mid-year regulatory update - cottingham & butler · 2016; incentivizes continuous coverage by...

Presented By |

Mid-Year Regulatory Update

Adam Jensen, Vice President

2

PRESENTER

ADAM P. JENSENJD, MS-HRM, CEBS, GBA, FLMI

[email protected]

608.467.5030

Vice President, Compliance & HR Consulting

3

AGENDA

• ACA

• FLSA

• Wellness

• HIPAA

• ERISA (CHURCH PLANS)

4

ACA

Repeal in slow motion

• Pres. Trump campaigned on the premise of repealing the ACA immediately upon taking office.

• True repeal can only be done by Congress.

• Pres. Trump signed an executive order on his first day in office instructing DOL, Treasury/IRS, and HHS essentially to stop enforcing the ACA.

5

ACA


• Initial attempt at passing an ACA repeal bill met unexpected resistance from GOP Conservatives in the House and was pulled.

• On May 4, 2016, the House narrowly passed its version of the ACA repeal bill on a 217-213 vote.

• The Senate took up its repeal effort with many Senators expressing a desire to craft their own repeal bill independent of the House version.

6

ACA


• Senate repeal bill, Better Care Reconciliation Act (BCRA) is similar to the House’s American Health Care Act (AHCA), but does contain differences.

• The BCRA would reduce the federal deficit by $321 billion over 10 years.

• Congressional Budget Office (CBO) recently released an estimate that the Senate BCRA would result in 22 million uninsured by 2026, slightly less than the House bill.

• The increase in the number of uninsured would be larger among older people with lower incomes.

7

ACA

Comparison of bills

ACA AHCA (House) BCRA (Senate)

Employee Pre-Tax Treatment of Group Plan Premiums

Premiums for employer-sponsored coverage excluded from employees’ taxable income; employers required to report cost of coverage on Form W-2.

Does not cap the employee tax benefit for employer-sponsored coverage; retains the obligation that the employer report coverage amounts on Form W-2, and an additional W-2 field is added: each month with respect to which an employee is eligible for a group health plan.

Does not cap the employee tax benefit for employer-sponsored coverage.

8

ACA


Insurance Subsidies

Federal income-based subsidies (available to eligible individuals with incomes between 100%-400% of the federal poverty level) for individual coverage purchased on the exchanges.

Replaces federal subsidies with a refundable tax credit that is tiered by age:

• $2,000 per year for anyone under 30;

• $2,500 per year for 30-39;

• $3,000 per year for 40-49;

• $3,500 for 50-59; and • $4,000 for over 60.

Retains ACA premium subsidy structure, but adjusts eligibility and amounts.

Available to individuals with incomes not above 350% of the federal poverty level. Adjusts benchmark plan for subsidy awards to a “skinnier”, cheaper plan (58% AV) with the median premium cost of all QHPs in the rating area (rather than second lowest-cost silver plan).

9

ACA


Insurance Subsidies

Reduces the credit amount for individuals with income over $75,000, or $150,000 for joint filers, by 10% of gross income over those threshold amounts; credits capped for family at $14,000 per year; no credit eligibility if coverage includes abortions.

Subsidies are tiered by income and age.

Credits are not available to individuals who are eligible for a group health plan; no longer requires that such group plan be affordable or offer minimum value. Subsidies are not available for plans that cover abortions.

10

ACA


Individual Mandate

Requires individuals (unless exempted) to obtain ACA-compliant health insurance or else pay a tax penalty.


Effectively eliminates the individual mandate by making penalty $0 as of 2016; incentivizes continuous coverage by imposing a 30% surcharge on otherwise-applicable premiums for individuals who go more than 2 months without coverage.


Effectively eliminates the individual mandate by making penalty $0 as of 2016.

Does not contain a continuous coverage penalty.

11

ACA


Employer Mandate

Requires employers with 50 or more full-time employees to offer ACA-complaint health insurance; absent such an offering, imposes penalties on covered employers.

Effectively eliminates the employer mandate by making penalty $0 as of 2016.

Effectively eliminates the employer mandate by making penalty $0 as of 2016.

12

ACA


Essential Health Benefits

Requires individual and small group plans to offer 10 essential health benefits; no dollar limits allowed on essential health benefits (including in large group market).

States may apply for waivers to establish their own essential health benefit requirements for individual and small group markets.

Does not contain an EHB-specific waiver, but generally loosens/expands the ACA’s Sec. 1332 waiver processes and requirements to give states more flexibility with respect to broader ACA requirements (including QHP requirements, EHBs, etc.).

13

ACA


Wellness Permits employers to adopt wellness incentives, within certain nondiscrimination parameters, for group health plan participants to meet wellness targets.

Retains ACA wellness program structure.

Retains ACA wellness program structure.

14

ACA


HSAs Left in place existing HSA rules.• Only

prescribed medicines (non OTC) are considered qualifying medical

Modifies certain HSA rules, including: • Increases annual tax

free contribution limit to equal the limit on out-of-pocket cost sharing under qualified high deductible health plans ($6,550 for self only coverage, $13,100 for family coverage in 2017);

• Allows spouses to make catch-up contributions to the same HSA;

Same as House.

15

ACA


HSAs • Reduces tax penalty for HSA withdrawals used for non-qualified expenses from 20% to 10% (retains provision that amounts withdrawn for qualified medical expenses are not subject to income tax); and

• Allows OTC drugs as qualified medical expenses.

16

ACA


Taxes and Fees

Levies various fees and taxes oninsurance companies, pharmaceutical manufacturers, and medical device manufacturers; and taxes net investment income and high-cost, employer-sponsored coverage (“Cadillac tax”).

Eliminates the Cadillac tax for years 2020 through 2025 (leaving the possibility that the tax could be imposed beginning in 2026). Repeals several other ACA taxes and fees beginning in 2017: • Annual provider fee; • Net investment

income tax; • Prescription drug tax;

and • Medical device tax. Medicare payroll tax increase repealed as of 2023.

Eliminates the Cadillac tax for years 2020 through 2025 (leaving the possibility that the tax could be imposed beginning in 2026).

Repeals small business tax credit after tax year 2019 (and in the meantime, will not allow credit for plans that cover abortion).Repeals several other ACA taxes and fees, including:

17

ACA


Taxes and Fees

• Annual provider fee (will not go into effect after current 2017 moratorium);

• Net investment income tax (2017);

• Prescription drug tax (2018); and

• Medical device tax (2018).

Medicare payroll tax increase repealed as of 2023.

18

ACA


Popular ACA Market Reforms

Preexisting Condition Coverage: Prohibits insurers from denying coverage to people who have preexisting medical conditions.

Retains ACA market reforms.

Regarding preexisting conditions - states may apply for waivers that allow health status underwriting, in certain circumstances, for individuals who do not maintain continuous coverage (in lieu of 30% surcharge).

Retains ACA market reforms.

Requires states, starting in 2019, to set their own MLR and rebating rules.

19

ACA


Popular ACA Market Reforms

Dependent Coverage (Under 26): Allows individuals to stay on their parents’ health insurance plans until the age of 26.

Adds a new ERISA structure that allows for the establishment of association health plans as large group plans for small businesses/individuals. These plans would be exempt from the community rating and essential benefit requirements currently imposed on small group and individual plans. Would preempt state barriers to establishment of such plans.

20

ACA


Age Rating Permits insurers to charge elderly customers no more than 3 times what they charge young adults.

Increases the ACA ratio, allowing insurers to charge elderly customers up to 5 times what they charge young adults. State waivers also available to further increase the age rating ratio.

Increases the ACA ratio, allowing insurers to charge elderly customers up to 5 times what they charge young adults. Allows states to set a different ratio.

21

ACA


Medicaid Expansion

Allows states to expand Medicaid coverage for low-income individuals, and provides federal support for such expansion.

Discontinues the ACA’s Medicaid expansion in 2020 (but allows states to continue expansion with less federal support); allows states to impose a work requirement on nondisabled, nonelderly, non-pregnant adults as a condition of Medicaid coverage; and otherwise restructures the federal financing system for Medicaid into a per capita model (with per-enrollee caps on federal payments).

Phases out ACA Medicaid expansion between 2021 and 2024 (and then proposes cuts to Medicaid funding after that – deeper cuts than the House proposal); allows states to impose a work requirement on nondisabled, nonelderly, non-pregnant adults as a condition of Medicaid coverage; and otherwise restructures the federal financing system for Medicaid.

22

ACA

What’s next and what should I do?

• Senate set to vote on BCRA very soon, passage is uncertain.

• ACA is the law until it is not.

• Employers should continue to make a good faith effort to comply until the law is repealed or amended.

23

FLSA

Obama administration changes

• FLSA had not been updated since 2004.

• Pres. Obama instructed DOL to update FLSA and especially the exempt salary test amount.

• Proposed and later final rules released that made numerous important changes

- Increased Salary Level Test- Use of Bonus Compensation- Automatic Increases- Increased HCE Exemption

24

FLSA

Increased salary test amount

• Proposed new minimum annual test amount at $47,476 (up from the current annual minimum of $23,660)

Use of Bonus Compensation

• For the first time, employers would be able to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the standard salary level.

Automatic Increases

• To ensure that they remain meaningful tests for distinguishing between bona fide executive, administrative, and professional workers who are not entitled to overtime and overtime-protected white collar workers, DOL proposed automatic updates to the salary test amount.

25

FLSA

Increased HCE Exemption

• The total annual compensation requirement for highly compensated employees (HCE) will be set at the annual equivalent of the 90th

percentile of full-time salaried workers nationally, which is $134,004 (up from $100,000 currently)

26

FLSA

Actions under Trump administration

• Upon taking office Pres. Trump signed an executive mandating a 60-day freeze on regulations that had not yet taken effect.

• Administration has delayed action in the 5th Circuit Ct of Appeals FLSA case, repeatedly requesting extensions.

• Expected to withdraw the appeal.

• Rest of FLSA rules are in limbo until DOL Secretary Acosta acts.

• Widely expected to support modest increase in salary test amounts. Secretary Acosta testified before Congress stating he believed a proper a test amount would be around $33,000.

27

FLSA


• No immediate action is anticipated by DOL and possibly not until year end or possibly even early 2018.

• Employers have the option to roll back increases to salaried employees, although that can have adverse impact on morale and retention.

• Can recharacterize salary increases as bonuses and return base compensation to prior amounts.

• Most employers are moving on and considering increases a cost of doing business.

• Employers should continue to monitor FLSA changes in the coming months.

28

WELLNESS

No major changes under Trump administration

• Despite expectations, Trump administration has not rescinded wellness rules under ADA or GINA

• EEOC has continued to enforce both ADA and GINA.

• EEOC recently announced a $100,000 settlement with Orion Energies of Wisconsin.

• Unfortunately, this leaves in place a federal district court finding rejecting ADA safe harbor argument for bona fide wellness plans. This only affects the 7th Circuit.

• Current ACA replacement bills from House and Senate preserve existing HIPAA wellness incentive rules.

29

WELLNESS


• EEOC is expected to continue to enforce wellness rules under ADA and GINA.

• HIPAA wellness rules with existing incentive structure of up to 50% of cost of coverage are expected to continue.

• Employers who sponsor wellness programs should continue to comply with HIPAA, ADA, and GINA.

30

HIPAA

HIPAA Privacy and Security audits continue

• HHS/CMS developed a “desk audit” process to audit Covered Entities in 2016.

• Audits continue, with the focus on medical providers.

• Widely expected that all Covered Entities will eventually be audited.

• CMS position is that failure to conduct a HIPAA Security risk assessment is “willful neglect” under the regulations and subject to penalties of at least $50,000.

31

HIPAA


• Review HIPAA Privacy and Security compliance.

• Update PHI flow to document:

• The persons or classes of persons with PHI access

• The PHI to which they have access

• The conditions under which they have PHI access

• Conduct a HIPAA Security audit and continue to audit on a regular basis.

• Make sure that any employees with PHI access have been trained in PHI handling and that the training is documented.

32

ERISA

Supreme Court Ruling in favor of church plans

• US Supreme Court ruled unanimously on June 5, 2017 in the case of Advocate Health Care Network v. Stapleton that employee benefit plans maintained by an organization controlled by or associated with a church are “church plans” and are exempt ERISA.

• Ruling applies to plans that were established by the principal-purpose organization and not directly established by a church.

• Ruling resolved disagreement among three separate circuits.

33

ERISA


• Church affiliated organizations should review their health & welfare and retirement plans for ERISA language.

• If the organization desires to be exempt from ERISA, the language should be removed.

34

THANK YOU FOR VIEWING!

ADAM P. JENSENJD, MS-HRM, CEBS, GBA, FLMI

[email protected]

608.467.5030

Vice President, Compliance & HR Consulting

mid-year regulatory update - cottingham & butler · 2016; incentivizes continuous coverage by...

Documents