Legislative Changes Employers Should Be Aware of for 2015 and Beyond
Since early June, conversations about the Affordable Care Act have ranged from the Supreme Court decision and the impact of the court’s decision to penalty updates, reporting changes, and updates to benefit maximums.
As we move into fall, we have recapped some of the legislative changes to watch for in Q3 and Q4 of 2015 and how these inform your decisions for 2016. Each change will have a direct impact on the offer of coverage and ACA mandated requirements.
King v. Burwell: A Decision in Favor of the ACA
The court ruled 6 to 3 in favor of the White House, which essentially kept the Affordable Care Act (ACA) in place. The justices decided that the five contested words in the ACA (“exchange established by the state”) are not and were not intended to be interpreted that people in the 34 states without healthcare exchanges are not eligible for federal tax credits or subsidies. Subsidies will remain available in all states with federally established or partnership exchanges, thereby maintaining the mandate under which employers may be subject to potential penalties with respect to the granting of subsidies or tax credits.
After this decision, many companies found that an end-of-summer start to 2015 ACA compliance was very difficult, if not impossible. Companies providing ACA compliance announced as early as mid-July that they were no longer accepting new clients as timelines were too short for reporting accuracy by year-end.
While Health e(fx) was also forced to make the same announcement, we are currently bringing on new clients and working with existing ones to prepare for 2016 ACA compliance requirements and detailing the role 2015 data plays in the process.
For more information on the King v. Burwell decision, visit our full blog post here.
Medicaid Expansion: States News
Many states held off on Medicaid expansion when the Supreme Court decided to hear the King v. Burwell case. With the case decided, here is a summary of Medicaid’s “state of the union”:
5 states are expanding Medicaid using an alternative to traditional expansion (as outlined under the ACA): Arkansas, Indiana, Iowa, Michigan, New Hampshire
1 state is expanding Medicaid pending federal approval: Montana
24 states are expanding Medicaid: Alaska, Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Hawaii, Illinois, Kentucky, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, North Dakota, Ohio, Oregon, Rhode Island, Vermont, Washington, West Virginia
1 state is transitioning from alternative Medicaid expansion to traditional expansion: Pennsylvania
1 state has an ongoing update: Utah
HCR 12: A resolution was passed stating the governor, lieutenant governor, and legislative leaders will find a compromise to the Healthy Utah Plan by July 31, 2015. If an agreement is reached, the governor will call a special legislative session to vote on the plan. If agreement is met, goal is a January 1, 2016, effective date.
The remaining states are not expanding Medicaid.
2016: Plan Change Requirements
While late guidance caused a frenzy for insurers and employers, we’re seeing some areas where plan changes could save families hundreds or possibly thousands of dollars in out-of-pocket medical costs annually. In 2016, this could have a major impact on how much families pay for plans, as we’ve described below.
An overview of out-of-pocket maximums
In 2015, nearly all medical plans met minimum essential coverage and value and offered members the protection of an annual, out-of-pocket maximum for in-network care for essential health benefits.
An out-of-pocket maximum is the most a family or individual pays within a year for health coverage, including deductibles, coinsurance, or copays. Once the maximum is reached, the health plan steps in and pays 100% of the allowed amount of covered services.
There was a governmental limit on how much these out-of-pocket maximums could be. Family health plans, which include spouse, children, or spouse and children, could have a single, out-of-pocket maximum for the entire family; these were allowed to be twice the max of an individual’s health plan. In 2015, plans could count each family member’s expenses until the family maximum was reached. At that point, the plan would start covering all family members’ in-network care in full. This is about to change.
As of 2016, regardless of whether a plan covers a single person or a family, there is a limit on how much one person can be required to spend.
– For individuals, plans cannot require a person to pay more than the maximum amount.
The individual maximum can be up to $6,850 and the family maximum up to $13,700. For high-deductible plans that are compatible with HSAs, amounts are reduced: $6,550 and $13,100, respectively.
Many plans are already set up this way, yet many must change. For 2016, family plans can be set up one of two ways:
1. A family plan maximum that is no more than the maximum for individual coverage.
2. A higher family maximum but with an individual maximum “embedded” in the plan. Once one person’s allowed bills reach the maximum, his or her bills are covered in full for the rest of the year. Other family members will continue to pay their share of their bills until one of them also reaches the individual maximum, or the family maximum is reached.
As you can see, for a family member who has the majority of the medical expenses, this change could mean thousands of dollars in out-of-pocket savings for the family. However, this enhanced coverage may come at a price. Insurers and plan providers have to calculate how much more this enhanced coverage will cost, and set prices accordingly, ensuring the affordability requirements are maintained.
Employers have to choose the plan design that meets the needs of their employees as well as the affordability maximums set by the ACA. The process of determining the employee contribution will be key to ensuring these requirements are met and costs are managed appropriately.
Extensions for Certain ACA Information Reporting Deadlines
During a July 2, 2015, conference call, the IRS told a group of payroll industry participants that employers will be able to request an extension of the ACA filing deadline for filing information returns with the IRS, and furnishing ACA statements to payees. These reporting requirements were initially scheduled to go into effect beginning with the 2014 coverage year, but the IRS provided transitional relief and postponed them until 2015.
Code Sec. 6055(a)
This code generally requires every health insurance issuer, the sponsor of a self-insured health plan, a government agency that administers government-sponsored health insurance programs, and other entities that provide “minimum essential coverage” (defined in Code Sec. 5000A(f)) to file annual returns reporting information for each individual for whom such coverage is provided.
Companies and organizations filing an information return reporting minimum essential coverage (MEC) must also provide a written statement to each employee listed on the return that shows their information was reported to the IRS (Code Sec. 6055(c)(1)). The purpose of this is to allow taxpayers to establish, and for the IRS to verify, that taxpayers were covered by MEC and their months of enrollment during a calendar year.
Reporting entities subject to Code Sec. 6055’s requirements use Form 1094-B, Transmittal of Health Coverage Information Returns, and Form 1095-B, Health Coverage, or another form that the IRS designates to report minimum essential coverage.
Code Sec. 6056
Code Sec. 6056 requires large employers* to report annual information regarding health insurance that they do or do not offer to full-time employees. The code also requires employers to furnish related statements to these employees.
What employers report allows the IRS to administer the Code Sec. 4980H employer shared responsibility provisions. This also allows employees to determine whether they may claim a Code Sec. 36B premium tax credit on their individual tax returns for each month of the calendar year.
Employers can meet the Code Sec. 6056 requirements by filing the following:
By filing each Form 1095-C and the transmittal Form 1094-C with the IRS, employers meet the requirement for fulfilling Code Sec. 6056 (Reg. § 301.6056-1(c)(1)).
Dates to know:
- By February 1, 2016: Many employers will have to furnish Form 1095-B or Form 1095-C to employees, beginning with the 2015 tax year.
- By March 31, 2016: If employers are filing electronically, this is the filing deadline for all of the above forms with the IRS.
How to Make an Extension Request
The forms that can be extended include: Form 1094-C, Form 1095-C, Form 1094-B, and Form 1095-B.
Employers may request an extension of the information return filing deadline with the IRS on Form 8809, Application for Extension of Time To File Information Returns. This form is already used to request a deadline extension for Forms W-2 and 1099. The IRS is currently revising the form to include boxes that can be selected for the ACA information returns. The IRS regulations allow filers to request an automatic 30-day extension for the information return filing deadline on Form 8809, and an additional 30-day extension if:
The deadline extension to furnish the ACA forms to employees will be noted in an upcoming revision to IRS Publication 1220, Specifications for Electronic Filing of Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G. You can request an extension by submitting a letter to the IRS that contains certain information. These requests are not automatically approved. An extension of the deadline that is approved will allow for a maximum of 30 additional days from the original due date.
Please note, it will be required that each employer file Form 8809. As we await the revision to IRS Publication 1220, there is no assumption that Health e(fx) will be able to file this extension on a client’s behalf; Health e(fx) is, however, fully prepared and ready to file as expected, February 1, 2016, for employee statements and March 31, 2016, for IRS transmissions.
It’s been quite a year for everyone, and this summer’s King v. Burwell decision was certainly a benchmark for the ACA.
We are all entering a busy time of year, one that is more critical with the addition of new required reporting following on the heels of open enrollment, the holiday season, and the beginning of 2016’s first quarter. Moving forward, Health e(fx) will keep you up-to-date as additional legislative changes are implemented. Please send questions on Health e(fx) to firstname.lastname@example.org
If you have any questions regarding topics in this newsletter, including legislative changes, please contact your benefits broker/consultant or legal team for interpretation and implementation at your organization.
* As defined in Code Sec. 4980H; in general, employers that employed an average of at least 50 “full-time employees” during the preceding calendar year.