Health Care Reform – ACA Changes and Other Updates
Kelley Drye Client Advisory
This Advisory supplements our previous advisories dated January 2018, December 2016, December 2015 (as supplemented in January 2016), October 2014, October 2013, November 2012, November 2011, and October 2010, addressing requirements of the Affordable Care Act (“ACA”). Below is a summary of recent developments impacting health care reform, as well as other recent developments affecting employer-sponsored health plans that will be relevant for employer-sponsored plans in 2019.
Review and Update Plan SPDsGiven the changes that have been made to health care reform over the years (legislative changes, new regulations, courts cases, etc.), clients are well advised to take a fresh look at their summary plan descriptions for certain less obvious changes that might be required. While clients might annually update their summary plan descriptions in ordinary course for co-pays, eligibility and contact information, there are additional technical changes that may or may not be required for certain arrangements.
Individual Mandate RepealThe Tax Cuts and Jobs Act (the “Act”) eliminates the shared responsibility payment for those individuals who fail to maintain minimum essential health coverage beginning January 1, 2019. The Act did not, however, repeal the employer shared responsibility mandate or reporting requirements. Those requirements are still in play, and the IRS has been actively enforcing these requirements against employers.
ACA Information Reporting Deadlines ExtendedThe IRS has extended the due dates for furnishing individuals with 2018 ACA information returns on Forms 1095-B and 1095-C from January 31, 2019 to March 4, 2019. The IRS did not, however, extend the deadline for filing ACA information returns with IRS, which remains February 28, 2019 if not filing electronically and April 1, 2019 if filing electronically.
The IRS has extended good-faith transition relief from ACA reporting penalties for employers that can demonstrate they have made good faith efforts to comply with the 2018 information reporting requirements. This relief, however, applies only to furnishing and filing incorrect or incomplete information and not to a failure to timely furnish or file a statement or return. In the latter case, penalties may apply absent reasonable cause.
Cadillac TaxThe Bipartisan Budget Act of 2018 further delayed the Cadillac Tax until 2022. The Cadillac Tax, which imposes a 40 percent tax on the cost of employer-sponsored health coverage over a threshold amount (e.g., $10,200 for individual coverage and $27,500 for family coverage, indexed to the Consumer Price Index), was originally scheduled to go into effect in 2018. Despite bipartisan calls for a repeal of the Cadillac Tax, repeal remains uncertain and employers should continue reviewing their health plans to assess whether future changes may be required to avoid or at least mitigate the tax.
Indexing Adjustment for ACA Affordability RequirementFor purposes of ACA’s employer mandate, employer-sponsored health coverage must meet affordability requirements; specifically, an employee’s share of the cost of coverage must not exceed a certain percentage of household income. That percentage has been increased from 9.56% in 2018 to 9.86% in 2019.
Cost Sharing Limits IncreaseHealth care reform requires that cost sharing for essential health benefits (e.g., emergency services) under a group health plan be subject to an overall annual limit. Cost-sharing includes such items as deductibles, coinsurance and copayments. For 2019, the annual cost sharing limit is $7,900 for self-only coverage and $15,800 for family coverage.
New Form for Plan Sponsors of Limited Wraparound CoverageEmployers who offer coverage that supplements individual health insurance coverage or coverage under a multistate plan program (i.e., limited wrap around coverage) may avoid having to meet a number of compliance requirements under ERISA, the Code and the Public Health Services Act if such limited wraparound coverage satisfies certain conditions, including a reporting requirement. The Centers for Medicare and Medicaid Services (“CMS”) has released a form to be used by sponsors to satisfy these reporting requirements. The CMS reporting form must be filed on a one-time basis by the first day of the first plan year that the limited wraparound coverage is first offered.
Expansion of Association Health PlansIn response to a 2017 Executive Order by the Trump Administration, the DOL has issued final regulations intended to make it easier for small businesses and self-employed individuals to form association health plans. In particular, the final regulations change the criteria for a “bona fide group or association” under ERISA to broaden the types of employer groups or associations that can act as a single employer for purposes of establishing a group health plan. By acting as a single employer, the members of an employer group or association can avoid the administratively burdensome task of having to individually satisfy compliance requirements applicable to individual and small group insurance.
Anti-Assignment of Claims Clause EnforcedEarlier this year, in a suit brought by medical service providers seeking payment on a benefit claim assigned to them by a patient, the Third Circuit enforced a clause in the relevant health insurance plan that prohibited assignment of claims. In doing so, the Third Circuit echoed the consensus among sister Circuits that anti-assignment of claims clauses in ERISA governed health plans are generally enforceable. The ruling comes as health providers and third-party collectors grow increasingly aggressive and creative in their attempts to collect on claims. Employers sponsoring health insurance plans should consider adding an anti-assignment of claims clause to their plans to help mitigate this trend.
If you have any questions or compliance concerns or would like assistance with updating your health plan’s summary plan description, please contact our Employee Benefits group.