Here’s another insightful Affordable Care Act update from our friend Jason M. Cogdill, Corporate Counsel & Benefits Attorney at ProBenefits, Inc.
Will the employer mandate be delayed? I continue to estimate the probability of delay as roughly 50 percent. Not only was the mandate not delayed after Labor Day, but the IRS re-released draft forms for the employer and insurer reporting (6055/6056 reporting) that will be part of the mandate. That is being interpreted by some as a sign that the agencies are proceeding on schedule and that a delay may not be imminent.
If delayed, it would of course be helpful if employers knew enough ahead of 1/1/15 to adjust any planned workforce adjustments or expanded coverage. The mid-term elections are taking place November 4. I have two informal dates circled: October 15 and November 14. If the mandate is not delayed by the week of 10/15, it is unlikely to be delayed prior to the elections. If not delayed prior to the elections, the next key date is November 14, the day before the 2015 Marketplace open enrollment period begins. If not delayed by 11/15, then the probability of delay likely decreases significantly. In 2013, the delay was announced on July 2 (six months prior to planned effective date), so we are already well past that at this point and the clock is ticking.
Without question, the best plan for 100+ employers is to prepare now to comply and let any potential delay be a backup solution. Groups with 100 or more full-time employees, including equivalents, need to prepare to identify all 30+ hour employees and evaluate options to offer qualifying coverage at the 2015 effective date. If any organization has not yet done the full analysis, the three initial key questions are: (1) does the mandate apply in 2015 based on the IRS formula for FT + FTE determined by any 6-month period in 2014; (2) if so, what is the specific effective date in 2015; and (3) which employees will qualify as 30+ hour employees and must be offered coverage to avoid potential penalties.
Key Developments since June
- June 25 – Agencies issued final rules on eligibility waiting period, including confirmation of orientation period extension
- June 30 – U.S. Supreme Court ruled in favor of privately held companies challenging contraceptive mandate
- June 30 – IRS published final rules on small business tax credit (only available to qualifying employers purchasing coverage through FF-SHOP for 2014 and beyond)
- July 22 – Two federal Circuit Courts of Appeal issued opinions on challenges to ACA subsidy awards in states without state exchanges (likely to go to Supreme Court in 2015)
- July 24 – IRS issued proposed regulations on issues regarding premium tax credit
- July 24 – IRS released draft forms for insurer and employer reporting under Code 6055 & 6056
- July 24 – IRS set maximum amount for individual mandate penalty (percentage) at $2,448 per individual (up to $12,240 for family of 5+)
- August 28 – IRS re-released draft forms for reporting, with updated instructions
Update on “Skinny Plans” and Alternative Options for Large Employers
A continuing hot topic is how “skinny plans” (also known as “MEC” plans to designate Minimum Essential Coverage) will or will not assist large employers with mandate compliance in 2015. The keys to remember with MEC plans are that: (1) these plans meet the low standard of Minimum Essential Coverage to help an employer avoid the A penalty (“sledgehammer”) by offering coverage to all 30+ hour employees; and (2) these plans, by themselves, do not meet the higher standard of Minimum Value (60% actuarial value or Bronze level coverage) to satisfy the terms of the B penalty (“tackhammer”). At this point, I think that most employers that use MEC plans will use them in conjunction with a plan that provides Minimum Value, in order to avoid potential B penalties for employees who decline the MEC coverage and receive premium subsidies at the Marketplace.
A related topic involves a new plan option that I am referring to as “skinny Bronze.” This is a plan designed to look like Bronze major medical coverage, except without hospitalization or surgical benefits. The promoters of these plans claim that they meet Minimum Value. If so, then such plans would allow an employer to offer them as a single option and avoid any risk of the A or B penalty if the coverage is offered to all 30+ hour employees and affordable to 30+ hour employees consistent with the 9.5% rule.
The primary approach for all employers is offering Minimum Value, affordable coverage to all 30+ hour employees for 2015. If that strategy is not workable for a particular organization, then alternative strategies are available, including the above. However, before an MEC strategy, 70% strategy, or skinny Bronze strategy is considered, an employer will need to understand fully all of the potential scenarios and risks.
Upcoming Item: Reinsurance Fees
Other than the mandate, the only upcoming ACA item for the remainder of 2014 is the new required contribution to reinsurance fee. The reinsurance fee took effect in January and applies based on the calendar year for 2014-2016. Many fully insured plans are already paying reinsurance fees because they were built into the 2014 premiums by the carrier (the carrier is required to calculate and submit them). For self-funded plans, the reinsurance fees will be paid in two installments. Employers who are subject to the fees will have to report the participant count to HHS by November 15. HHS will then bill the employer for $52.50 per participant, theoretically by 12/15, with payment due by 1/31. The remaining amount ($10.50 per participant) will be billed to the employer by the Treasury during 2015. The amount of the reinsurance fee for 2014 is $5.25 per member per month ($63 annually). The fee will decrease to $3.67 per month ($44 annual) for 2015.
CMS has been hosting a series of webinars on the calculation and submission of the reinsurance fee. You can access copies of the slides from these presentations via the CMS webpage and REGTAP.
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