Data, Information, and Healthcare Price Transparency

Submitted by Ed Oleksiak, Senior Vice President of Employee Benefits for Holmes Murphy. Used with permission from Holmes Murphy.

Despite an election year’s numbing impact on regulatory and legislative healthcare change, one issue that could move forward in 2020 is “healthcare price transparency.”

On June 24, 2019, President Trump issued Executive Order 13877 directing federal agencies to increase healthcare price and quality transparency. The order directs federal agencies to require hospital disclosure of negotiated rates in a form “understandable” by patients. The definition of “understandable” could depend on whether you graduated from medical school or are a 19-year-old fresh out of high school.

On November 15, 2019, the Centers for Medicare & Medicaid Services (CMS) issued the Hospital Transparency Final Rule. The final rule requires hospitals to provide patients with clear, accessible information about their “standard charges” through the use of standardized data elements. You could probably have a multi-day debate about what is a “standard charge.”

Finally, in November 2019, the Transparency in Coverage Proposed Rules were released, which will allow consumers to shop and compare costs of health insurance (including providing paper copies within two business days without charging an additional fee). Can you imagine telling Amazon they have to provide purchasers with a paper copy of the sales slip with each transaction? If that was the case, I doubt we would have had $258 billion or 5 percent of all retails sales in 2018 via Amazon.


While the concept of healthcare price transparency is a noble concept (and one I agree with), we have to make sure we provide consumers with information and not just data.

Let me explain. Early in my career as a “mainframe” computer programmer (long before laptops, iPads, and cell phones), my boss at the time taught me a very valuable lesson. Rather than simply taking the manual paper version of a process and automating it with a computer, let’s look at the process, improve it, and make it more usable for the end-user. We accomplished the improvements by asking the end-user what they could use to do their job more accurately and faster.

A great example would be the early versions of street mapping software. The early software simply put MAPSCO online. No value was added other than turning a paper book with maps into an online version you could print out, thus providing data but not really information.

Fast forward to today where we have Waze, which allows drivers to know how long it will take them to get to their location, provides faster alternate routes, and notifies them of accidents and radar traps. That is “information.”


My fear in our rush to healthcare price transparency is that we will provide consumers with data and not information. Technology can (given time and the opportunity to ask the consumer what they want) provide the consumer with information that will help them make informed healthcare purchasing decisions.

Providing data dumps of healthcare prices in the name of transparency will not work and will only delay the development of real consumer tools that provide information. Transparency may be required to lift the veil off of pricing so that app-based tools can be created, or we use tools like SimplePay Health that could transform the healthcare purchasing experience and allow consumers to make educated decisions for themselves and their loved ones. I hope transparency results in consumer information and not just data.

What is Medical Loss Ratio and How Do You Handle MLR Rebates?

Submitted by Annette Bechtold, Senior Vice President of Regulatory Affairs and Reform Initiatives for OneDigital. Used with permission from OneDigital.

The Medical Loss Ratio, or MLR, is the percentage of premium dollars received by a health insurance carrier that is spent on medical claims and quality improvement.

The Affordable Care Act (ACA) requires health insurance carriers to submit data to the U.S. Department of Health & Human Services (HHS) each year detailing premiums received and how those premium dollars are spent. The ACA requires carriers to maintain at least an 80% MLR for small group (1-50 employees on average in prior calendar year and at least two employees on first day of plan year, though a few states define small group as 1-100 employees) or 85% MLR for large group. If a carrier maintains a lower MLR, it must issue a premium rebate to policyholders by no later than September 30 each year.

If HHS notifies a carrier that its MLR is too low, the carrier must issue an MLR rebate to whomever holds the insurance policy. In most cases, the employer sponsor of a group health plan is the policyholder, so this InfoBrief will focus on employer plan sponsors and the strict ACA rules regarding what they can do with an MLR rebate.

What does MLR mean for Plan Sponsors?

Plan sponsors first must determine how much, if any, of the rebate amount, is considered “plan assets” under the Employee Retirement Income Security Act of 1974 (ERISA). Typically, the percentage of the MLR rebate, considered to be plan assets, is proportionate to the employee’s percentage of overall premium contributions. Thus, for example, if an employer pays 100% of premium cost, none of the rebate is plan assets, and the employer may retain the full amount. If participants pay all of the premium cost, all of the rebate is plan assets and must be used for the benefit of the participants. If, for example, an employer pays 70% of premiums and employees contribute 30%, 30% of the MLR rebate is plan assets.

What does ERISA require?

Determining how much of a rebate is plan assets is important because ERISA requires plan sponsors to use any MLR rebate amount found to be plan assets for the exclusive benefit of plan participants and beneficiaries within three months of receiving an MLR rebate. Plan sponsors must decide whether they will use these plan assets for the benefit of current participants or current as well as prior year participants (i.e., participants who actually contributed premiums for coverage subject to the MLR rebate but who are no longer employed). U.S. Department of Labor (DOL) Technical Release 2011-04 permits plan sponsors to choose to provide rebated plan assets solely to current participants if the costs of paying former participants is equal to or greater than the rebate amount due to them.

What does the DOL require of MLR rebates?

The DOL states that plan sponsors must use a reasonable and objective method to allocate any MLR rebate amounts they distribute in cash to all affected individuals and provides these three safe harbors:

  • Evenly to all covered participants;
  • Based on each participant’s actual contributions; or
  • In a way that reasonably reflects each participant’s contributions.

Plan sponsors have options aside from making cash payments directly to current and former participants. Plan sponsors may weigh all facts and circumstances, including:

  • Cost of distributing payments;
  • Size of the rebate amounts due (i.e., de minimis* amounts); and/or
  • Negative tax consequences (e.g., amounts are taxable to fully insured plan participants who paid premiums contributions on a pre-tax basis).

If, based on the foregoing factors, an employer decides it will not make cash payments to current or former participants, an employer may use the assets to reduce future premium contributions for current participants, or to provide general benefit enhancements for current plan participants.

How is de minimis determined?

One of the permissible reasons for an employer not to make cash distributions to current and former participants is if the amounts due to each such participant is de minimis. Plan sponsors have leeway to determine whether rebate payments would be de minimis and should consider how much each participant would get after taxes, the costs of producing rebate checks and the costs of mailing rebates. There are no hard and fast rules on what amounts are de minimis, but a fair, objective and reasonable analysis will consider the foregoing factors when making this determination. Additionally, plan sponsors should document any decisions relating to determining de minimis amounts and should be sure to apply these amounts either to offset future premium payments or to add enhanced benefits to the plan.


Prudence suggests that plan sponsors should determine their general strategy for handling MLR rebates and draft it into their group health plan documents and SPDs. The overall strategy should address how plan assets will be calculated, how rebates will be distributed, whether any rebates will go to cover administrative expenses and how the sponsor will determine de minimis amounts and what will be done with those amounts.

Click here to download the MLR InfoBrief prepared by OneDigital.

IRS Expands List of Preventive Care for HSA Participants to Include Certain Care for Chronic Conditions

Today the IRS added care for a range of chronic conditions to the list of preventive care benefits that may be provided by a HSA compatible high deductible health plans (HDHP). Notice 2019-45, lists the new types of medical care that may be treated as preventive care for this purpose.

Individuals covered by an HSA compatible HDHP generally may establish and deduct contributions to a Health Savings Account (HSA) as long as they have no disqualifying health coverage or not enrolled into Medicare. To qualify as a high deductible health plan, an HDHP generally may not provide benefits for any year until the Federal (not health plan) minimum deductible for that year is satisfied.

The IRS together with the Department of Health and Human Services, have determined that certain medical care services received and items purchased, including prescription drugs, for certain chronic conditions should be classified as preventive care.

Notice 2019-45 provides that the following services and items for individuals with the specified chronic conditions listed are treated as preventive care.

Of note is that male contraceptives will continue NOT to be considered preventive. We mention this as some states have taken the stance that they are. See page 2 of the notice which states, “the notice provides that a health plan that provides benefits for male sterilization or male contraceptives before satisfying the minimum deductible for an HDHP under section 223(c)(2)(A) does not constitute an HDHP, regardless of whether the coverage of such benefits is required by state law.”

A Detailed Look at Considerations for the New HRA Options

The final rule regarding HRA expansion was released and scheduled to take effect for plan years beginning on or after January 1, 2020. The rule was in response to the October 12, 2017 executive order issued by President Trump to prioritize near-term improvement: association health plans (AHPs), short-term, limited-duration insurance (STLDI), and health reimbursement arrangements.

The final rule establishes new parameters to allow employers to offer an HRA to be used for the purpose of purchasing individual health coverage in lieu of a traditional group health plan, and separately for an HRA to be used for excepted benefits coverage.

The first major provision of the proposal would establish new parameters to allow employers to offer an HRA for tax-preferred funds to be used for the purpose of paying all or a portion of individual health coverage in lieu of a traditional group health plan. This would effectively provide the same tax benefits of the employer exclusion for individuals who obtain coverage on the individual market. The individual coverage HRA will be available on a class-by-class basis, with employers permitted to create classes of employees around certain employment distinctions, such as salaried workers versus hourly workers, full-time workers versus part-time workers, and workers in certain geographic areas. Employers will be able to maintain their existing group health plan for current enrollees, with new hires offered an individual coverage HRA.

The second provision of the proposal would permit an employer to offer employees an HRA for excepted benefits, although the rule firmly states that excepted benefits are not individual coverage. Further, employers are not permitted to offer employees both an HRA for purchase of individual health coverage and an HRA for excepted benefits. This provision permits employers that offer traditional group health plans to provide an HRA of up to $1,800 per year, indexed to inflation, to reimburse an employee for certain qualified medical expenses, including premiums for short-term plans. NAHU specifically opposed this provision to reimburse individuals for the purchase of short-term plans under the proposed rule. Excepted benefits must not be an integral part of the health plan, the HRA must be made available under the same terms to similarly situated individuals, and the HRA cannot provide reimbursement for premiums for traditional health insurance coverage. This HRA could be available even if the employee doesn’t enroll in the traditional group health plan.

Items in the final rule that should be emphasized or have changed from the proposed rule include:

  • Applies to all size employers
    • The employer may offer both the HRA for individual premium (ICHRA) including Medicare A, B or C, Medicare supp, Medigap, and student health plans as long as it’s not excepted benefits.
  • Reiterates the prohibition against employee CHOICE of HRA or traditional group health plan
    • In light of the continued concern with the added complexity that would be required and the response from commenters, the final rules do not allow an individual coverage HRA to also be integrated with other group health plan coverage, such as spousal coverage.
  • Minimum class size requirements were added from the proposed rules based on comments.
  • Minimum  10 for an employer with less than 100 employees, a number rounded down to a whole number equal to 10% of total for an employer w 100-200 employees and 20 for employer with more than 200 employees
  • Includes an opt out provision due to concerns that an employee is unable to obtain a PTC while covered under the HRA
  • Employer substantiation requirements
  • Employer notice requirements
  • Do not permit integration with healthcare sharing ministry plans
    • reminder to be mindful of Medicare Secondary Payer (MSP) rules regarding incenting employees of the health plan
    • HRAs , OTHER than excepted HRAs, are group health plans and as such are MEC and can be used to avoid Penalty A of the ESR/ Play or Pay mandate
    • The HRA offered by a small employer may not reimburse premiums for short-term, limited-duration insurance
  • An Applicable Large Employer (ALE) must consider the HRA under the affordability rules of the Play or Pay mandate
    • The total funds offered through an ICHRA may vary in two instances: as the age of the participant increases (not to exceed a 3:1 age band), and based on the number of dependents covered.

For more information on the HRA final rule, join us on Thursday, July 18, at 1:00 p.m. Eastern for a NAHU member-exclusive Compliance Corner webinar on the health reimbursement arrangement final rule.

ACA Affordability – Managing Risk

Submitted by Ken Stevenson, Vice President of Employee Benefits at Earl Bacon Agency

Beginning with Plan years that started in 2015 Applicable Large Employers (50 or more fulltime employees including equivalents in the PRECEDING calendar year) had to concern themselves with a little thing called the “Affordability Threshold”.  The original Affordability Threshold was 9.5%.  Not a nice neat round 10%.  That would have been too easy.  Yes 9.5%.  Then it became a question of 9.5% of what and the IRS had more answers for that too.  But this column isn’t about the rational for the number, the indexing or any of the safe harbors.  By now we have learned to live with the Affordability Threshold whether its 9.5% or 9.69%.  We’ve, for the most part, figured out which safe harbor or safe harbors to use when filing under 4980H.

This column is about managing the risk of meeting or missing the Affordability Threshold and the consequences it brings.

As agents and brokers, an entirely new demand is being asked of employers and it must be approached with caution.  Because the consequences are severe and unlike any experienced before.  The IRS doesn’t play, so when an employer calls saying they received a letter from the IRS telling them they are being penalized, guess who is assumed responsible?  Remember the letter (IRS letter 226J) is for something that transpired several years ago.  Personnel may have changed and/or conversations may have been forgotten since then.  But again, this column is not about what to do after getting a letter from the IRS but managing the risk beforehand.

So, let’s look at the risk.  You can take the approach of zero risk.  In 2019 the Affordability Threshold is 9.86% of annual income and the federal poverty level (FPL) for a single individual is $12,490 in income annually.  So that means that an employer using the FPL safe harbor should have their employee’s monthly health insurance contribution be no more than $102.63 for their plan to be deemed affordable ($12,490 / 12 months = $1040.80 monthly income x 9.86%  = a maximum contribution of $102.63 ).  That puts the employer at ZERO risk of being fined due to failure to meet the affordability threshold.  Depending on the industry, economy and labor market, this may be a suitable approach.  However, for many employers it’s not economically feasible as using the FPL safe harbor produces the maximum out of pocket for employers. For those employers, it becomes a delicate balance of cost, plan design, multiple plan offerings, choosing a more appropriate safe harbor, measurement and stability options, etc.  to avoid the risk of an IRS penalty.  Some employers, and brokers, spend large sums of money on affordability calculators or outside consultants to do testing, just to make sure they are not subject to the IRS penalties.  They seek ZERO risk.  But do they need to?  It is worth it?  Remember when the ACA passed, and employers were asking is it cheaper to just pay the fine?  This may be in a different context but it’s worth exploring.

Here is an example.  Employer B&A.  B&A typically has around 250 employees.  Turnover is high and they elected to use a standard monthly measurement period.  There is a wide variance in incomes.  About 10% are minimum wage employees which also has the highest turnover.  Those employees average only about 3 months employment.  It now becomes a simple math problem.  The employee contribution is currently $165 per month on their lowest cost plan.  Roughly 25 employees will not meet the affordability threshold.  Since the group has a 60-day waiting period, the risk exposure is roughly 30 days (90-60) X 25 X $312.50 = $7,812.50.  Remember the penalty is prorated monthly.  The first option that many employers choose is to increase contribution levels for the whole group and avoid the penalty.  B&A determined that if they did that it would cost them an additional $18,000 a year.  So while they were at risk of an IRS fine, the cost of that fine was lower than increasing contributions for the entire group.  One final point on the application of the penalty.  Remember an employer penalty is only applied when a fulltime employee BOTH purchases an individual plan in the Marketplace AND receives a premium tax credit.  B&A felt that an even smaller number of those 25 “at risk” employees would meet that criteria.  Most were young and either on their parents plan or buying health insurance was just not a priority for them.  So that $7,812.50 penalty risk would most likely be much less and they were willing to accept that.

In this case accepting some risk was worth it for the employer.  But its important to document a conversation like this because there is still nothing more frightening for an employer than seeing that IRS letterhead.


Medicare Part D Disclosures Due by March 1, 2019 for Calendar Year Plans

The plan sponsor must complete the online disclosure reporting if the health plan(s) prescription drug coverage is creditable or non-creditable within 60 days after the beginning of the plan year. For calendar year health plans, the deadline for the annual online disclosure is March 1.

Timing of Disclosures to CMS
The disclosure notice must be provided within the following time frames:

  • Within 60 days after the beginning date of the plan year;
  • Within 30 days after the termination of a plan’s prescription drug coverage; and
  • Within 30 days after any change in the plan’s creditable coverage status.

The CMS reporting requirement applies if the group health plan(s) covers any Medicare-eligible individuals at the start of each plan year. This includes anyone on Federal COBRA or State Continuation.

For more information, visit: CMS Creditable Coverage Disclosure Form

Update on the Women’s Contraceptive Coverage Regulations

Submitted by Carol Taylor, Account Executive and Compliance Officer, Kirby Employee Benefits, Jupiter, FL

Since the passage of the Affordable Care Act in 2010, the coverage for preventive care has been a changing landscape. There have been numerous changes to the U.S. Preventive Services Task Force ratings for A & B recommended evidence-based items or services.

Among the requirements, FDA-approved contraception methods and contraceptive counseling at no cost-sharing to the insured (when provided by a network provider) has also seen a number of changes in guidance.

Since the release of final regulations in June 2013, to be effective as of the 2014 plan year, there was an exemption for religious employers from providing the coverages for contraception if they have a religious objection to doing so. The religious employer was defined as those listed in the Internal Revenue Code 6033(a)(3)(A)(i) or (iii), which are churches, their integrated auxiliaries, conventions or associations of churches, or any religious order.

The religious exemption allowed those non-profit employers to not be required to offer, contract, refer or pay for contraceptive coverage, which was to be done through a self-certification to their carrier or administrator, as well as the Department of Health & Human Services. The insurance carrier or administrator is then required to notify plan participants that no-cost contraception would be available to them, and with rules released in August of 2014, that HHS would arrange for the insurer or TPA to provide those.

The landscape changed again in June 2014 with the U.S. Supreme Court decision in Burwell v. Hobby Lobby et. al., which expanded the religious exemption to closely held corporations with strong religious objections to covering contraceptives. These employers were to use the same methods of certifying that the non-profit religious employers were using.

Fast-forward to November 2018 when the two latest revisions were released, allowing for expanded religious or moral objection to covering contraceptive methods, including certain ones that may be viewed as abortifacients and/or sterilization procedures.

The first rule provides an exemption to entities and individuals that object to services covered by the mandate on the basis of sincerely held religious beliefs. They would be exempt from the mandate and no longer required to provide contraceptive coverage, in full or in part. The rules under this section maintain the availability of the accommodation, where the insurer or the administrator is responsible for providing those services to the plan participants, but it would be voluntary at the option of the employer. They would also be able to offer those methods they did not object to, but could exclude those for which they have objections.

The second rule gives nonprofits, small businesses and individuals with non-religious moral convictions opposed to those services similar protections to those with religious objections.

For individuals with religious or moral objections with either employer-sponsored or individual market coverage, the exemption would be allowed where the plan sponsor and/or carrier is willing to offer a plan to them that omits the offending contraceptive coverage.

These new rules were to take effect on January 14, 2019. In last-minute decisions by two different courts, the rules have been delayed. The first court decision came from a federal judge in California on Sunday, January 13, 2019. It suspended the rule from being implemented in 13 states that had filed suit: California, Connecticut, Delaware, Hawaii, Illinois, Maryland, Minnesota, New York, North Carolina, Rhode Island, Washington, Virginia and the District of Columbia. The second court decision came on Monday, January 14, in a separate case brought by Pennsylvania and New Jersey, which prevents the rules from going into effect while the lawsuits are ongoing.

For now, the previous regulations stand until the court cases make their way up the chain, likely headed for the U.S. Supreme Court.

HRA Expansion: An In-Depth Look at the Proposed Rule

Submitted by Annette Bechtold, Senior Vice President of Regulatory Affairs and Reform Initiatives for OneDigital

In response to President Trump’s October 12, 2017 Executive Order, the Departments of Health and Human Services, Treasury and Labor issue the proposed rule expanding Health Reimbursement Arrangements. This third and final rule aims to provide employers with additional options when offering health benefits to their employees while providing employees with greater opportunity to purchase coverage of their choosing.


As we know, the ACA’s market rules put some restrictions on how, and when, employers may use HRAs in their benefits program. The 2013 IRS notice clarifies that an HRA is a health plan. As such, it must contain all the ACA group health plan mandates unless integrated with a group’s ACA-compliant health insurance plan. The Departments clarify that “an employer-sponsored HRA cannot be integrated with individual market coverage.” This type of employer payment plan would need to satisfy market reforms, including the prohibition on annual limits integration with an ACA-compliant plan. In its design, it would fail to comply with ACA health plan mandates and prohibition on integration of an HRA with individual health coverage. This practice does not meet the market reform or integration rule. Therefore, the Departments prohibit this practice.

The October 29, 2018, proposed rule allows employers to integrate their HRA with individual health insurance coverage as long as it is nondiscriminatory in its implementation. The subsequent release of IRS Notice 2018-88 addresses the interaction of this HRA expansion and the ACA’s employer shared responsibility provisions, e.g., offering a health plan that meets affordability and minimum value requirements, and self-funded nondiscrimination rules. The rule and notice address the following areas:

HRA Integration Requirements

For an HRA be considered an ACA-compliant health plan, it must be integrated. This new proposed rule provides new integration rules applicable to individual health coverage integrated with an HRA. To meet integration requirements, employers and plan sponsors must:

  • Require participants and dependents to be enrolled in individual health insurance coverage for each month they are enrolled in an HRA
  • Prohibit offering an HRA and traditional insurance to the same class of employees
  • Offer HRA integrated with individual coverage on the same terms to each participant within the class
  • At least annually, allow participants to opt-out of, and waive , future reimbursements from HRA
  • Regularly substantiate and verify enrollment in individual coverage
  • Provide notice to eligible participants regarding offer and enrollment of HRA.

It is important to note that when considering the eligibility of these premiums for pretax treatment under an employer’s cafeteria plan, employers may not allow salary reductions to purchase a qualified health plan through the exchange. However, they may allow salary reductions for premiums to purchase individual coverage outside the exchange, subject to all other cafeteria plan rules.

Excepted Benefits

The proposed rule sets additional criteria for limited excepted benefits with regard to these arrangements. Excepted benefits include certain types of coverage — e.g., accident, disability, dental, vision, short-term health policies, workers’ compensation, some FSAs, etc. and are not subject to ACA health plan rules.

Employers that wish to provide an HRA without regard to whether employees have coverage or have coverage that meets market requirements may do so if the HRA meets the following requirements:

  1. The HRA must not be an integral part of the plan.
  2. The HRA must provide limited benefits (no more than $1,800, indexed for inflation).
  3. The HRA may only provide reimbursement of individual premiums if they consist solely of excepted benefits or group health plan coverage that solely consists of excepted benefits – this includes short-term limited duration insurance policy premiums and COBRA premiums.
  4. The HRA must be made available to all similarly situated individuals.

Effect on Premium Tax Credits

Under the ACA, premium tax credits are available only to those who buy individual insurance coverage through the exchange, have no offer of minimum essential coverage or whose offer is not affordable, and meet the income requirements for subsidization of premiums. Therefore, an individual covered by an HRA integrated with individual health coverage would be ineligible for a premium tax credit unless it is an excepted benefit.

If the HRA with individual coverage were unaffordable, the employee would be eligible for a PTC provided they meet all other criteria. The Departments lay out a new calculation to determine affordability.

Step 1: Identify employee’s required contribution. This is the amount the employee would need pay for coverage. The required contribution is the difference between:

  • premium for self-only coverage of lowest cost silver plan in employee’s rating area
  • new HRA dollars the employer provides (for self-only coverage type)

Step 2: Determine employee’s maximum allow affordable premium contribution – this is the employee’s maximum payment responsibility.

  • employee’s household income x required percentage (i.e.. 9.86% for 2019)

Step 3: Compare contributions

  • The required premium contribution is greater than the allowable contribution = UNAFFORDABLE
  • The allowable contribution is higher than the employee contribution = AFFORDABLE

Interaction with ERISA

ERISA obligations and responsibilities for employers in the design, delivery and operation of the benefit plan apply to group health plans. Individual health plans do not fall under ERISA and are not considered part of an employer-sponsored plan and, as such, are not eligible for COBRA as long as:

  • Coverage purchased is voluntary for employees
  • Employer/plan sponsor does not select or endorse an issuer/carrier
  • Reimbursement for non-group health insurance premiums is limited only to individual coverage
  • Employer/plan sponsor receives no consideration
  • And each participant is notified annually that individual coverage is not subject to ERISA

Special Enrollment Periods

The Departments recognize that employers offering a new HRA integrated with individual health coverage may do so outside the individual market annual open enrollment. This would result in individuals being unable to participate in the program. Therefore, the proposed rule adds some additional circumstances by which an individual could enroll outside of the annual open enrollment.

Specifically, the rule would:

  1. Allow employees and their dependents to enroll or change individual health insurance coverage outside of the individual market annual open enrollment period if they gain access to an HRA integrated with individual health insurance coverage
  2. Apply the new special enrollment period to individuals who are provided QSEHRAs
  3. Establish the coverage effective date as the first day of the first month following the individual’s plan selection
    • If plan selection is made prior to the HRA effective date, then coverage begins on the first day of the month following the qualifying event or first of the month if triggering date is on the first of the month
    • Individuals may elect to report the qualifying event up to 60 days after the date of the qualifying event and qualify for the special enrollment period during the regular special enrollment period window.
  4. Include this special enrollment period in the limited open enrollment periods available off Exchange

Integration with ACA employer shared responsibility requirements

  • 4980H(a) – Failure to offer – Penalty does not apply If employer offers HRA to 95% of full-time employees and their dependents
  • 4980(b) – Penalty does not apply if employer’s HRA offer is affordable
  • Neither penalty is contingent on whether any full-time employee receives a premium tax credit (PTC)

Minimum Value; if HRA is affordable, it automatically meets minimum value

Affordability; if the allowable contribution is higher than the employee’s required contribution, it is affordable

The IRS and Treasury address the finer points of the affordability calculation in their notice and, to make it more workable for employers, anticipate releasing guidance finalizing the following safe harbors:

  • Calendar year safe harbor: affordability for CY plan based on cost in prior calendar year
  • Non-calendar year safe harbor: affordability of first month of plan year applies to full plan year
  • Location safe harbor: may use lowest cost silver plan in rating area of employer site rather than EE residence
  • Affordability safe harbor: use of 4980H safe harbors, e.g. W-2, rate of pay, and FPL, to determine affordability and minimum value for individual HRAs

Integration with §105(h) Nondiscrimination Rules

Section 105(h) prohibits self-funded plans from discriminating in favor of highly compensated individuals (HCIs). Specifically, to avoid violating the nondiscrimination rules, all benefits available to HCIs, and their dependents, must be available to all other participants and their dependents. The maximum dollars available must be uniform for all. Employers may not vary these dollars due to age or years of service. If a plan is found to be discriminatory, the excess benefits the HCIs receive become taxable (i.e., included in gross income).

Without any new guidance or modification, employers that offer different HRA maximums to different classes or raise their HRA contribution due to change in age, under the age-banded premium categories in the individual market, would violate the 105(h) rules. Treasury and IRS anticipate releasing future guidance to address these situations.

For these two circumstances, new guidance will indicate that the HRA will not fail if it meets all of these conditions:

  • The HRA provides the maximum dollar amount, made available to all members of a particular class, be uniform.
  • Any increases in the price of coverage due to age are uniform for all participants in that class who are of the same age.
  • And the HRA reimburses premium only with no claims reimbursement.

Applicability Dates

The rule contains a significant amount of questions for which the Departments seek feedback. These comments are due back by December 28, 2018. NAHU is preparing comments to all request made in the original proposed rule and the IRS/Treasury Notice. Due to the volume of questions and request, NAHU anticipates a response no earlier than spring of 2019.

The proposed rule, if adopted, would apply to groups and insurance issuers for plan years beginning on or after January 1, 2020. However, the Departments have asked commenters to address whether this date is appropriate.


This new rule provides an interesting alternative to traditional health benefits. Its feasibility and attractiveness to employers is contingent on any modification in the final rules and the particular circumstance of the individual employer and the individual state marketplace coverage cost and availability. Until the Departments receive all the comments, review them and address them in the next version of this regulation, this option remains unavailable.

HHS Adjusts Civil Monetary Penalties

Submitted by Compliance Committee Chair Joan Fusco, Chief Compliance Officer at Savoy Associates

HHS has announced annual adjustments of civil monetary penalties. The latest adjustments are based on a cost-of-living increase of 2.04%.

Here are the highlights:

  • HIPAA Administrative Simplification. HIPAA administrative simplification encompasses standards for privacy, security, breach notification and electronic healthcare transactions. The HITECH Act of 2009 created liability for Business Associates and substantially increased the penalty amounts creating four categories of violations. The penalty amounts for each violation are:
    • Lack of knowledge: The minimum penalty is $114 (up from $112), the maximum penalty is $57,051 (up from $55,910) and the calendar-year cap is $1,711,533 (up from $1,677,299).
    • Reasonable cause and not willful neglect: The minimum penalty is $1,141 (up from $1,118), the maximum penalty is $57,051 (up from $55,910) and the calendar-year cap is $1,711,533 (up from $1,677,299).
    • Willful neglect, corrected within 30 days: The minimum penalty is $11,410 (up from $11,182), the maximum penalty is $57,051 (up from $55,910) and the calendar-year cap is $1,711,533 (up from $1,677,299).
    • Willful neglect, not corrected within 30 days: The minimum penalty is $57,051, the maximum penalty is $1,711,533 (up from $1,677,299) and the calendar-year cap is $1,711,533 (up from $1,677,299).
  • Medicare Secondary Payer.The Medicare Secondary Payer statute prohibits a group health plan from “taking into account” the Medicare entitlement of a current employee or a current employee’s spouse or family member and imposes penalties for violations. The indexed amounts for violations applicable to employer-sponsored health plans are:
    • The penalty for an employer that offers incentives to Medicare-eligible individuals not to enroll in a plan that would otherwise be primary is $9,239 (up from $9,054).
    • The penalty for willful or repeated failure to provide requested information regarding group health plan coverage is $1,504 (up from $1,474).
    • The penalty for responsible reporting entities that fail to provide information identifying situations where group health plan is primary is $1,181 (up from $1,157).
  • Summary of Benefits and Coverage.An SBC generally must be provided to participants and beneficiaries before enrollment or re-enrollment in a group health plan. The penalty for a health insurer’s or non-federal governmental health plan’s willful failure to provide an SBC is $1,128 (up from $1,105) for each failure.

These adjustments are effective for penalties assessed on or after October 11, 2018, for violations occurring on or after November 2, 2015.

IRS Releases 2019 Tax Limits

The IRS has provided tax inflation adjustments for tax year 2019:

  • The dollar limit on employee salary reduction contributions to health FSAs will be $2,700 (up from $2,650 in 2018).
  • The maximum amount of payments and reimbursements under a QSEHRA will be $5,150 for self-only coverage and $10,450 for family coverage (up from $5,050 and $10,250 for 2018).
  • HSA-compatible high-deductible health plans:
    • The annual deductible for self-only coverage must not be less than $1,350 for self only and $2,700 for family (no changes from 2018).
    • The out-of-pocket maximum is $6,750 for self-only and $13,500 for family.
    • The annual contribution limit is $3,500 for self-only and $7,000 for family.


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