Viewing posts from: February 2015

No Surprise – the IRS wants your input on ACA's Cadillac plan tax

Posted February 24, 2015 by PHaynes

IRS-logoThe bad news is that the Internal Revenue Service (IRS) has no intention of paying us all a “consulting fee” but, the good news is that they are asking for our advice and input into how they might write the rules related to PPACA’s “Cadillac plan tax”.

IRS officials have put the request for commenters’ thoughts in IRS Notice 2015-16, which deals with Internal Revenue Code (IRC) Section 4980I.

Drafters of the Patient Protection and Affordable Care Act (PPACA) added IRC Section 4980I to impose a 40% excise tax on “high cost employer-sponsored coverage,” in an effort to raise revenue and mobilize employers and insurers to help hold down the overall cost of health care and health benefits.  PPACA calls for the Cadillac plan tax to apply for tax years starting after Dec. 31, 2017. In 2018, the tax could apply to individual coverage with a value of at least $10,200 and family coverage with a value of at least $27,500.  [For a refresher on this topic, please review our 2012 Webinar on PPACA’s Cadillac Tax].

In response to last year’s request for input on tax guidance priorities (IRS Notice 2014-58), thirty-three (33) responses were provided.  Here’s a small portion of the National Association of Manufacturers (NAM) September 2014 response:

The vast majority of manufacturers in America—including 97 percent of NAM member companies—voluntarily offer health benefits not only to attract a skilled workforce, but because they believe it is the right thing to do for their employees. During the debate on health care reform, manufacturers strongly supported proposals to reduce soaring costs, improve the efficiency of the current system and enhance the quality of care.


In contrast, the NAM opposed many provisions that would increase costs for employers and employees without driving down the cost of care. In particular, the NAM opposed the excise tax on high-cost plans. The so-called “Cadillac Tax,” which will go into effect in 2018 and affect all plans with benefit costs exceeding $10,200 per year for individuals and $27,000 per year for families, will translate into higher health care costs for employers and employees.


While the NAM will continue to pursue opportunities to repeal this new excise tax, we also recognize the critical need for IRS guidance on this provision to enable employers to comply with the law. Manufacturers must make multi-year planning decisions to ensure the success of their companies. In order to avoid potentially disruptive or costly problems when the tax is set to go into effect, companies need to begin planning now for what will certainly be a significant financial burden. Having a full understanding of how this tax will be implemented is absolutely essential to the viability of many employer plans.


Manufacturers are proud to provide the healthcare to their employees and are concerned that increased costs associated with the Cadillac Tax and other provisions of the Affordable Care Act will have a negative impact on their ability to continue providing coverage at a reasonable cost to the company and the employee

Officials at the IRS, an arm of the Treasury Department, are asking for commenters’ thoughts on how the IRS ought to define “applicable coverage” for Cadillac plan tax purposes, determine the cost of that coverage, and adjust the statutory dollar thresholds that govern when the tax kicks in.

Comments are due May 15.

Issue 1:  Which coverages should be included (and excluded) from the calculation of the values to be taxed?

Officials say they want to exclude the kinds of benefits traditionally “excepted” from Health Insurance Portability and Accountability Act (HIPAA) requirements and other major medical plan requirements, such as self-insured dental coverage, self-insured vision coverage and employee assistance programs (EAPs), from health benefits value calculations.

“Commenters are requested on any reasons why Treasury and IRS should not implement this approach,” officials say.  Officials also are asking how they should treat health reimbursement arrangements (HRAs), and how they should treat groups of related employers.  Officials note that PPACA requires them to base the income calculation rules on the premium value calculation rules used for COBRA continuation benefits, but that they also want to harmonize the rules with traditional group health market rules as much as possible.

Issue 2:  Level the playing field – changes in calculating COBRA premiums.

When self-funded employers and plan sponsors calculate COBRA premiums they typically use either an “actuarial cost method” or a “past cost method” to decide how much the COBRA premium ought to be.  These methods are defined at IRC § 4980B(f)(4)(B) are known as the “Reasonable Estimate” and “Safe Harbor”.   The Safe Harbor method permits less flexibility and generally yields lower COBRA rates than using the Reasonable Estimate method, so, its use could be a good “tool” for artificially avoiding the Cadillac plan tax (by devaluing the cost).  [Note:  the Safe Harbor is not available for use if there has (1) been a significant change in coverage under the health plan since the prior determination period and/or (2) there has been a significant change in the number of employees covered by the health plan in the prior determination period].

The IRS is thinking about requiring a plan that picks a COBRA premium determination method to stick with that method for at least (5) five years in typical situations, and to require a plan to use the actuarial basis method for two years if there is a significant problem with using the past cost method. Officials are asking whether they should apply a similar rule to Cadillac plan tax calculations.

Issue 3:  The IRS wants your ideas for lightening this excise tax burden.

Employers and Plan Sponsors can’t just “pass on the excise tax” to its employees.  Doing so will almost certainly impact the Affordability calculations under PPACA.  Plus, most pundits and commentators believe that Union plans (collectively bargained plans) will be the plans that are “that hardest hit” when the Cadillac tax begins to be enforced.

Section 4980I lets the IRS increase the high-value threshold to reflect inflation after 2018, and it lets the IRS adjust the threshold for age, gender or employment in a high-risk occupation, even in 2018.  “Comments are requested on whether it would be desirable and possible to develop safe harbors that appropriately adjust dollar limit thresholds for employee populations with age and gender characteristics that are different from those of the national workforce,” officials say.

Officials also are asking about how to implement adjustments for high-risk professions, such as law enforcement officers (as such term is defined in section 1204 of the Omnibus Crime Control and Safe Streets Act of 1968), employees in fire protection activities (as such term is defined in section 3(y) of the Fair Labor Standards Act of 1938), individuals who provide out-of-hospital emergency medical care (including emergency medical technicians, paramedics, and first-responders), individuals whose primary work is longshore work (as defined in section 258(b) of the Immigration and Nationality Act (8 U.S.C. 1288 (b)), determined without regard to paragraph (2) thereof), and individuals engaged in the construction, mining, agriculture (not including food processing), forestry, and fishing industries. Such term includes an employee who is retired from a high-risk profession described in the preceding sentence, if such employee satisfied the requirements of such sentence for a period of not less than 20 years during the employee’s employment.  See, 26 U.S. Code § 4980I (f)(3).

Links included above:


IRS Reporting on Employer and Individual Mandates – Final Instructions

Posted February 23, 2015 by PHaynes


On February 9, 2015, the Internal Revenue Service (IRS) released final forms and instructions for reporting on individual and employer mandates. The instructions and forms will be used by applicable large employers, insurers and employers with self-insured plans.

The Final Rules on Minimum Essential Coverage (MEC) and Large Employer reporting were released on March 5, 2014. The first reporting is required in early 2016 for the 2015 calendar year. Employers had the option to voluntarily report 2014 information by January 31, 2015 for the 2014 calendar year, but it was not required. (more…)

Eighth Circuit Affirms Denial of Statutory Penalties for Failure to Timely Provide COBRA Election Notice

Posted February 19, 2015 by Megan DiMartino


The Eighth Circuit has upheld a trial court’s denial of statutory penalties for failure to timely provide a COBRA election notice. The employee in the case had been on medical leave, exhausted benefits under her employer’s short-term disability (STD) plan in June 2011, and applied for long-term disability (LTD) benefits. Her LTD application was denied in October 2011, but the employer neglected to process her termination of employment or notify the medical plan’s insurer, even though her eligibility—and her contributions—had ended when the STD benefits expired. The plan continued to pay her claims through April 2012, when the employer discovered its error and processed the employee’s termination of employment, but the employee was not informed until June 2012 that the coverage had been terminated. The employee sued, seeking statutory penalties for the notice failure, but the trial court declined to assess penalties, finding that the employer had acted in good faith and that the employee was not harmed by the notice failure because she had received medical coverage at no cost through April 2012, with a value that far outweighed the claims she had incurred before enrolling in her spouse’s medical plan in June 2012 (see our article).

On appeal, the Eighth Circuit affirmed the trial court’s decision, rejecting the employee’s argument that the trial court should not have taken good faith and lack of prejudice into account when making its decision. The Eighth Circuit found no clear error in the trial court’s conclusion that the employee had received free coverage with a value that exceeded her out-of-pocket medical expenses. The Eighth Circuit also observed that there was no evidence that the employer had acted willfully. Accordingly, the Eighth Circuit ruled that the trial court had not abused its discretion in declining to assess statutory penalties.

Employee Health Improvement

Posted February 12, 2015 by Megan DiMartino

shutterstock_72339925 - CopyIncreasingly, employers are looking to data analysis and predictive modeling to identify and understand the health factors driving the cost of their health benefits program. With approximately 75% of health care cost attributable to people with chronic diseases, and the extensive body of evidence attributing chronic disease to lifestyle factors such as smoking, poor eating habits and physical inactivity, these same employers are actively seeking ways to promote positive changes in employees’ lifestyles by helping them reduce their health risk factors.

AP Benefit Advisors leverages claims data warehouses to store, access and analyze claims history and assess the risk factors that affect businesses. This allows for the development of customized solutions based on population. In addition, we identify large open claims and emerging claims in order to monitor medical management intervention and manage the reinsurance risk. By taking an in-depth look into employee health population management, we are able to identify a company’s risks, and potential areas of saving.

After these steps it becomes important to develop a strategy to bring wellness and health improvement to your workplace. To learn more about how you can customize a program to meet your needs, contact us

HRCI Pre-approved* Webinar – Intersection of the Affordable Care Act and ERISA: Health Care Reform & New Claims and Defenses

Posted February 11, 2015 by Megan DiMartino

Join AP Benefit Advisors General Counsel and Vice President-Compliance, Patrick Haynes, for this complimentary HRCI pre-approved* webinar as he discusses the Intersection of the Affordable Care Act and ERISA: Health Care Reform and New Claims and Defenses. Topics to be reviewed:

  • Court Cases Roundup: NFIB v. Sebelius, Burwell v. Hobby Lobby Stores, Inc., Halbig v. Burwell, King v. Burwell
  • Crawford HRCI Logo 2015The Good & Bad ER-Mandate Strategies
  • Workforce realignments
  • The return of ERISA §510, 29 U.S.C. §1140
  • ACA Whistleblower Protection
  • Benefit Claims Procedures
  • (more…)

Important Tax Information in the Mail to Your Clients

Posted February 6, 2015 by Megan DiMartino

Important Tax Information in the Mail to Your Clients Who Bought Coverage through the MD, VA, and DC Marketplaces

From Kaiser Permanente

By early February, your clients who enrolled in individual plan health coverage in 2014 through the Maryland, Virginia, or D.C. marketplaces should receive a tax statement from the marketplace. They will need this important statement, called Form 1095-A, to complete their 2014 taxes.

Kaiser Permanente will not mail tax statements for 2014 to your clients who purchased individual or group coverage outside of the marketplaces. Your clients may have heard of Forms 1095-B and 1095-C and may ask you about them. These forms are not required for the 2014 tax reporting year.

Please refer to the attached questions and answers that will help you assist your clients as they prepare to submit their 2014 taxes.

Tax Q&As for On-Exchange Members

Includes: Exchange members, both in state and federal exchanges

Q1:  I’ve heard that my health coverage may impact my taxes. Is that true?

A1:  Yes, your 2014 health coverage affects your income taxes in two ways.

1)  Federal tax law requires everyone either to have had health care coverage, or to have received an exemption from this requirement in 2014. If you/and or your dependents did not have an exemption and did not have qualifying health coverage in 2014, then you may owe a penalty—called a shared responsibility payment—with your tax return.

For more information about qualifying for an exemption from health coverage, contact your marketplace or visit

2)  If you received federal financial assistance in 2014, you will need to report the amount you received on your federal taxes.

  1. a) If the amount of assistance was less than the premium tax credit that you qualified or, then you should receive a credit.
  1. b) If the amount of assistance you received was more than the premium tax credit that you qualified for, then you may need to pay some or all of the advance payment of the premium tax credit back.
  1. c) You may have to complete one or two new tax forms.

For more information on how health coverage may impact taxes, contact your marketplace, or visit or

Region URL Phone
District of Columbia 1-855-532-5465
Maryland 1-855-642-8572
Virginia 1-800-318-2596

Q2:  How was my federal financial assistance calculated?

A2:  The amount of Advance Premium Tax Credit (APTC—also called federal financial assistance for premium payment) that was paid on your behalf to Kaiser Permanente to lower your premiums in 2014 was based on your estimate of your income and family size when you applied for health coverage, as well as the cost of the second- lowest-priced silver plan offered through your health insurance marketplace.

Now that you are filing your 2014 taxes, your APTC will be recalculated using your actual 2014 income and dependent information and compared to the amount of the advance payments made to Kaiser Permanente based on your estimate. Any change to actual income or dependents from what you estimated could increase or decrease the actual premium tax credit for which you qualify in 2014.

Based on your final 2014 information, if the amount of assistance you received was:

  • less than you were entitled to, you may receive a credit on your taxes, or
  • more than you were entitled to, you may need to pay some or all of the advance payment back.

Q3:  What forms or statements do I need to file my taxes?

A3:  If anyone in your household enrolled in a health plan through the marketplace in 2014, you’ll need to use the 1095-A statement, which you will receive from the marketplace, when you file your federal income taxes. You should receive it in the mail by early February. Keep your 1095-A statement with your W-2 forms and other important tax records. You will need it to fill out your 2014 federal income tax return.

You will use the information on the 1095-A statement to complete Form 8962, Premium Tax Credit (PTC). You should file Form 8962 with your 1040 tax return if you want to claim the premium tax credit or if you received advance payments (APTC) made to your health plan.

For more information on the 1095-A statement, contact your marketplace, or visit or

For more information on Form 8962 and Form 1040, visit You can also find copies of Form 8962 and Form 1040 on

Q4:  If I’m the main household subscriber, will I get one 1095-A statement or multiple 1095-A statements for each member of the family?

A4:  If you are all on the same health care plan, you’ll get one statement, which has all the members of your household listed. If you are on separate plans, you’ll get separate 1095-A statements.

For information on Form 1095-A, contact your marketplace, or visit or

Q5:  What if I enrolled in a health plan through the marketplace during a special enrollment period? Will I still get a 1095-A statement?

A5:  Yes, you will receive a 1095-A statement for the period you were enrolled in the health plan through the marketplace.

For more information on Form 1095-A, contact your marketplace, or visit or

Q6:  Will I have to pay a penalty if I was covered less than 12 months in 2014?

A6:  If, for any month in 2014, you or another member of your tax household did not have qualifying health care coverage, you may owe a penalty, called a shared responsibility payment. If you have an exemption application pending from the marketplace, you should wait until you receive either the denial or approval before continuing. If your application is pending and you need to file your federal tax return, see the Instructions for Form 8965.

For more information about Form 8965 and to determine if you owe a penalty, talk to your tax professional if you have one or visit

Q7:  What is Form 8962?

A7:  Use should use Form 8962 to figure the amount of your premium tax credit (PTC) and reconcile it with any advance payments of premium tax credit (APTC).

You then file Form 8962 with your tax return if you want to claim the premium tax credit or if you received advance payments (APTC) made to your health plan. For more information on Form 8962, and to find a copy of Form 8962, visit

Q8:  What does reconciliation mean?

A8:  If you received federal financial assistance (also called subsidies) to help pay for your health care coverage, you will use the information on Form 1095-A to complete Form 8962, Premium Tax Credit (PTC). Form 8962 helps you compare how much your health plan received for 2014 premiums that were advance payments of your premium tax credit to the final premium tax credit for which you qualify. Depending on the result, you may receive a credit or you may owe the difference. For more information, contact your marketplace, or visit or

Q9:  How do I get a copy of my Form 1095-A? (I lost it or never received it.)

A9:  Maryland and DC members: Contact your marketplace for another copy of Form 1095-A.

Virginia members: Download a copy at in a new section of My Account.

For more information on Form 1095-A, refer to the Form 1095-A instructions, contact your marketplace, or visit or

Q10: Where can I get help filing my taxes?

A10: You may get free assistance with filling out your taxes. This may include free access to tax software programs, or free in-person assistance. For information, visit or

You may also seek professional tax assistance. For more information about choosing a tax professional, visit

If you have additional questions about your taxes, visit

Q11: Why did I get more than one 1095-A?

A11: You will get multiple Form 1095-As if your family members were covered under different plans or if you made changes to your income or dependent information during the year. Be sure to keep all the 1095-As you get and keep them with your important tax documents.

It’s possible you could receive a “Corrected” Form 1095-A. You should use the most recent Form 1095-A that you receive when you complete your taxes. For more information on Form 1095-A, refer to the Form 1095-A instructions, contact your marketplace, or visit visit or

Q12: What if I think information on my Form 1095-A is incorrect?

A12: If you find information on Form 1095-A that you believe is incorrect, contact your marketplace call center.

For more information on Form 1095-A, refer to the Form 1095-A instructions, contact your marketplace, or visit or

Q13: What if I already filed my tax return before I got my 1095-A, or before I got a corrected one?

A13: You may have to file an amended federal income tax return. This means you’ll have to file a corrected version of your return with the IRS.

For more information about filing an amended tax return, contact your tax professional if you have one, and/or your marketplace or visit The IRS also has information about filing an amended return, at

Q14: Will I get a 1095-A if I’m ONLY enrolled in a stand-alone dental plan or a minimum coverage plan (previously called catastrophic plan)?

A14: If you are enrolled in a stand-alone dental plan and a health plan, you may receive a 1095-A statement. You won’t get a 1095-A statement if you’re enrolled in a minimum coverage plan. These plans don’t qualify for subsidies.

Taxes Q&As — Off-Exchange Members

Q1:  I am an off-exchange member and I did not receive a 1095-A statement. Why not? Do I need it?

A1:  Unless you were enrolled in a state or federal marketplace plan, you do not need a 1095-A statement to file your 2014 taxes. For more information about demonstrating your health care coverage when you file your 2014 taxes, visit or

Q2:  I heard that off-exchange members will get a 1095-B form from their carrier. Will Kaiser Permanente be sending me a 1095-B form this year?

A2:  No, the 1095-B form is not required for filing taxes in 2015 (reporting on the 2014 tax year). Kaiser Permanente will begin sending members the 1095-B form in 2016 (reporting on the 2015 tax year).

For more information about demonstrating your health care coverage when you file your 2014 taxes, visit or

Q3:  If I don’t get a 1095 form this year, how will I prove to the IRS that I had health insurance in 2014, as required under the individual shared responsibility mandate?

A3:  If you and your dependents had qualifying health coverage during most of 2014 from a source other than the health insurance marketplace, you’ll just need to check a box on your federal income tax form. You won’t get a 1095 form, and you don’t need to fill out any new forms.

For more information about demonstrating your health care coverage when you file your 2014 taxes, review your tax form instructions, or visit or

Q4:  I received a form that looks like the 1095-A statement from my employer/other issuer. What is that and what do I do with it?

A4: You may have received a 1095-C form from your employer, or, a 1095-B form from another health plan and/or government-sponsored program like Medicare, Medicaid or CHIP. These forms are not required for filing taxes in 2015 (reporting on the 2014 tax year). For more information about demonstrating your health care coverage when you file your 2014 taxes, visit or

Health Insurer Anthem Struck By Massive Data Breach

Posted February 4, 2015 by admin

Article from PDFs (below) from Anthem Blue Cross Blue Shield.

Today, Anthem Inc., the second largest health insurer in America revealed that hackers broke into the company’s servers and stole social security numbers and other personal information. This is a massive data breach with the potential to expose the information of nearly 80 million Anthem customers and has the potential to be the largest health care related data breach in history. The company notes that accounts associated with Anthem Blue Cross, Anthem Blue Cross and Blue Shield, Blue Cross and Blue Shield of Georgia, Empire Blue Cross and Blue Shield, Amerigroup , Caremore, Unicare, Healthlink, and DeCare were all part of the data breach.

After discovering the data breach the company contacted law enforcement, and has stated that they are working with the FBI and cooperating in their investigation. Anthem also stated that they have retained cybersecurity firm Mandiant to evaluate their systems.

Anthem’s President and CEO Joseph R. Swedish revealed that his own personal information was accessed during the data breach, as was the information of other Anthem employees. The company has not indicated that any medical information was revealed in the breach.

The company says it will provide credit monitoring and identity protection services free of charge to those who have been affected, individually affected customers have not yet been notified, likely because Anthem has yet to narrow down the scope of the breach. Accordingly, Anthem says it is conducting an extensive IT Forensic Investigation to determine which customers were impacted and says it will notify all Anthem members who are impacted through a written communication.

The data breach was discovered last week, but was only revealed today after trading closed; earlier in the day Anthem Inc. stock closed up at 137.65.

anthem thumb anthem employer toolkit thumb

February 12, 2015 Update from CareFirst BCBS

CareFirst BlueCross BlueShield (CareFirst) was made aware last week by Anthem (like CareFirst, a Blue Cross Blue Shield company) of a cyber-attack on Anthem’s information technology system and a resulting data breach. Anthem has indicated that some CareFirst members were impacted by the data breach.
We have received from Anthem certain information about the potential impact of this breach on current and former CareFirst members. We are currently engaged in the complex process of vetting that information and verifying the number and identity of those affected, and – importantly – the type of information involved. This is a complex process and will take some time to complete.

At this time, it is important to note that:

  • CareFirst members represent a small portion of the overall number of individuals affected by the Anthem breach – around 0.5 percent of the total number.
  • The most potentially sensitive data included in the breached information is Social Security Numbers (SSNs). Our early analysis of the data provided by Anthem so far suggests that this data was rarely present in the data of CareFirst members. This review and analysis will continue and be verified.

We expect to know more and have more to say regarding this matter in the next week. In the meantime, Anthem will be communicating (via letter) to all individuals affected and those individuals will be able to enroll in two years of free credit monitoring and identity theft repair services. The cost of these services will be borne by Anthem. Starting this Friday, Feb. 13, those affected will be able to visit for details on how to enroll.

In addition, after carefully analyzing and verifying the data, CareFirst will directly notify those CareFirst members at the greatest risk as a result of the breach – chiefly, those apparent few where SSNs may have been compromised.

More information regarding the Anthem data breach and its impact on CareFirst members will be posted on as it becomes known.

In response to the breach, CareFirst is working to understand the full nature of the Anthem cyber-attack and actively reviewing its security posture and technical controls. We are conducting a full scan of our technical environment and also reverse engineering the Anthem attack to look for the telltale signs of any data breach in our operating systems. This includes a forensic investigation of our technical environment, looking for any signs of intrusion, malware, hacks, or abnormal systems activity. At this time, we have found no evidence of any breaches or abnormal activity in CareFirst’s systems, network or databases.

I will continue to keep you updated as we learn more.

Subscribe to Our Blog