it is to their success.”

HHS – How to Verify Exchange Subsidy Eligibility

Posted January 17, 2013 by PHaynes

HHS: How to Verify Exchange Subsidy Eligibility

HHS (the Department of Health and Human Services) issued a proposed rule outlining the processes they and state regulators will use to verify individuals’ eligibility for federal premium subsidies to purchase health insurance through public exchanges.

In order to qualify for tax credits to buy health coverage through an exchange, individuals must qualify based on income, availability or cost of health plans they have access to.  The regulators (federal and state) must verify each of these data points.  Unless and until there is a centralized database available, exchange administrators will be permitted to use any available data electronic source approved by HHS, including paper records if necessary, in order to confirm an applicant’s eligibility for premium subsidies.  Or, state exchange regulators could choose to have HHS conduct the verification(s).

PPACA provides premium subsidies are not available to individuals enrolled in coverage (or eligible to be enrolled in coverage) if the employer-sponsored plan meets affordability and minimum value standards.  Recent IRS guidance made it clear that coverage is not affordable if the contributions paid by employees for single (employee-only) coverage exceeds 9.5% of their wages.  Also, these premium subsidies are not available to employees earning more than 400% of the FPL (federal poverty level).

Employer notification

The proposed rule also seeks to finalize the method and manner in which employers will be notified when one or more of their employees has been determined to be eligible for subsidized coverage through an exchange, as well as the process by which employers can appeal such determinations.

Under the proposed rule, employers would receive notice when an employee is determined eligible for subsidized coverage. If the eligibility was triggered because the exchange determined that an employer did not provide qualified coverage, that employer would be warned that they may be liable for tax penalties through the IRS.  Employers would be able to appeal determinations about the nature of the coverage they offer prior to the penalty’s enforcement, according to the proposed rule. HHS said it would establish a formal appeals process for employers in states that decline to construct their own.


Top Group Health & Healthcare Legislation Blogs

Posted January 16, 2013 by Megan DiMartino

The last few months have seen a number of legislative and regulatory changes in the healthcare sector. We make it a priority here on the AP Benefit Advisors blog to cover such issues, in detail, without bias, and in a timely manner. Here are a few of the big news items from the last few months:

IRS Releases Publications 502 and 503 for 2012 Tax Returns

Posted January 15, 2013 by PHaynes

The IRS released the latest versions of Publications 502 and 503 for use in preparing 2012 tax returns. Publication 502 (Medical & Dental Expenses) describes what medical expenses are deductible by taxpayers on their 2012 federal income tax returns.  Under Code § 213(a), a taxpayer may claim a deduction for certain unreimbursed medical expenses to the extent they exceed 7.5% of the taxpayer’s AGI (Adjusted Gross Income).  Note:  For the tax year beginning January 1, 2013 (as a result of PPACA, federal health care reform) deductions will need to exceed 10.00% of the taxpayer’s AGI in order to be deductible.

Publication 502 provides valuable guidance on what qualifies as a medical expense under Code § 213(d), and thus helps identify the expenses that may be reimbursed or paid by Health Care FSAs, HSAs, or HRAs, or covered on a tax-favored basis under other group health plans (e.g., an employer-sponsored major medical plan). But referring to Publication 502 in connection with these tax-favored benefits must be done with caution, because it addresses only the expenses that are deductible—it doesn’t describe the different rules for reimbursing medical expenses under Health Care FSAs, HSAs, or HRAs.

Publication 503 (Child and Dependent Care Expenses)  explains the requirements that taxpayers must meet in order to claim the dependent care tax credit (DCTC) under Code § 21 for child and dependent care expenses. Similar, but not identical, requirements must be met for expenses to be reimbursable under a DCFSA (Dependent Care FSA).

These 2012 Publications are substantially similar to their 2011 counterparts. Relevant dollar amounts (e.g., the standard mileage rate for use of an automobile to obtain medical care) have been revised to reflect their 2012 inflation-adjusted values. In addition, in Publication 502, the entry for “Trips” has been expanded to explain how the lodging expense rules apply when someone (e.g., a parent) is traveling with the person receiving medical care, and the explanation of the health coverage tax credit (HCTC) has been updated.

The 2012 version of Publication 503 no longer includes examples showing how to complete Form 2441 (Child and Dependent Care Expenses). However, an example has been added that illustrates how an employee with two qualifying individuals can exclude $5,000 of DCAP reimbursements and also take a partial DCTC based on $1,000 of additional dependent care expenses.  Note:  Publication 503 is written primarily to help taxpayers determine whether expenses qualify for the DCTC, and caution should be used when consulting it to determine which expenses are reimbursable under a DCFSA.

IRS Links

New AHIP Infographic on Impact of ACA’s Essential Health Benefits Requirement

Posted January 9, 2013 by Megan DiMartino

Starting on January 1, 2014, the Affordable Care Act (ACA) requires all health insurance policies sold in the individual market and to small employers to cover minimum Essential Health Benefits (EHB), which include items and services within at least 10 categories of benefits; no cost-sharing for preventive care; no annual or lifetime limits on coverage; and a minimum “actuarial value” of sixty percent. The EHB requirement is much broader than what many individuals and small businesses choose to purchase today, which means that millions of people may be required to purchase coverage that is more expensive than they have now.

AHIP’s new infographic highlights the impact of the Essential Health Benefits requirement:

As the non-partisan Institute of Medicine noted in its recommendations to HHS, “If cost is not taken into account, the EHB package becomes increasingly expensive, and individuals and small businesses will find it increasingly unaffordable. If this occurs, the principal reason for the ACA—enabling people to purchase health insurance and thus covering more of the population—will not be met.”

For health care reform to work, coverage needs to be affordable and there needs to be broad participation in the health care system. To learn more, visit

Affordable Healthcare Reform

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