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Summary of Eligibility Waiting Period Requirements

eligibility waiting periodsOn February 20, 2014, the Department of Health and Human Services (HHS), the Department of Labor (DOL) and the Internal Revenue Service (IRS) released final regulations on the eligibility waiting period requirements. The Patient Protection and Affordable Care Act (PPACA) provides that plans may not require an employee who is eligible for coverage to complete a waiting period of more than 90 days before coverage is available. This requirement is effective on the first day of the 2014 plan year. This requirement applies to all plans, including grandfathered plans, fully insured and self-funded plans, and plans offered by small employers. It applies to both full-time and part-time employees if the employer has chosen to cover part-time employees. These final regulations are effective as of the beginning of the 2015 plan year, but they largely mirror the rules that are already in place for 2014. They do not in any way delay the requirement that plans meet the eligibility waiting period requirement by the start of the 2014 plan year.

The regulations state that an eligibility waiting period cannot be more than 90 days. This, literally, is 90 calendar days – a plan that begins coverage as of the first of the month after 90 days of employment, or after three months of employment, will be out of compliance. If the 91st day falls on a weekend or holiday, the plan may not wait to begin coverage until the following work day. In that situation, the plan will need to begin coverage as of the Friday before the end of the allowed waiting period.

The waiting period may be delayed until the employee meets the plan’s eligibility requirements. For example, if the plan does not cover employees who work fewer than 30 hours per week, or employees in certain job categories, and an employee moves from ineligible to eligible status, the waiting period may begin as of the date the employee first moves into the eligible class. Other acceptable eligibility requirements include earnings requirements for salespeople, cumulative service requirements of up to 1,200 hours for part-time employees, or employees covered under a multiemployer plan, and similar arrangements that are not designed to circumvent the waiting period.

Example: Fay begins working 25 hours per week for Acme Co. on January 6, 2014. Acme’s group health plan does not cover part-time employees until the employee has completed a cumulative 1,200 hours of service. Fay satisfies the plan’s cumulative hours of service condition on December 15, 2014. Acme must offer Fay coverage by March 15, 2015 (the 91st day after Fay meets the service requirement.).

The regulations recognize that multiemployer plans often have complicated eligibility rules, and that is permitted as long as the eligibility requirements are not designed to avoid the waiting period rules.

Example: A multiemployer plan has an eligibility provision that allows employees to become eligible for coverage by working a specified number of hours of covered employment for multiple contributing employers. The plan aggregates hours in a calendar quarter and then, if enough hours are earned, coverage begins the first day of the next calendar quarter. The plan also permits coverage to extend for the next full calendar quarter, regardless of whether an employee’s employment has terminated. This arrangement satisfies the regulation.

An employer may require that an orientation or probationary period be successfully completed before an employee is considered an eligible employee. However, in a proposed regulation issued with the new final regulation, the agencies state that because of concerns that orientation or probationary periods will be used to improperly delay coverage, they are considering limiting permissible orientation and probationary periods to one month.

The regulation allows a waiting period that is longer than 90 days for new variable hours employees. A variable hours employee is someone whose hours cannot be predicted when the person is hired. An employer may average the time worked by a variable hours employee over his or her initial measurement period to determine if the employee is eligible for coverage. The waiting period may be imposed after the initial measurement period is completed as long as both periods are completed by the first day of the month following completion of 13 months of employment.

Example: Ann is a variable hours employee because she is an on-call nurse. Ann’s employer uses a 12-month initial measurement period for variable hours employees and a 60-day waiting period. Ann is hired May 10, 2014. If Ann averages 30 or more hours per week during the initial measurement period, she must be offered coverage with an effective date of July 1, 2015, or sooner.

Individuals who are part way through a waiting period as of the start of the 2014 plan year must be credited with time prior to 2014, so that their total waiting period as of the start of the 2014 plan year is no more than 90 days.

Example: Ed is hired October 22, 2013. Ed’s employer has a calendar year plan and during 2013 it used a six-month waiting period. Ed must be offered coverage with an effective date on or before January 20, 2014, because that is Ed’s 91st day of employment.

Although not related to eligibility waiting periods, this regulation also confirms that certificates of creditable coverage need to be provided through December 31, 2014, (regardless of plan year). The certificates will not be required after that date because pre-existing condition limitations will not be permitted after the start of the 2014 plan year.

New PPACA Fees Strike Employers

By Josie Martinez
Senior Partner and Legal Counsel 

EBS Capstone, A UBA Partner Firm

PPACA FeesThe goal of health care reform is health care for all… but at what cost? By 2015, businesses with 100 or more full-time or full-time equivalent (FTE) employees will be at risk for financial penalties (the so-called “employer shared responsibility assessments”) if they do not offer health coverage to full-time employees.  The same fate follows in 2016 for large employers with 50 to 99 FTEs.  We are all well aware of the “no offer” and “insufficient offer” assessments that could be applied to employers that do not offer affordable, minimum value coverage to full-time employees, and most of us have already been advising clients on penalty avoidance strategies for many months. Meanwhile, business owners nationwide struggle with weighing the financial aspects of providing such coverage or paying the penalties.  A recent survey suggests that only 28 percent of companies that employ a large number of low-income workers offer health benefits. 

There are other costs to consider as well. In addition to the employer shared responsibility assessments, various other fees are being felt by employers. These fees are expected to ultimately result in higher premiums and could undermine the core principle of affordability in the Patient Protection and Affordable Care Act (PPACA) that is meant to provide basic health protections for all Americans.  Over the next several years, group health plans may be required to absorb the costs of up to four new fees. These fees imposed by PPACA on insurers will inevitably trickle down to increase rates in the coming years.  In a recent meeting presented by a major national health insurance carrier, regarding “State and Federal Reform Impact,” it became clear that at least three new assessments/fees imposed on carriers will affect employers’ renewal rates in the future and ultimately their bottom line. 

  1. Reinsurance Assessment – This per capita fee on medical plans will fund a three-year reinsurance program designed to reimburse companies that insure high-cost individuals in the individual health insurance market.  The total amounts to be assessed are $12 billion in 2014, $8 billion in 2015, and $5 billion in 2016.  The estimated fee is approximately $63 per year ($5.25 per month) per covered individual in the first year; however, fees are expected to decrease in subsequent years.  The assessment applies to both insured and self-funded plans. Insurance providers will pay the fee for insured plans while third-party administrators may pay the fee on behalf of self-funded plans. The fee is collected each year from 2014-2016 and the first payment is due January 15, 2015, for the 2014 benefit year. Membership counts for 2014 must be submitted to HHS by Nov. 15, 2014, based on the first nine months of the year. We expect this same schedule in 2015 and 2016.
  2. Comparative Effectiveness Research Fee (CERF) – This is an annual fee imposed on all insured and self-insured plans.  The goal of the research is to determine which of two or more treatments works best when applied to patients, thereby comparing different types of therapy against each other.  CERF will be charged to health plans to help fund the research that will be conducted by the Patient Centered Outcomes Research Institute, a nonprofit organization established by PPACA. The initial annual fee is $1 per year per health plan member (includes dependents). The annual charge increases to $2 per member the following year and then increases annually with inflation after that until it ends in 2019.  Insurance providers will pay the fee on behalf of insured plans, while employers with self-funded plans will need to determine their liability and account for this fee in their own reporting.  For many plans, the first payments were due in July 2013.
  3. Health Insurance Industry Fee – This annual fee impacts fully insured plans.  The estimated cost of this tax will be $8 billion for 2014 and eventually increase to $14.3 billion by 2018.  The tax is divided among health insurers and will likely be passed on to plan sponsors as an addition to premium.   The Health Insurance Industry Fee has a much greater potential financial impact than either of the other two taxes because it is intended to help fund the cost-generating provisions of the PPACA. The fee will be divided among health insurance carriers based on each carrier’s share of the overall premium base and will only be assessed relative to insured health plans, inclusive of medical, dental, and vision plans. Self-funded health plans and associated stop loss premium will not be included in the premium base. The cost impact of the fee is expected to be in the range of 2 percent to 2.5 percent of premium in 2014, increasing to 3 percent to 4 percent of premium in later years. Insurance companies will likely begin to reflect this additional cost in their premium rates in 2013 and/or 2014. Importantly, this fee does not sunset.
  4. Cadillac Tax – A 40 percent excise tax will be assessed on the cost of coverage for health plans that exceed a certain annual limit ($10,200 for individual coverage and $27,500 for other than individual coverage) beginning in 2018. Under the current regulations, the cost of health coverage includes employer contributions to HRAs, as well as employer plus employee pre-tax contributions to FSAs and HSAs. Health insurance issuers and sponsors of self-funded group health plans must pay the tax on any dollar amount beyond the caps that is considered “excess” health spending. Note: There are certain adjustments built into the thresholds that may apply by 2018. Also, the thresholds may increase for certain plans pursuant to age and gender adjustments.

These new fees are supposedly intended to raise revenues that will support the individual insurance market, help fund the state exchanges, and assist with conducting research for more effective treatments. However, they will also dramatically impact group health plan premiums and could spur many employers to drop their group health plan sponsorship, pushing more employees into the individual market. In anticipation of what lies ahead, it behooves us to work proactively with employers well before the effective dates so they can plan their finances accordingly rather than be blindsided by unwelcome surprises.

Who’s Walking and Who’s Just Talking?

employee benefitsThere is a lot of talk about the many cost-control and health care reform tactics available to employers, but what are companies actually implementing? The latest UBA Benefit Opinions Survey aims to define just that. While clients and prospects of UBA’s Partner Firms have contributed thousands of responses to the survey, any employer can participate and get a complimentary findings report. This landmark benchmarking resource compiles information from employers representing all major industry classifications, employee size categories and regions of the country, and delineates employers’ opinions in five key areas:

  • Health Plan Strategies
  • Benefits Philosophy and Opinion
  • Health Plan Management
  • Personal Health Management
  • Employee Communications

Health plan strategies, philosophy, management, and communications have become a critical focus for employers evaluating their options to comply with health care reform and remain competitive. Nearly 80% of all employers continue to be firmly committed to the value of providing health benefits to active employees and their dependents and more than 95% believe good benefits help attract and retain employees according to the previous survey results.

If your company is interested in comparing attitudes and strategies with your peers regarding employer-provided health care, we invite you to participate. The survey is open from February 14 through March 10, 2014. Some of the results will undoubtedly be surprising and will help employers see how they stack up when it comes to:

  • How savvy employees are about health care costs
  • Prevailing employee attitudes during open enrollment
  • What programs are helping employees become better health care consumers
  • Wellness and prevention programs that are actually in use
  • Prescription cost-control strategies that are working
  • What most employers think when it comes to dependent coverage, consequences for unmanaged chronic care, and more
    • Health care reform strategies in place —from early renewals, Small Business Health Options Program (SHOP) enrollment, ensuring health care is “affordable” and/or moving to Administrative Services Only (ASO) or self-funded models—to skinny plans, paying penalties, and/or sending employees to public exchanges for subsidies

Participate in the UBA Benefit Opinions Survey today to make more informed decisions regarding compliance, employee retention and cost management strategies.

More on Skinny Plans: No Minimum Value Plans Continue to Be an Option

By Josie Martinez
Senior Partner and Legal Counsel 

EBS Capstone, A UBA Partner Firmno minimum value plans

As the implications of health care reform become more apparent, large employers are increasingly grappling with coverage options to avoid the penalties. Over the past few months, there has been considerably more attention paid to the problems faced by the staffing industry and similar employers as these temporary and variable hour employees are generally common law employees of the organization, and ultimately such companies are on the hook as it relates to offering health coverage. 

One option some employers are looking at is the offer of a “no minimum value plan” – this is a group health plan that provides medical care, but may not satisfy the 60% minimum value threshold. Granted, if an employer offers such a plan that is not minimum value, an employee may apply for a tax credit at the exchange and this could trigger a $3,000 penalty ($3,000 for any full-time employee that receives a tax credit), but this penalty would be lower than the penalty associated with not offering any health plan at all (the $2,000 penalty/every full-time employee). 

These types of plans are starting to make their way into the market for just this reason – as a viable alternative to staffing companies and/or other companies that operate in a similar fashion. At the end of the day, it allows employers to satisfy the coverage requirement under the Patient Protection and Affordable Care Act (PPACA) and avoid the hefty penalty associated with that option. So, it minimizes the risk financially. Also, if employees accept the “skinny” plan, they will not be penalized with the individual tax penalty currently in effect for not having coverage – in some respects, a win-win for both parties. 

Some employers are using a modified version of this strategy. These employers offer employees two options: (1) a skinny plan, and (2) a richer option with a premium contribution cost that just barely meets the 9.5% wage threshold, which few low income employees are expected to take. This strategy enables employees to opt for the skinny plan that they can afford, while the offer of the richer option immunizes the employer from the play or pay penalties.

A third strategy is to simply offer the richer option and allow it to be unaffordable. For example, the plan could be offered on a fully contributory (i.e., employee pays all) or nearly fully contributory basis. This strategy avoids the “no offer” penalty, although the employer is still liable for the “unaffordable” penalty, but only with respect to those employees granted a premium tax credit.

Keep in mind, these strategies are aggressive. There are those who argue the skinny plans will not provide sufficient coverage to satisfy the “minimum essential” coverage criteria, but under the current regulations, it seems a possibility. Eventually, these plans may not pass muster, but for now there is nothing definitive against going this route so it is something to consider.

Employers interested in finding out what healthcare strategies other companies are using should complete the UBA Benefit Opinion Survey. Respondents will receive a complimentary copy of the full national report of survey findings which will provide valuable data on what employers are actually doing (vs. just talking about).

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IRS Issues Final Regulations on Employer Shared Responsibility (Play or Pay)

By Linda Rowings
Chief Compliance Officer
United Benefit Advisors compliance with health care reform

On February 10, 2014, the IRS issued final regulations on the employer-shared responsibility requirements, often known as “play or pay.” The final regulations follow the proposed regulations in many respects, but also contain some transition rule surprises.

For many employers, the most important part of these regulations is the transition rule – while employers with 100 or more full-time or full-time equivalent employees will still need to meet the play or pay requirements in 2015, those with 50-99 full-time or full-time equivalent employees do not have to comply until 2016 if they meet certain requirements. For these mid-size employees to be eligible for the delay, the employer will have to certify that:

  • It has not reduced the size of its workforce or the overall hours of service of its employees so that it could qualify for this delay; and
  • It has not eliminated or materially reduced any coverage it had in effect on February 9, 2014. A material reduction means that:
    • The employer’s contribution is less than 95% of the dollar amount of its contribution for single-only coverage on February 9, 2014, or is a smaller percentage than the employer was paying on February 9, 2014;
    • A change was made to the benefits in place on February 9, 2014, that caused the plan to fall below minimum value; or
    • The class of employees or dependents eligible for coverage on February 9, 2014, has been reduced.

It is expected that this certification will be part of the reporting form.

This delay does not affect the effective date of the insurance market rules – employers still must implement the changes required for 2014, including the 90-day maximum for waiting periods, discontinuance of pre-existing condition limitations, removal of annual dollar maximums, and cost-sharing maximums (out-of-pocket and sometimes deductible) limits. Small insured groups still need to offer the 10 essential health benefits at the metal levels (i.e., platinum, gold, silver, and bronze) and use community rating starting in 2014.

Large Employer Responsibilities and Potential Penalties

If an employer is large enough for the play or pay requirements to apply, two separate requirements, and potential penalties, apply.

The first requirement is that the large employer offer “minimum essential” (basic medical) coverage to most of its employees. For 2015, “most” means 70% of its employees. For 2016 and later, “most” means 95% of its employees. If the employer does not meet this requirement, it will owe $2,000 per full-time employee, even on employees who are offered coverage. However, for 2015 the first 80 employees are excluded from this calculation. Beginning in 2016, the first 30 employees are excluded.

Beginning in 2016, the requirement to offer minimum essential coverage includes dependent children (up to age 26). An employer that offered coverage for dependent children in 2013 or 2014 is expected to maintain that eligibility. Coverage does not have to be offered to stepchildren or foster children or to spouses.

The second requirement is that the large employer offer coverage that is both “affordable” and “minimum value” to its full-time (30 or more hours per week) employees or pay a penalty of $3,000 per year for each full-time employee who receives a premium tax credit. Therefore, an employer that provides minimum essential coverage to most of its employees and avoids the $2,000 per employee penalty, still may have to pay the $3,000 penalty on an employee who is either in the group that is not offered coverage or who is offered coverage that is not both affordable and minimum value if the employee receives a premium tax credit. 

Under both the proposed and final regulations, coverage is considered affordable if the cost of single coverage for the least expensive plan option that provides minimum value does not exceed 9.5% of the employee’s income or Federal Poverty Level (FPL). The cost of single coverage is always the measure of affordability, even if the employee has family coverage. An employer may use any of three safe harbors when measuring the employee’s income:

  • The employee’s Box 1 W-2 income for the current year.
  • The employee’s rate of pay on the first day of the plan year, multiplied by 130 for hourly employees to create the employee’s assumed monthly income.
  • The most recently published FPL for a single person (for 2014, FPL for a single person in the 48 contiguous states is $11,670, for Alaska it is $14,580, and for Hawaii it is $13,420).

Coverage is considered minimum value if the actuarial value of the coverage is at least 60%.

Additional information is available through a U.S. Treasury Department fact sheet.

UBA has also developed an analysis of the Employer Shared Responsibility (Play or Pay) Final Regulations. To request the analysis, click here.


Open Enrollment Issues for the Marketplace Over? Not Hardly!

By Carol Taylor
Employee Benefit Advisor
D&S Agency, a UBA Partner Firmhealth marketplace enrollment issues

With open enrollment for the Marketplace close to 60% complete, one would like to think what they were told about the subsidy they will be receiving is accurate. How can you be sure that you were given correct information? Let’s take a look at the 2014 Federal Poverty Level (FPL) tables and see if the information given is accurate. Considering those numbers were just released January 23, 2014, it is unlikely the information given previously on www.healthcare.gov will be updated. The FPL amounts increased by 1.5%, which may benefit some, but for others it will likely lower subsidy determinations. So, what does this mean for you?

First, you might have to pay back some of the subsidy. The Advanced Premium Tax Credits (APTC) are the subsidy amounts paid toward the medical insurance premiums by the federal government. Those subsidies are based on your household income and where that falls within the FPL tables. For those that received too high of a subsidy, some, or all, of those amounts must be paid back at the time you file your IRS 1040 annual tax form.

Second, for those qualifying for Medicaid, again based on the household income and where that falls within the FPL tables, you might just as quickly “unqualify” for Medicaid. Of course, since the tables were just released recently, by the time the state you reside in can reassess the determinations made, they may not have adequate time to notify you before the end of the Marketplace open enrollment. This could lead to a person not having time to enroll in qualifying coverage, and then facing the individual mandate tax penalty when filing annual tax forms.

One more item to be mindful of before agreeing to enroll in your state Medicaid program, you should seek advice on whether that gives the state a right to your assets once you are deceased. Many states have long look back periods, so even if you were to transfer a vehicle, home or land to an heir, the state may have the right under their laws to take that property to recoup monies paid for your medical care.

With even shorter open enrollment periods for the Marketplaces in the years to come, the late release of the FPL tables will continue to be an issue. With open enrollment scheduled to end in late December or mid-January, how can you make an accurate, fact-based decision when you cannot know the facts until well after the annual open enrollment ends? Even worse, some will not find out that they must repay subsidies back to Uncle Sam until a year later when filing their taxes. Seek out a trusted advisor so that you can make sure you don’t find yourself with an unexpected tax bill.