Tag: affordable health care law
Employer-Sponsored Plans Take Note: The Legislative Process to Amend, Repeal, and Replace Aspects of the Patient Protection and Affordable Care Act has Begun
Employer-plan sponsors need to be ready to act as changes to the landscape of the Patient Protection and Affordable Care Act (“PPACA”) as applied to employer-sponsored group health plans are looming on the horizon.
On January 20, 2017, President Trump signed Executive Order 13765 titled “Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal” (the “Executive Order”). The Executive Order indicates a clear intent to repeal the PPACA in the future and in the meantime urges federal government agencies to take legally permissible leniencies in enforcing certain aspects of the PPACA: “To the maximum extent permitted by law, . . . [executive departments and agencies] . . . shall exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the Act that would impose a fiscal burden on any State or a cost, fee, tax, penalty, or regulatory burden on individuals, families, healthcare providers, health insurers, patients, recipients of healthcare services, purchasers of health insurance, or makers of medical devices, products, or medications.” A copy of the Executive Order is available at: https://www.gpo.gov/fdsys/pkg/FR-2017-01-24/pdf/2017-01799.pdf
While the Executive Order serves as a general mission statement for the new administration, it does not provide an instantaneous change to the PPACA (the President cannot, by unilateral action, repeal final regulations). Furthermore, while the Executive Order provides a clear overall goal, it does not include details regarding how this goal will be achieved. Moreover, the Executive Order does not specifically mention any relief for employers or plan sponsors, nor does it discuss if and how any PPACA provisions regulating employers and employer-sponsored plans are expected to be impacted. Since the release of the Executive Order, all eyes in the benefits community have been on the status of the PPACA.
In the wake of the Executive Order, in February 2017, the IRS became the first agency to follow the Executive Order’s directive to start unwinding certain provisions of the PPACA. Specifically, the IRS released a statement indicating that individual tax returns will not be automatically rejected during processing merely because the taxpayer fails to indicate his or her health coverage status. This IRS statement appears to have loosened the IRS’ enforcement of the individual shared responsibility mandate. The IRS’ statement related to the individual shared responsibility mandate can be found at: https://www.irs.gov/affordable-care-act/individuals-and-families/individual-shared-responsibility-provision
It is important to note that the IRS statement did not indicate that the IRS would waive penalties for individuals who fail to maintain compliant health insurance coverage: “However, legislative provisions of the ACA are still in force until changed by Congress, and taxpayers remain required to follow the law and pay what they may owe.” And, again, the IRS statement does not address anything about its enforcement of the employer shared responsibility mandate or other PPACA provisions regulating employer-sponsored plans. Thus, the Executive Order and IRS statement have left the employee benefits community uncertain as to how the new administration intends to address the PPACA as it relates to employer-sponsored plans.
Yesterday, however, the House Republicans addressed this looming issue. On March 6, 2017, the House Ways and Means Committee and the House Energy and Commerce Committee each released proposed legislation to repeal and replace certain aspects of the PPACA, entitled the American Health Care Act (the “Proposed Legislation”). The Proposed Legislation provides insight into how the landscape of the PPACA may be altered with respect to employer-sponsored plans.
If enacted as drafted, the Proposed Legislation, as summarized, would dismantle certain taxes imposed under the PPACA, eliminate both the individual and employer shared responsibility mandate penalties, while keeping other portions of the PPACA in place, such as prohibiting pre-existing condition exclusions from coverage and allowing dependents to continue coverage under their parents’ health plans until the age of 26.
Other provisions of the Proposed Legislation establish a patient and state stability fund to provide states financial assistance to design programs aimed at each state’s own population and needs for affordable health care, transition Medicaid to a “per capita allotment,” increase the contribution maximums for health savings accounts (HSAs), repeal the tax on over the counter drugs, repeal the limitations of contributions to health flexible spending accounts, and assist those in the low to middle-income brackets with monthly tax credits to assist with health care costs.
A summary of the Proposed Legislation impacting employers, as prepared by the Committee on Ways and Means Majority Staff, is as follows:
“SUBTITLE _ — REPEAL AND REPLACE OF HEALTH-RELATED TAX POLICY”
“SECTION_04: SMALL BUSINESS TAX CREDIT
“This section repeals Obamacare’s small business tax credit beginning in 2020. Between 2018 and 2020, under the proposal, the small business tax credit generally is not available with respect to a qualified health plan that provides coverage relating to elective abortions.”
“SECTION_06: EMPLOYER MANDATE
“Under current law, certain employers are required to provide health insurance or pay a penalty. This section would reduce the penalty to zero for failure to provide minimum essential coverage; effectively Prepared by the Committee on Ways and Means Majority Staff March 6, 2017 repealing the employer mandate. The effective date would apply for months beginning after December 31, 2015, providing retroactive relief to those impacted by the penalty in 2016.
“SECTION_07: REPEAL OF THE TAX ON EMPLOYEE HEALTH INSURANCE PREMIUMS AND HEALTH PLAN BENEFITS
“Obamacare imposed a 40 percent excise tax on high cost employer-sponsored health coverage, also known as Cadillac plans. Under current law, the tax will go into effect in 2020. This section changes the effective date of the tax. It will not apply for any taxable period beginning after December 31, 2019, and before January 1, 2025. Thus, the tax will apply only for taxable periods beginning after December 31, 2024.
“SECTION_08: REPEAL OF THE TAX ON OVER-THE-COUNTER MEDICATIONS
“Under current law, taxpayers may use several different types of tax-advantaged health savings accounts to help pay or be reimbursed for qualified medical expenses. Obamacare excluded over-the counter medications from the definition of qualified medical expenses. This section effectively repeals the Obamacare tax on over-the-counter medications. The effective date begins tax year 2018.
“SECTION_09: REPEAL OF INCREASE OF TAX ON HEALTH SAVINGS ACCOUNTS
“Distributions from an HSA or Archer MSA that are used for qualified medical expenses are excludible from gross income. Distributions that are not used for qualified medical expenses are includible in income and are generally subject to an additional tax. Obamacare increased the percentage of the tax on distributions that are not used for qualified medical expenses to 20 percent. This section lowers the rate to pre-Obamacare percentages. This change is effective for distributions after December 31, 2017.
“SECTION_10: REPEAL OF LIMITATIONS ON CONTRIBUTIONS TO FLEXIBLE SAVINGS ACCOUNTS
“Obamacare limits the amount an employer or individual may contribute to a health Flexible Spending Account (FSA) to $2,500, indexed for cost-of-living adjustments. This section repeals the limitation on health FSA contributions for taxable years beginning after December 31, 2017.”
“SECTION_12: REPEAL OF ELIMINATION OF DEDUCTION FOR EXPENSES ALLOCABLE TO MEDICARE PART D SUBSIDY
“Prior to Obamacare, as an incentive for employers to offer retiree drug coverage, employers who offered sufficient prescription drug coverage to their employees qualified for the Retiree Drug Subsidy to help cover actual spending for prescription drug costs. Obamacare eliminated the ability for employers to take a tax deduction on the value of this subsidy. This section repeals this Obamacare change and re-instates the business-expense deduction for retiree prescription drug costs without Prepared by the Committee on Ways and Means Majority Staff March 6, 2017 reduction by the amount of any federal subsidy. This section applies to taxable years beginning after December 31, 2017.”
“SECTION_14: REPEAL OF MEDICARE TAX INCREASE
“Obamacare imposed a Medicare Hospital Insurance (HI) surtax based on income at a rate equal to 0.9 percent of an employee’s wages or a self-employed individual’s self-employment income. This section repeals the additional 0.9 percent Medicare tax beginning in 2018.
“SECTION_15: REFUNDABLE TAX CREDIT FOR HEALTH INSURANCE
“The program also calls for simplified reporting of an offer of coverage on the W-2 by employers. Reconciliation rules limit the ability of Congress to repeal the current reporting, but, when the current reporting becomes redundant and replaced by the reporting mechanism called for in the bill, then the Secretary of the Treasury can stop enforcing reporting that is not needed for taxable purposes.
“SECTION_16: MAXIMUM CONTRIBUTION LIMIT TO HEALTH SAVINGS ACCOUNT INCREASED TO AMOUNT OF DEDUCTIBLE AND OUT-OF-POCKET LIMITATION
“This section increases the basic limit on aggregate Health Savings Account contributions for a year to equal the maximum on the sum of the annual deductible and out-of-pocket expenses permitted under a high deductible health plan. Thus, the basic limit will be at least $6,550 in the case of self-only coverage and $13,100 in the case of family coverage beginning in 2018.
“SECTION_17: ALLOW BOTH SPOUSES TO MAKE CATCH-UP CONTRIBUTIONS
“This section would effectively allow both spouses to make catch-up contributions to one HSA beginning in 2018.
“SECTION_18: SPECIAL RULE FOR CERTAIN MEDICAL EXPENSES INCURRED BEFORE ESTABLISHMENT OF HSA
“This section sets forth certain circumstances under which HSA withdrawals can be used to pay qualified medical expenses incurred before the HSA was established. Starting in 2018, if an HSA is established during the 60-day period beginning on the date that an individual’s coverage under a high deductible health plan begins, then the HSA is treated as having been established on the date coverage under the high deductible health plan begins for purposes of determining if an expense incurred is a qualified medical expense.”
“SUBTITLE _ — REPEAL AND REPLACE OF CERTAIN CONSUMER TAXES”
“SECTION_02: REPEAL OF HEALTH INSURANCE TAX
“Obamacare imposed an annual fee on certain health insurers. The proposal repeals the health insurance tax beginning after December 31, 2017.”
For the full summary of the Proposed Legislation, please see: https://waysandmeans.house.gov/wp-content/uploads/2017/03/03.06.17-Section-by-Section.pdf and http://energycommerce.house.gov/sites/republicans.energycommerce.house.gov/files/documents/Section-by-Section%20Summary_Final.pdf
Please note that the American Health Care Act is proposed legislation; the changes which may be made to the PPACA through final legislation are still uncertain. The Committees for both the House Ways and Means and the House Energy and Commerce have scheduled a markup of this proposed legislation for tomorrow, Wednesday March 8th. Unless and until any legislation is finalized, employers must stay their current course, including complying with ACA employer reporting requirements and the employer shared responsibility mandate.
We will keep you posted as the legislative process progresses.
This email serves solely as a general summary of complex proposed legislation and government initiatives. It does not constitute legal guidance. Please contact us with any questions related to the Proposed Legislation and what impact finalization might have on your employer-sponsored plans.
Questions? Contact us to learn more.
Elizabeth H. Latchana specializes in employee health and welfare benefits. Recognized for her outstanding legal work, in both 2018 and 2015, Beth was selected as “Lawyer of the Year” in Lansing for Employee Benefits (ERISA) Law by Best Lawyers, and in 2017 as one of the Top 30 “Women in the Law” by Michigan Lawyers Weekly. Contact her for more information on this reminder or other matters at 517.377.0826 or firstname.lastname@example.org.
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Client Alert: PCORI Payment Due July 31st
Reminder: Plan Sponsors of Certain Applicable Self-Funded Health Plans Must Make PCORI Fee Payment By July 31, 2015
Please let this serve as a reminder that the Patient-Centered Outcomes Research Institute (PCORI) fee is due by July 31st and must be reported on Form 720. The fee will be used to partially fund the PCORI which was implemented as part of the Patient Protection and Affordable Care Act.
Instructions are found HERE (see Part II).
The Form 720 itself is found HERE (see Part II).
Form 720, as well as the attached Form 720-V to submit payment, must be used to report and pay the requisite PCORI fee to the IRS. While Form 720 is used for other purposes to report excise taxes on a quarterly basis, for purposes of this PCORI fee, it is only used annually and is due by July 31st of each relevant year.
As previously advised, plan sponsors of applicable self-funded health plans are liable for this fee imposed by Code section 4376. For plan years ending on or after October 1, 2013 and before October 1, 2014, the fee is $2.00 per covered life. For plan years ending on or after October 1, 2014 and before October 1, 2015, the fee is $2.08 per covered life. The fee increases per year and concludes with plan years ending on or after October 1, 2018 and before October 1, 2019. [For calendar year plans, the fee runs from 2012 through 2018 plan years.]
The fee is due no later than July 31 of the year following the last day of the plan year.
There are specific calculation methods to be used to configure the number of covered lives and special rules may apply depending on the type of plan being reported. For example, HRAs and health FSAs that are not excepted from reporting only must count the covered participant and not the spouses and dependents. The Form 720 instructions do not outline all of these rules.
For more information regarding this fee payment and how to report it appropriately, please contact Elizabeth H. Latchana at 517.377.0826 or email@example.com.
This correspondence is intended to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.
SCOTUS Same-Sex Marriage Decision May Impact Employee Benefits Plans
On Friday, June 26, 2015, the U.S. Supreme Court issued the 5-4 landmark decision in Obergefell v Hodges striking down same-sex marriage bans across the country as unconstitutional under the Fourteenth Amendment. Continue reading SCOTUS Same-Sex Marriage Decision May Impact Employee Benefits Plans
Supreme Court of the United States Upholds Affordable Care Act Subsidies, Siding with the Administration in King v Burwell
In a historic 6-3 decision, the Supreme Court today upheld that the federal tax subsidies available to Americans who purchase health insurance through the Federal Health Insurance Marketplace (Federal Marketplace) are legal under the Affordable Care Act (ACA). Continue reading Supreme Court of the United States Upholds Affordable Care Act Subsidies, Siding with the Administration in King v Burwell
Accountable Care Organizations 2.0
Attorney Michael James spoke to the Michigan Association of CPAs yesterday on his presentation “Accountable Care Organizations 2.0”. The presentation addressed the hundreds of pages of recently proposed regulations related to ACOs that represent the most dramatic overhaul of the Medicare Shared Savings Program since its inception. Other insights in the presentation:
- Current Regulatory Environment for Integrated Models
- How the Environment Evolves Under Proposed Regulations
- Various Requirements Needed for ACOs
- Potential Risks Under Current ACO Models Continue reading Accountable Care Organizations 2.0
Client Alert: New Guidance Related to Wellness Programs Released
Employers and plan sponsors that maintain wellness programs need to carefully review those programs to ensure compliance with various employment and benefit laws, including recently released guidance under the Patient Protection and Affordable Care Act (“PPACA”) and Title I of Americans with Disabilities Act (“ADA”). Nondiscrimination compliance issues surrounding employer wellness programs have been a hot topic since the issuance of the final regulations related to the prohibition against discrimination based on health status pursuant to the PPACA in 2013. Continue reading Client Alert: New Guidance Related to Wellness Programs Released
Client Alert: More Changes to the Summary of Benefits & Coverage (SBC)
Plan sponsors have work to do on their summary of benefits and coverage (“SBC”) in the coming months. The government recently published proposed regulations related to the Patient Protection and Affordable Care Act’s (“PPACA”) SBC requirement. The proposed regulations would modify the 2012 final regulations and are intended to streamline and shorten the SBC in order to make it more useful and user-friendly to individuals, issuers, and group health plans.
The proposed regulations also incorporate a number of clarifying FAQs released by the government after the adoption of the 2012 final regulations. In conjunction with the release of the proposed regulations, the government contemporaneously made available proposed revisions to the SBC template, Continue reading Client Alert: More Changes to the Summary of Benefits & Coverage (SBC)
Client Alert: Cadillac Tax on High Cost Employer Health Plans Approaching
The Internal Revenue Service (IRS) recently issued Notice 2015-16 commencing the regulatory process to develop guidance on what’s been called the Cadillac Tax, i.e., the excise tax on high cost employer-sponsored health coverage.
Employers and plan sponsors, especially those with negotiated collective bargaining agreements, need to start actively planning now to mitigate exposure to the Patient Protection and Affordable Care Act’s (“PPACA”) Cadillac Tax under Code section 4980I, which is scheduled to go into effect for taxable years beginning on or after January 1, 2018. Continue reading Client Alert: Cadillac Tax on High Cost Employer Health Plans Approaching
Client Alert and Reminder: Form W-2 Reporting Due, Disclosure Due to CMS for Medicare Part D
Reminder: Form W-2 Reporting on Aggregate Cost of Employer Sponsored Coverage
Unless subject to an exemption, employers must report the aggregate cost of employer-sponsored health coverage provided in 2014 on their employees’ Form W-2 (Code DD in Box 12) issued in January 2015. Please see IRS Notice 2012-9 and our previous e-mail alerts for more information.
For a helpful IRS link that includes a chart setting forth various types of coverage and whether reporting is required, click here. Please note this is a summary only and Notice 2012-9 should also be consulted. Continue reading Client Alert and Reminder: Form W-2 Reporting Due, Disclosure Due to CMS for Medicare Part D