The month of July brought court cases, draft forms, and a FAQ of interest to group health plans.
Courts Issue Opposite Rulings in Premium Subsidy Cases
On July 22, 2014, two Courts of Appeal issued decisions on eligibility for the premium tax credit/subsidy under the Patient Protection and Affordable Care Act (PPACA). The cases involve challenges to the IRS ruling that individuals are eligible for the premium subsidy regardless of whether their state has a state-run or federally-run Marketplace/exchange. One court (in a case called King v. Burwell) held that the IRS interpretation is reasonable. The other court (in a case called Halbig v. Burwell) held that based on the way the law is written, the subsidies should only be available to people living in a state that has a state-run exchange. Both decisions are on hold while they are appealed, which means that, for now at least, employees will still receive premium subsidies and employers should continue preparations to meet the employer-shared responsibility/play or pay requirements.
Employer Reporting Requirements
On July 24, 2014, the IRS published drafts of several of the forms that will be used to provide the reporting needed to verify that individuals and employers are meeting their shared responsibility obligations under PPACA and that individuals who request premium tax credits are entitled to them. Instructions were not released with the draft forms, so some questions remain unanswered.
Generally speaking, an employer will not have any reporting requirement if it has fewer than 50 full-time and full-time equivalent employees in its controlled group and it sponsors a fully insured medical plan. All other employers will have at least some reporting. This appears to include employers with 50 to 99 employees for 2015 – even though the employer-shared responsibility requirement has been delayed until 2016 for most employers in this group, reporting is still needed to help determine whether individual employees owe penalties or are eligible for premium subsidies.
While the forms are not yet final, they will provide employers insight into what types of information they should be gathering – starting January 1, 2015 – to be able to meet their reporting obligations.
Follow-Up to the Hobby Lobby Decision
The Supreme Court of the United States recently decided in a case generally referred to as the Hobby Lobby case that closely-held corporations whose owners have religious objections to providing coverage for contraceptives are not required to provide that coverage to satisfy PPACA requirements. We still do not know how an employer that wishes to claim this exemption based on its religious beliefs will do this. Despite this missing information, the regulatory agencies have issued a reminder that if an employer with religious objections to covering contraceptives now eliminates or reduces that coverage because of the Supreme Court decision, it will need to issue a summary of material modifications within 60 days after the effective date of this reduction in coverage.
In another development, the Equal Employment Opportunity Commission (EEOC) has updated its guidance on how to comply with the Pregnancy Discrimination Act (PDA). This guidance says that to comply with the PDA contraceptives must be covered, and that the EEOC may challenge an employer that does not provide this coverage because of its religious beliefs.
Cost of Living Adjustments
Many of the thresholds in PPACA have annual cost-of-living adjustments. The IRS has released the 2015 “affordability” thresholds. Affordability is measured differently for purposes of eligibility for the premium tax credit/subsidy (and any employer-shared responsibility penalty triggered by an employee receiving a premium subsidy) and the individual-shared responsibility penalty. For 2015 an employee will be eligible for a premium subsidy if the employee’s cost for single-only coverage under the least expensive minimum value plan offered to the employee exceeds 9.56% of the employee’s safe harbor income. An individual will be exempt from the individual-shared responsibility requirement if the cost of coverage exceeds 8.05% of the individual’s household income. (The 2014 figures were 9.5% and 8%.)
PPACA requires that insurers whose medical loss ratios (MLRs) do not meet a threshold return part of their profits to the policyholders. MLRs are calculated based on the insurer’s experience in the individual, small group or large group market within a state, not the policy’s actual experience. The deadline for insurers to mail rebates due for 2013 is August 1, 2014. Plans that receive rebates generally must share the rebates on a pro rata basis with employees if the employees contributed toward the premium.
There are different rules for handling these rebates depending on whether the plan is a government or church plan, or if it is sponsored by a private employer.
Question of the Month
Q: Have the Transitional Reporting Fee (TRF) forms been released?
A: The TRF forms have not been released yet. Insurers and plan sponsors of self-funded major medical plans will file their first TRF report by November 15, 2014, through www.pay.gov. The fee will be calculated based on the report filed at www.pay.gov and will be automatically deducted from the plan sponsor’s designated account on a date chosen by the plan sponsor (but not later than January 15, 2015).
The TRF is due for 2014, 2015, and 2016. The fee for 2014 is $63 per covered life. (It may be paid in installments of $52.50 by January 15, 2015, and $10.50 by November 15, 2015.) The fee for 2015 will be $44 per covered life. The fee for 2016 is expected to be approximately $27.
The TRF will be calculated based on average covered lives during the first nine months of 2014 (even if the plan operates on a non-calendar plan year). The methods used to count lives are very similar to those used to calculate the Patient-Centered Outcomes Research Institute (PCORI) fee. View a chart that compares the PCORI and TRF requirements.