Viewing posts from: November 2014

HHS is Consistent! Pre-Thanksgiving Regulation Dump – 2014 Version

Posted November 25, 2014 by PHaynes

PPACAThe Department of Health and Human Services (HHS) has come through for us again.  This year’s pre-Thanksgiving regulation dump came a bit earlier than expected.  They issued proposed regulations that address a variety of Patient Protection and Affordable Care Act (PPACA) benefit provisions for 2016 affecting both the group and individual markets. There is a 30-day comment period on these proposed regulations. We will focus solely on the key provisions of the group markets here.

Preview of the proposed guidance: Here.  Note, this document is scheduled to be published in the Federal Register on 11/26/2014 and available online at, and on

2016 Transitional Reinsurance Fee Contribution Amount: The Reinsurance Fee applies to insured and self-funded group health plans for calendar years 2014 through 2016. The 2015 fee amount of $44 was announced previously. The proposed fee for 2016 is $27 per covered individual.   [Note:  Insured expatriate plans do not have to pay the reinsurance fee. The regulations propose that self-insured expatriate plans also not be required to pay the reinsurance fee for 2015 and 2016].

Cost-Sharing Limits: The proposed plan year cost-sharing maximums for 2016 are $6,850 for self-only coverage and $13,700 for family coverage. Insurers are permitted, but not required, to count out-of-network costs toward the annual cost-sharing limits.

Lower Cost-Sharing Limits for Certain Individuals: Lower cost-sharing limits are proposed for certain individuals with lower incomes. For individuals with household incomes between 100% and 200% of the federal poverty level, the proposed maximum is $4,250 for self-only coverage and $4,500 for family coverage. For individuals with incomes between 200% and 250% of the federal poverty level, the proposed maximums are $5,450 for self-only coverage and $10,900 for family coverage.

Minimum Value: To meet the minimum value requirement, a plan must include substantial coverage of both inpatient hospital services and physician services in addition to meeting the requirement to cover at least 60% of allowed costs.

A proposed minimum value calculator for 2016 was issued, including links to the draft actuarial value calculator and the draft calculator methodology.

If you are looking for links to 2015’s calculator and methodology they can be found here.

Medical Loss Ratio (MLR) Rebates: Currently, individuals enrolled in insured group health plans subject to ERISA must receive the benefit of any MLR rebates within three months of receipt by the group policyholder. The proposed regulations would apply this same three-month timing to individuals enrolled in non-federal governmental plans and other group health plans not subject to ERISA.

The proposed regulations also clarify how certain types of expenses should be treated in calculating the medical loss ratio.

New Essential Health Benefit Benchmark Plan Selection: The proposed rules would require all states to select new benchmark plans for 2017 based on plans available in 2014.

Hardship Exemptions from the Individual Mandate: Individuals who live in states that chose not to expand Medicaid, who have household incomes below 138% of the federal poverty level, are under age 65 and do not qualify for Medicaid or Medicare, will automatically qualify for a hardship exemption from the Individual Mandate. They will not be required to apply for Medicaid and be denied, or to obtain a hardship exemption certificate from the Marketplace.

Any individual whose gross income is below the federal income tax filing threshold can qualify for a hardship exemption from the Individual Mandate. This exemption can be claimed through the tax filing process.

Opt-Out Madness: This most recent round of regulation-dumping has a curious piece about employer opt-out credits. Often employers will use an opt-out credit as an incentive for employees to choose not to enroll in the employer’s health plan. Well, we already remind the employee that choosing not to be covered might result in them being fined under PPACA’s individual mandate rules, but the opt-out could have consequences for the employer’s plan too.

The employer’s opt-out credit must be treated as an “additional employee contribution” for purposes of the affordability test under PPACA’s employer mandate rules.

This strange position is quite a departure from conventional notions of “employee cost share”. Therefore, most employers/plan sponsors have not included these dollars in their affordability calculations. The position that the regulators have taken (and that, could change, or be reinforced during the comment period) is that starting on January 1, 2015, when the affordability rules become effective, that for opt-out credits, that can’t be converted to cash, they will be treated as additional employee contributions.

Here’s an example:

  • An employee’s required contribution for individual coverage under the employer’s Medical/Rx plan is $100 per month.
  • The employer offers a taxable/cash opt-out payment of $50 per month to the employee if he/she waives coverage for the Medical/Rx plan.
  • The “cost” to the employee for purposes of determining affordability under PPACA is $150 (not $100).

The point is that the employees who enroll in the health plans are paying $100 for their coverage and they are giving up their right to receive the $50. Employees who elect health coverage will have $150 less in taxable income than employees who decline coverage. (Meaning the employee is “effectively” paying $150 for his/her coverage).

We can only guess that the reason for this rule is that under an alternative rule (i.e., opt-out credits do not count as employee contribution) employers could simply convert cafeteria plan contributions (which obviously do count as employee contributions) to opt out credits that would count as employer contributions.

Here’s another example. Let’s assume an employer is willing to pay an employee $5,000 per month and charge the employee $200 per month for health coverage.  That coverage might not be affordable.  If opt-out credits count as employer contributions, the employer could instead say that it is paying the employee $4,800 per month and providing free health insurance, but employees who opt-out get $200 more per month in taxable income.  The result for the employee is exactly the same because in each case, the employee chooses between $5,000 in taxable income with no insurance or $4,800 in taxable income with health coverage.  However, for the employer the opt-out approach would mean that the coverage is affordable while the other approach means coverage may not be affordable.  If opt-out credits instead count as employee contributions (as the new regulations provide), opt-out credits are treated just like cafeteria plan contributions for affordability purposes.

Anyway, we believe that is the logic that the regulators wrestled with.  And, with that, please try to enjoy your Thanksgiving holiday!



IRS Releases 2015 Versions of Forms for Trustee Reporting of HSA Contributions and Distributions

Posted November 24, 2014 by Megan DiMartino


The IRS has released Forms 5498-SA and 1099-SA for the 2015 tax year, along with their combined instructions. (The 2015 General Instructions for Certain Information Returns, which relate to these and certain other information returns, have not yet been released.) Form 5498-SA is used by trustees and custodians of HSAs, Archer MSAs, and Medicare Advantage MSAs to report contributions to (and the fair market value of) these accounts; Form 1099-SA is used to report distributions from these accounts.

The 2015 versions of these forms do not differ significantly from their 2014 counterparts. Filing and delivery deadlines have been updated, and a few other minor changes have been made. The instructions in Form 1099-SA for distribution recipients now remind recipients that they may repay mistaken distributions no later than April 15 of the first year they knew or should have known the distribution was a mistake, provided the trustee allows the repayment. The instructions in Form 5498-SA no longer indicate that complete identification numbers are reported to state and local governments, and they now mention employer identification numbers as a type of personal identification number that may be truncated. The revised combined instructions now discuss truncation of identification numbers separately for each form, and they have a new discussion of the reporting that is required if an HSA is closed because the account holder failed to satisfy certain identification requirements under the USA PATRIOT Act.

Top Benefits News & Legislation Blogs

Posted November 17, 2014 by Megan DiMartino

USSCNews and regulations surrounding benefits legislation continue to build as the Patient Protection and Affordable Care Act is deployed. In the past few weeks we’ve seen a significant number of guidelines and regulations issued from government agencies as well as legal challenges in courts throughout the land. Staying current with these developments can save businesses money and even help them to shape future legislation and regulations. Don’t be caught unaware when new regulations are knocking at your door. Here are a few of our most recent and relevant benefits update blogs:

Today We Honor Our Military Veterans

Posted November 11, 2014 by Megan DiMartino

flag smallVeterans Day is an important opportunity for our nation to show our appreciation for military veterans and all they have done to serve and protect us. Today everyone at AP Benefit Advisors would like to honor our family, friends, employees and customers who served in the United States Military Services. We thank you for your service!

US Supreme Court to Hear Challenge to Subsidies in Health Care Law

Posted November 7, 2014 by PHaynes

USSCToday the U.S. Supreme Court agreed to hear the case regarding the issue of whether Americans with coverage under the Affordable Care Act are allowed to receive subsidies from the federal exchange.

While there has been much talk about repealing PPACA (the Affordable Care Act) and there may even be measures passed in the House and the new Senate, there will not be sufficient votes to overcome President Obama’s veto.  So, the likelihood of any “repeal” during the next two years is zero.

For the twenty-seven states that have not established their own exchanges (and many if not most of these red states are highly unlikely to do so), there is an issue remaining–one of subsidies.  There are competing lower court decisions regarding the statutory legitimacy of subsidies for those in the federal exchanges.

Here are five key points to consider about the Supreme Court’s decision to hear this case.

  1. What’s at stake: whether subsidies to individuals can be paid on all exchanges or only on “exchanges established by a State.”
  2. The IRS issued a rule saying that subsidies can be paid for any exchange coverage, but legal challengers say the statute is clear that subsidies can be paid only on exchanges established by a state.
  3. The overall question is one of pure statutory interpretation. This case pits the strict constructionists (led by Justice Scalia) against those who would be more liberal in allowing courts to consider ancillary evidence of what a statute means (including other provisions from the statute itself).
  4. Chief Judge Roberts is likely the key vote. The last Supreme Court case on PPACA (the Affordable Care Act) put into question Congress’ ability to do a law like this at all. That had huge political ramifications.  But, this case is really much smaller – any state can become a partnership exchange with a stroke of the states’ pen, and could then enable its citizens to access subsidies.  So, this is really more of a states’ rights issue (each state gets to decide for itself); and Congress can fix it by fixing the statutory language.
  5. If the Supreme Court flips this, and at least four justices are likely to vote that way, there would be no subsidies in twenty-seven (27) states, since they are currently “pure” or “federal only” exchanges. This would completely undermine the universal access aspiration of the President.

What would this mean for an employer in one of those 27 states? Well, any employer that only has employees in states with no subsidies would not have any mandate obligation. Penalties are paid only if at least one of your employees receives a subsidy because of these consequences, it is much more likely that everyone comes to the table to fix the law if the Supreme court rules for the challengers.  Stay tuned….


  • Subsidies


Misconceptions About High Deductible Health Plans and HRAs, HSAs, FSAs and Fully Insured Supplements

Posted November 6, 2014 by Megan DiMartino

Join AP Benefit Advisors Senior Counsel, Patrick Haynes, as he reviews High Deductible Health Plans (HDHPs), HRAs, HSAs, FSAs and Fully Insured employee or employer paid supplements to these high deductible health plans. What are the exposures, the risks, the Cadillac taxes and the costs relating to these plans? Should the strategy be complete replacements, or should they be used as an additional offerings? HDHPs (often coupled with HSAs) continue to gain traction among employers as a viable solution to cost share health insurance benefits, lowering costs for both themselves and their employees. Are they a solution to the 2018 Cadillac tax? It is estimated that 45% of all U.S. companies now offer an HSA-eligible HDHP. Attorney Haynes will review the nuances of these plans. Topics include:


  • Misconceptions with HDHPs, HRAs, HSAs, FSAs 
  • Fully Insured employee or employer paid supplements 
  • Exposure, risk, taxes and cost 
  • ROI vs. HMO and PPO plans 
  • Compliance, HDHPs and The Cadillac Tax 
  • HDHP challenges for larger employers 

​Open to all HR professionals – but not brokers, agents, TPAs

Date & Time: Thu, Nov 13, 2014 12:00 PM – 12:30 PM EST
Space is limited – reserve yours today:

Reinsurance Contribution Information

Posted November 5, 2014 by Megan DiMartino

The reinsurance contribution process requires four steps completed through Additionally there are crucial deadlines and a number of important notes. Click on the thumbnail below to read the full PDF, or contact us for more info.reinsurance contribution thumb bordered

EEOC Loses Another Round – Wellness Battle Continues?

Posted November 5, 2014 by PHaynes

EEOCIn a decision that’s being hailed as a victory for employer-sponsored wellness programs, the U.S. District Court for the District of Minnesota yesterday denied the Equal Employment Opportunity Commission’s (EEOC) request for a temporary restraining order and preliminary injunction against Honeywell International Inc.

The EEOC claims the company’s wellness program violates the Americans with Disabilities Act and the Genetic Information Nondiscrimination Act by imposing penalties on employees who decline to participate in the company’s biometric screening program.

The American Benefits Council praised the court’s decision, calling it “welcome relief for company sponsors of employee wellness programs.  Unfortunately, the EEOC decided to pursue litigation before issuing guidance on this matter,” says James A. Klein, president of the American Benefits Council. “This is very frustrating for employers who care about the well-being of their employees and take seriously their compliance obligations. It is impossible for employers to abide by rules that do not exist.”

“Like many other Council member companies, Honeywell has devoted substantial time and resources to the development and implementation of these programs. The recent legal action by the EEOC, particularly in the absence of formal guidance on wellness programs from the commission, sends the wrong message,” says Klein.

While the EEOC’s recent actions around wellness programs may have created some “uncertainty” for employers, others are seasoned veterans in this area and rest assured that they’ve been following the requirements for voluntary wellness programs as established by HIPAA and PPACA (The Affordable Care Act).  It would be preferable to see the EEOC work closely with HHS/DOL and Treasury to put out additional guidance and clarify their differences, if any, with the voluntary wellness programs that have operated for years under HIPAA’s Wellness rules and not under PPACA’s protections too.

EEOC’s lawsuits, since August of 2014:

  • Orion Energy Systems – this case probably has very little to do with wellness, and more to do with alleged, poor labor practices–such as firing a wheelchair-using worker after refusing to provide him with an ADA-approved reasonable accommodation (like an automatic door opener), etc.
  • Flambeau, Inc. – EEOC alleges that Flambeau cancelled Mr. Dale Arnold’s coverage when he refused to complete a Health Risk Assessment.
  • Honeywell. – discussed at length, above.

As always, employers and plan sponsors should consult with their trusted advisers and counsel to take stock of their programs, review the size, scope and frequency of their rewards, update their communication materials and continue to gauge and improve their delivery methods.  If you’d like more information about how to amend your wellness plans to comply with HIPAA, GINA and PPACA, please contact one of our Account Managers or Sales Executives.

IRS: Group Health Plans that Fail to Cover In-Patient Hospitalization Services Won't Comply with PPACA

Posted November 4, 2014 by PHaynes

Apples_to_Oranges_Skinny_MECPerhaps you joined us for one or more of our webinars about Skinny or MEC plans.  Or, maybe you’ve been reading the Wall Street Journal and other sources on the issue of HHS’ AV (Actuarial Value) Calculator (really, it’s a spreadsheet).  Well, some vendors had been selling/offering health plans that were designed to meet all of PPACA’s Employer Mandate fines, but, regretfully these plans did not cover hospitalization.  As of this morning, the Department of Treasury removed those plans as an option.  (They did, however, allow someone that already bought a plan like those, prior to 11/04/2015 have a one-year “pass” on this issue provided that the purchased coverage begins on or before March 1, 2015).

However, please don’t be confused by the IRS’ closure of this, one-loophole.  MEC plans, plans that offer Minimum Essential Coverage (or preventive care) still comply with PPACA’s $2K/employee mandate fines and are only subject to PPACA’s $3K fines for the limited subset of any employees that make an application for exchange coverage and obtain a subsidy.  So, those plans, remain unaffected by IRS Notice 2014-69.  (See our Apples vs Oranges chart).

From IRS Notice 2014-69

Proposed Amendments to Regulations Relating to Minimum Value – HHS intends to promptly propose amending 45 CFR 156.145 to provide that a plan will not provide minimum value if it excludes substantial coverage for in-patient hospitalization services or physician services (or both). Treasury and the IRS intend to issue proposed regulations that apply these proposed HHS regulations under Code section 36B. Accordingly, under the HHS and Treasury regulations, an employer will not be permitted to use the MV Calculator (or any actuarial certification or valuation) to demonstrate that a Non-Hospital/Non-Physician Services Plan provides minimum value.

It is anticipated that the proposed changes to regulations will be finalized in 2015 and will apply to plans other than Pre-November 4, 2014 Non-Hospital/Non-Physician Services Plans on the date they become final rather than being delayed to the end of 2015 or the end of the 2015 plan year. As a result, a Non-Hospital/Non-Physician Services Plan (other than a Pre-November 4, 2014 Non-Hospital/Non-Physician Services Plan) should not be adopted for the 2015 plan year. (As noted above, it is anticipated that the proposed changes to regulations, when finalized, will not apply to Pre-November 4, 2014 Non-Hospital/Non-Physician Services Plans until after the end of the plan year beginning no later than March 1, 2015. The Departments anticipate that final rulemaking will be completed on or about that date.)

Pending issuance of final regulations, in no event will an employee be required to treat a Non-Hospital/Non-Physician Services Plan as providing MV for purposes of an employee’s eligibility for a premium tax credit under Code section 36B, regardless of whether the plan is a Pre-November 4, 2014 Non-Hospital/Non-Physician Services Plan.

AP Benefit Advisors’ Sept 9, 2014 Webinar:  Innovative MEC & Skinny Plans – How to Avoid Employer Penalties

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