Q1 ACA Legislative Update

Health e(fx)’s goal is to help remove the complexities of ACA compliance and reporting so you can focus on your business and employees. As part of this effort, we keep our clients up-to-date with legislative changes that may impact benefit planning.

This quarterly legislative update includes information on:

  • Updated FAQs for HIPAA Special Enrollment
  • Enforcement of ACA Section 1557 HHS Non-discrimination Regulations Partially Enjoined
  • HHS 2018 Health Plan Out-of-Pocket Maximums
  • Seattle Initiative 124 Passes, Impacting Large Hotels and their Seattle Low-income Employees
  • Arizona and Washington Paid Sick Leave Mandate
  • EEOC Final Rules on Employer Wellness Programs for 2017
  • IRS Delays Issuing Revised “Opt-Out” Payment Guidance
  • HHS Updates Federal Poverty Level Figures

Updated FAQs for HIPAA Special Enrollment

Recently, the Department of Labor (DOL), Department of Health and Human Services (HHS), and the U.S. Treasury issued updated FAQs About Affordable Care Act Implementation Part 35.

The FAQs cover new guidance on HIPAA special enrollment periods, an update on women’s preventive services coverage requirements, and clarifying information on qualifying small employer health reimbursement arrangements (QSE HRAs).

HIPAA special enrollment periods

Under HIPAA, if an individual loses eligibility for coverage in the individual market, the individual is entitled to special enrollment in eligible group health plan coverage. The individual is eligible for this group coverage special enrollment regardless of whether they are eligible for other coverage in or outside of a marketplace. If an individual is enrolled in coverage through the marketplace and the carrier is discontinuing the plan, the discontinuation of the plan is not considered a loss of coverage event or eligibility. Therefore, the individual is not entitled to a special enrollment period.

Women’s preventive services coverage

The updated FAQs also provide detail concerning non-grandfathered health plan obligations to provide coverage for preventive women’s health services, including certain screenings in the following areas: breast cancer screening for average-risk women, breastfeeding services and supplies, testing for HIV, screening for interpersonal and domestic violence, cervical cancer screening, and screening for gestational diabetes.

These FAQs reiterate that these services must be provided without cost sharing, for plan years beginning on or after December 20, 2017 (i.e., as of January 1, 2018, for calendar year plans). Until then, plans must continue to provide services as prescribed in earlier guidance from the Health Resources & Services Administration.

Enforcement of ACA Section 1557 HHS Non-discrimination Regulations Partially Enjoined

Section 1557 of the ACA prohibits certain federally funded healthcare programs and activities (“covered entities”) from discriminating on the basis of race, color, national origin, sex, age, or disability. The final regulations enjoin the Section 1557 regulation’s prohibitions against discrimination on the basis of gender identity and termination of pregnancy on a nationwide basis. They also further define “on the basis of sex” to include discrimination based on gender identity, sex stereotyping, and pregnancy (including termination of pregnancy, childbirth, or related medical conditions). Under the final regulations, covered entities may not:

  • deny, cancel, limit, or refuse health coverage;
  • deny a claim;
  • impose additional cost sharing; or
  • employ discriminatory marketing or benefit designs based on an individual’s belonging to any of these protected classes.

While the final regulations generally became effective on July 8, 2016, the provisions of those regulations that required changes to plan benefit design (including covered benefits, benefit limitations or restrictions, and cost-sharing) did not apply until the first day of the first plan year beginning on or after January 1, 2017.

Employers considering coverage plan design changes impacting gender transition services should proceed with caution. On December 31, 2016, a federal district court judge from Texas issued a nationwide injunction preventing the Department of Health and Human Services (HHS) from enforcing its regulations under Section 1557 of the Affordable Care Act (ACA) as they apply to “covered entities” with respect to discrimination based on gender identity or termination of pregnancy. While the Section 1557 regulations did not directly require covered entities to include coverage for specific types of gender transition services, they did provide that covered entities’ group health plans should not discriminate based on gender identity. They also indicated a categorical exclusion of all gender transition services was discriminatory. As a result, most health carriers added gender transition coverage to their insured policies for plan years beginning on or after January 1, 2017. In addition, most third-party administrators requested self-insured employers to specifically identify whether they wanted to cover such services or not.

HHS Sets 2018 Health Plan Out-of-Pocket Maximums

On December 22, 2016, HHS published its annual Notice of Benefit and Payment Parameters for 2018 and a final rule that includes 2018 health plan out-of-pocket maximums (OOPM) in the Federal Register. The final regulations set 2018 limits at $7,350 for individual coverage and $14,700 for coverage tiers other than individual. Previously in May of 2016, HHS issued the final 2017 Notice of Benefit and Payment Parameters, which affects both the group and individual plan markets.

Employers need to be mindful of new regulations that began in 2016 requiring that all non-grandfathered health plans apply the self-only out-of-pocket maximum to any individual, regardless of whether the individual participates in a self-only tier of coverage or any other tier of coverage, such as family coverage.

Out-of-pocket maximums and HSA contribution limits – ACA and IRS (HDHP)

Separate from the ACA’s annual out-of-pocket (OOP) maximums set by the HHS for non-grandfathered health plans, are the annual OOP maximums that the Internal Revenue Service issues specifically for high-deductible health plans (HDHPs). These HDHP OOP maximums are typically offered along with health savings accounts (HSAs).

For example, in 2017, while the ACA’s OOP maximum is $7,150 for individual coverage and $14,300 for coverage tiers other than individual, the IRS issued HSA-compatible HDHP OOP maximums of $6,550 for individual coverage and $13,100 for coverage tiers other than individual. The IRS is expected to issue 2018 OOP maximums for HDHP/HSA plans in the second quarter of 2017. Employers that offer these plans should ensure they meet the IRS’s lower OOP maximums.

Health Plan Out-of-Pocket Maximums (ACA and IRS HDHP) and HSA Contribution Max*

Coverage Level 2018 OOP Max – ACA 2017 OOP Max – ACA 2016 OOP Max – ACA
Individual-Only Coverage $7,350 $7,150 $6,850
Family Coverage $14,700 $14,300 $13,700

*Source: Department of Health and Human Services (HHS)

Coverage Level 2018 OOP Max – IRS HDHP 2018 HSA Max Contribution – IRS HSA 2017 OOP Max – IRS HDHP 2017 HSA Max Contribution – IRS HSA
Individual-Only Coverage TBD TBD $6,550 $3,400
Family Coverage TBD TBD $13,100 $6,750

Seattle Initiative 124 Passes, Impacting Large Hotels and their Seattle Low-income Employees

Seattle Initiative 124 (I-124) was drafted by UNITE HERE Local 8, a union primarily representing Washington and Oregon workers in hotel, restaurants, food service, and airport concession jobs. I-124 significantly expands the requirements of large employers under the ACA, imposing an expansive new set of labor standards on large hotel employers operating in the city of Seattle. In summary, the initiative would require hotels to provide housekeepers with panic buttons, track guests accused of harassment, limit housekeeper workloads, provide thousands of low-wage employees with medical plan eligibility and affordability requirements that are significantly greater than those provided under the ACA, and retain workers during ownership transfers.

The measure defines “full-time” as those who work 80 hours per month (an average of 18.5 hours per week).

“Low-wage” employees are defined as those whose total compensation from the hotel employer is 400% or less of the federal poverty line (FPL) (see chart below for one-person household). To avoid the additional compensation impact, hotels will need to provide at least gold-level (80% actuarial value) health benefits for low-wage workers with contribution cost to the employee of no greater than 5% of the employee’s gross taxable earnings. Those hotel employers that meet this requirement would not have to pay the additional compensation stipend required under I-124, a minimum monthly stipend of at least $200.

Family Size 100% of Federal Poverty Line 138% of Federal Poverty Line (Medicaid Expansion) 400% of Federal Poverty Line (Seattle I-124 low-income threshold)
1 $11,770 $16,242 $47,080

Arizona and Washington Paid Sick Leave Mandate

Arizona and Washington are the most recent states to join Connecticut, California, Massachusetts, Oregon, and Vermont in mandating statewide paid sick leave. Taking an opposing stance, Ohio has barred paid sick leave mandates, and five jurisdictions in Illinois withdrew participation in a county law mandating paid sick leave.

Effective July 1, 2017, for Arizona, and January 1, 2018, for Washington State, employers must begin providing paid sick leave benefits to employees.

Arizona employers:

Effective July 1, 2017

IMPACTED: Most private and municipal employers with 15 or more employees must provide up to 40 hours of paid sick leave per year, at a rate of one hour for every 30 hours worked. Employers with fewer than 15 employees must provide 24 hours of paid sick leave per year, also at a rate of one hour for every 30 hours worked. Part-time and temporary workers are included. Employers should note that the provisions of the new paid sick time law are minimum requirements, and nothing in the new law prevents an employer from establishing a more generous policy or continuing one already in place.

EXEMPT: Small businesses that have annual gross revenues of less than $500,000 and who are not engaged in interstate commerce or in the production of goods for interstate commerce, the U.S. government and the state of Arizona.

Washington State employers:

Effective January 1, 2018

IMPACTED: All employers (both public and private) in Washington must provide employees with paid sick leave earned at a rate of one hour for every 40 hours worked. Within the state, Seattle, Tacoma, and Spokane have their own paid sick leave ordinances; however, Spokane’s City Council voted to allow the city’s ordinance to expire on the later of December 31, 2017, or on the effective date of the statewide law.

EXEMPT: Workers exempt from the state’s Minimum Wage Act.

States/Municipalities with bans on paid sick leave

Ohio, Alabama, Florida, Georgia, Indiana, Kansas, Louisiana, Michigan, Mississippi, Missouri, North Carolina, Oklahoma, Tennessee, and Wisconsin have passed a preemptive law banning local jurisdictions from enacting paid sick leave mandates. In Illinois, five jurisdictions within Cook County (Barrington Village, Oak Forest, Rosemont, Tinley Park, and Mount Prospect) have all passed their own ordinances and opted out of the paid sick leave ordinance passed by Cook County, IL.

EEOC Final Rules on Employer Wellness Programs for 2017

New rules issued by the U.S. Equal Employment Opportunity Commission describe how the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA) apply to employer wellness programs that request health information from employees and their spouses. The new rules, which apply beginning in 2017, affect all workplace wellness programs (including programs in which employees or their family members may participate without also enrolling in a particular health plan).

The two new rules apply to employers with 15 or more employees generally prohibit employers from obtaining and using information about employees’ own health conditions or about the health conditions of their family members. Both laws, however, allow employers to ask health-related questions and conduct medical examinations such as biometric screenings to determine risk factors, if the employer is providing health or genetic services as part of a voluntary wellness program.

The final ADA rule provides that wellness programs that are part of a group health plan and that ask questions about employees’ health or include medical examinations may offer incentives of up to 30% of the total cost of self-only coverage.

The final GINA rule provides that the maximum incentive attributable to a spouse’s participation may not exceed 30% of the total cost of self-only coverage, the same incentive allowed for the employee. No incentives are allowed in exchange for the current or past health status information of employees’ children or in exchange for specified genetic information (such as family medical history or the results of genetic tests) of an employee, an employee’s spouse, and an employee’s children.

Both rules also seek to ensure that wellness programs aim to promote good health and are not just used to collect or sell sensitive medical information about employees and family members or to shift health insurance costs to them. The ADA and GINA rules require wellness programs to be reasonably designed to promote good health and prevent disease. The two rules also make clear that the ADA and GINA provide important protections for safeguarding health information. The ADA and GINA rules state that information from wellness programs may be disclosed to employers only in aggregate terms.

Notice Requirement: The ADA rule requires that employers give participating employees a notice that informs them on what information will be collected as part of the wellness program, with whom it will be shared and for what purpose, the limits on disclosure, and the way information will be kept confidential. GINA includes statutory notice and consent provisions for health and genetic services provided to employees and their family members.

IRS Delays Issuing Revised “Opt-Out” Payment Guidance

The IRS has finalized regulations on premium tax credits available to eligible individuals who enroll in the ACA’s marketplace coverage. These regulations finalize many, but not all, of the provisions in the proposed regulations. The IRS delayed issuing revised guidance related to opt-out payments and impact payments have on affordability of employer-provided health coverage for an individual. The IRS expects to finalize those proposed regulations separately in the future. In the interim, the transition relief provided in the July 2016, IRS proposed regulations for opt-out arrangements in effect before December 16, 2015, continues to apply into 2017.

The proposed regulations followed previous guidance set out in Notice 2015-87.  In summary, unless an opt-out arrangement qualifies as an “eligible opt-out arrangement,” the dollar amount of the opt-out payment will be taken into account when determining the amount of the employee’s required contribution (e.g., an increase to the amount the employee is required to pay for employer health coverage and in turn can affect employer shared responsibility assessments).

HHS Updates Federal Poverty Level Figures

HHS recently updated federal poverty level (FPL) guidelines for 2017. These guidelines impact eligibility for federal subsidies when purchasing Marketplace coverage and for Medicaid eligibility. Employees’ eligibility for subsidies and Medicaid can also be important for employers under the “play or pay” mandate and for determining affordability parameters for ACA Safe Harbor compliance. The new Federal Poverty line guidelines increase the 2017 dollar amount for employers using 100% of the Federal Poverty line “affordability” Safe Harbor to $97.38 per month.

For 2017, all “applicable large employers” (ALEs) may be at risk of employer “play or pay” penalties if they fail to offer full-time employees health coverage that meets “minimum value” and that is “affordable.” Regulations provide three affordability “Safe Harbor” methods for employers to be assured that coverage is affordable: Rate of pay, W-2 Box 1, and the Federal Poverty Line. 2017 FPL percentage is 9.69%.  For 2017, the FPL income for a single individual in all states, including the District of Columbia, is $12,060 (Alaska and Hawaii amounts are higher). Based on that amount, the monthly Safe Harbor employee contribution threshold for 2017 is $97.38 (with slightly higher amounts for employees residing in Alaska or Hawaii).

The 2017 FPL Guideline numbers for employers:

  Poverty Line Percentage 2017 Poverty Line US Poverty Line Monthly Contribution Max – US Poverty  Line Hawaii Poverty Line Monthly Contribution Max – Hawaii Poverty  Line Alaska Poverty Line Monthly Contribution Max – Alaska
Individual 9.69% $12,060 $97.38 $13,860 $111.92 $15,060 $121.61