Good Neighbor Insurance (www.gninsurance.com and www.gninsurance.com) is continuing to update our clients on the new health insurance laws.   There are six major coverage options for those in the US and even though some of the rules and regulations are similar for all many differences are there and it all depends on how old you are and for whom you work.  Many critical details of this new insurance law will be clarified in the months and years to come.

These six major coverage options are:

(1) Individual or family coverage (private health care plans)

(2) Employee/employer group option for small businesses (typically under 50 employees)

(3) Employee/employer group option for large businesses (typically larger than 50 employees)

(4) Exchange options through the state you are residing in (fully integrated 1-1-2014 and are quasi-government and private insurance coverage combined)

(5) Medicare (which include Parts A, B, C, and D) for those 65 years onwards

(6) Full government health plans like Medicaid, CHIP, TRICARE, VA and other coverage plans as may be designated by the Department of Health and Human Services based mostly on financial criteria and/or military service.

The president signed the Patient Protection and Affordable Care Act (PPACA) into law on March 23, 2010. Additionally, he signed the Health Care and Education Reconciliation Act of 2010 on March 30, 2010, which made amendments to the PPACA law. The president’s signature on the reform bills triggered a series of major changes to the health care system that will affect every American. There were several changes that became effective upon President Obama’s signature. The rest of the changes are scheduled to become effective at varying times over the next several years.

The law is wide-reaching and encompasses more than 2,700 pages and many more pages of expected new regulation. Many of the specific details are yet to be finalized by federal agencies and state officials. This guide outlines some of the major sections of the law, and we’ve indicated when guidelines are pending from the United States Department of Health and Human Services (HHS) and other federal or state agencies. These guidelines will help all health insurance companies comply more completely with the reforms.

We have some additional information on common ownership:  an employer who is part of a group of employers treated as a single employer under §414 (b), (c), (m), or (o) of the IRC (including employees of a controlled group of corporations, employees of partnerships, proprietorships, etc., which are under common control, and employees of an affiliated service group) are treated as a single employer.

Cadillac Plans

Q – Please clarify some of the taxation for year 2018 “Cadillac Plans”. We are being told that the excise tax on High Cost Insurance is placed on the “Insurers” of employer sponsored plans with aggregate expenses that exceed $10,200 for individual coverage, and $27,500 for family coverage. I thought this tax would go against the employees receiving the benefit. How is that going to work?

A – This is correct. Although at first glance it seems to make no sense, this is directly impacting union plans and the richer self-insured plans.

Carve-Outs

Q – Will all of the carriers do carve-out as it is the Employers responsibility to comply with HCR?

A – As far as I am aware, all carriers are still doing carve-outs.

Q – Do you know if the 2010 tax return documents for businesses are going to impose/include the fines and penalties for discriminating (carve-outs)?

A – I haven’t seen any changes to the tax forms, except the new 8941 for the small business tax credit. But, it’s still early – the forms could still change.

Class Act Program

Q – I read some small print that indicated that employers could opt out of the so-called Class Act program. Is this true? If so, do we know HOW yet?

A – Employers CAN opt out, but no details have been disclosed. The general opinion at this time is CLASS is going to have a delayed implementation date of 2013.

Employer Contribution

Q – If a group pays a different benefit for some employees based on the years of service with the company, is that ok now or not with all the reform stuff? (example: 5-years employment with the company, the company pays 50% of dependent cost; 10-years employment, the company pays 100% of dependent cost) I have not read anything on this, and could not find any information on the length of service.

A – They can do this, but each different contribution must comply with 105(h) independently of the other.

Q – Is it true that under the new law, an employer must charge every employee the same deduction regardless of tenure? I have a client that will not be grandfathered and now charges employees with less than 5 years employment a percentage of the dependent premium, but charges nothing to employees with over five years service. Is it legal for him to retain this deduction schedule, or since he will not be grandfathered will he have to change and start charging all employees the same deduction?

A – If the plan is not grandfathered – it will be subject to the 105(h) testing.

Grandfathered Status

Q – When do client administrators need to send the Grandfather Plan memo to employees?

A – It should be distributed with the first open enrollment following September 23, 2010.

Q – If the carrier gives you a 15% increase and you don’t change your contribution, does that automatically make you non-grandfathered because you passed on the increase? In addition, what if your contribution is a flat dollar amount. If that dollar amount doesn’t change but you get an increase?

A – Plans are allowed to increase premiums, so as long as the contribution is not lowered, they will remain grandfathered. A defined contribution plan is not specifically discussed.

Q – A group has a health plan that includes optional benefits, (like supplemental accident, preventive care buy-up, enhanced diagnostic x-ray and lab benefit, etc.); if the group changes one of those optional benefits, does that cause loss of grandfather status? I’m guessing at this point, any change to any benefit, even outside of the core benefit plan is a trigger?

A – If the benefit is actually part of the health plan, then I would agree – they are reducing benefits and thus would loose their grandfathered status. If they are offered independent of the health plan, there would be no impact.

Q – We have a renewal to handle for a group that currently has two separate plans which, at the present time, both offer the same benefits. One is specifically for the owners and the other is for key employees only excluding all other employees. In order for the key employee plan to continue to carve-out, I understand they can make only minor changes and not change carriers. But how about the owners’ plan? I know that the owners’ plan would lose their grandfathered status if we switched carriers but would this change affect the other plan’s status in anyway?

A – The owners plan would loose grandfathered status and be subject to testing. It would not impact the other plan.

Q – I am hearing from some carriers that the Waiver Procedure for the limited medical plans, also may contain guidance that will waive the provision which mandates that Grandfathered Plan Status is lost if you change insurance carriers, have you heard any confirmation on this?

A – Not true, DOL reiterated that changing carriers will cause you to lose grandfathered status on their webinar earlier this week.

Miscellaneous

Q – Do the group benefits (or individual) that are going to be required to be “reported” on someone’s W-2 form for health benefits, going to be considered part of their salary and subject to being taxed or not?

A – This is not taxable at this time.

Q – Currently an employer is required to pay 50% of the employee rate, is the percentage expected to change?

A – This is a carrier requirement, not a legislative issue.

Q – In 2014, what if an employer offers insurance to an employee and they refuse the coverage because they don’t want to pay the additional premium?

A – There is an individual mandate in 2014, so if they don’t purchase coverage somewhere, they will be penalized. If they go to the Exchange and buy coverage AND qualify for a tax credit or cost-sharing reduction, the employer would be penalized.

Q – A group I have has 2 group policies; 1 is for owners, and the other for management. In the owner’s policy, if they take a draw instead of a paycheck, will they have to claim their health premiums as income?

A – This is a question for the CPA.

Q – Companies with less than 50 employees don’t have to offer insurance to their employees, but many choose to set up group plans. I understand that the number designated as “small group” is going to change to companies employing over 100, so would that mean that companies with less than 100 employees would not have to offer insurance?

A – Employer penalties begin at 50 full-time employees (FTE) in 2014.

Q – If an employer has more than one group medical plan available, is the employer required to give employees a 30-day window prior to renewal to choose between plans?

A – I am not aware of any such requirement. The 30 days come into the situation, it’s addressing someone who was previously excluded who is now eligible to join/rejoin the plan. For example, children who previously aged-off, but are under 26.

Disclaimer: The above information is not intended to be legal advice. This is based on current interpretations and subject to change

Q – Is 30 hrs considered part-time currently?

A – No, this is the definition in 2014.

Model Notices

Q – I have a list of notices and when they are to be published/made available to employees. My list includes “PPA (before 1-1-2011)”, but I can’t remember what this is. Do you know?

A – It is the notice used for the Patient’s Bill of Rights – the one that addresses pediatricians, OB/Gyn’s, etc.

Non-Discrimination

Q – We have a group with over 50 employees who pays 100% of employee cost. The dependent contribution is based off of employee compensation. They are planning on passing on some or most all of the increase for their December renewal to the dependent portion. They want to remain grandfathered. I advised that if they change the contribution on any of the tier’s more than 5% they lose their grandfathered status. The group has read material that it’s only if the employee portion contribution changes more than 5%. Who’s right?

A – The following information is from a legal analysis from Groom Law Group: “Decrease in Employer Contribution: A policy or plan will lose grandfather status if an employer (or employee association) decreases its contribution rate toward the cost of any tier of coverage (e.g., self or family) by more than 5% below the contribution rate on March 23, 2010.”

Q – I have a non-grandfathered health plan that will offer 2 levels of benefits. The core plan is a $3,000 deductible which everyone will get, and the employer will pay 99% of the employee premium, and 0% for dependents. Is there a problem if the employer also offers say a $1,500 deductible and allows any employee to choose that plan if they pay 100% of the difference?

A – As long as both plans are offered on a non-discriminatory basis, (i.e. everyone gets the same contribution and has the same waiting period), this is not a problem, even if the highly-compensated drift toward one of the two plans.

Q – Small business, older owner opts out of the group and buys an individual plan for himself and his family, (typically an HSA or Catastrophic plan with less benefits than the group) the strategy being to keep him out of the group census due to age. Can this impact the non-discrimination rules if he isn’t contributing to employee dependent costs on the group plan?

A – As long as he’s contributing at the same level for all employees who are on the group plan, this is not an issue under 105(h).

Non-Grandfathered Plans

Q – In the minimum design requirements for Non-Grandfathered plans, is there allowed to be more than a $2,000 deductible option for employer groups? I have a group asking and I am not familiar with this provision.

A – This provision doesn’t come into play until 2014.

Participation Laws

Q – Do you have any more information on the 50% participation requirement that small businesses need to comply with? A client wants to know how the health reform is impacting this rule.

A – PPACA has nothing to do with the participation requirement – this is a carrier requirement and the carriers can continue to require at least 50% participation. However, in 2014, if the group has more than 50 ees, there may be a penalty to the employer if an employee seeks coverage in the Exchange instead of through the employers plan.

Q – Under last week’s Q & A regarding the mandate for coverage in 2014, why would the employer be penalized if the employee was able to obtain coverage from the exchange – the employee is covered per the mandate?

A – If the employee purchases through the Exchange and gets a tax credit or cost-sharing subsidy, the employer’s plan may be deemed “unaffordable” and the employer is penalized for each employee getting a tax credit or subsidy through the exchange.

Penalties

Q – Can you clarify the “carve out” penalties and when they will become effective for “grandfathered” and “non-grandfathered” health plans?

A – If a plan fails the highly compensated test for plan years beginning after September 23, 2010, the penalty is $100 per day per incident. This does NOT apply to grandfathered plans.

Premium Tax/Tax Credit

Q – If the employer pays 100% or 50% of the employee premium, under the new bill is the employee now being taxed on the premium the employer is paying?

A – No.

Q – How does a non-profit implement the tax credit? They have done the preliminary 3 step and have determined they would benefit but since they don’t pay taxes, how do they get their money?

A – It will actually be part of their 2010 tax return when they file.

Tax Credit

Q – I have a small group consisting of 2 corporate officers/owners with no other employees. If they meet the salary limitations would they be eligible for the tax credit? I can determine that owners are not included in the calculation, but I’m unclear on whether the business is still eligible to receive the tax credit?

A – The tax credit is for employer contributions paid on behalf of employees, so since there are no non-owner employees, I would presume NO. Unfortunately, until the instructions for 8941 are released, the definition of who is considered an employee for purposes of the credit is unknown. The draft of 8941 has been released, but the instructions and final version aren’t expected until later this year.

Waiting Periods

Q – Can a small group have different waiting periods for different classes?

A – Yes, but if the plan is not grandfathered each waiting period must be tested for compliance with 105(h).

Doug Gulleson loves to scuba dive overseas and makes sure he has his US health care and overseas health care, www.gninsurance.com , information with him at all times when he travels   Keep our blog close by you, www.gntravelinsurance.com, for continual updates on the changes with the US health care system.