By Phil Larson

A significant number of the reported HIPAA data breaches for March were reported by health plans, in fact three of the four largest HIPAA breaches for the month were from health plans. A majority of these incidents involved hacking of network servers.     

A "covered entity" must notify the Health and Human Services or HHS if it discovers a breach of unsecured protected health information. See 45 C.F.R. § 164.408.  All notifications must be submitted to the Secretary of HHS using the web portal found at HHS.gov.

The HIPAA reporting rules that require government reporting change based on the number of individuals impacted.  If a breach of unsecured protected health information affects fewer than 500 individuals, a covered entity must notify the Secretary of the breach within 60 days of the end of the calendar year in which the breach was discovered.  ​For larger breaches, entities must report breaches "without unreasonable delay" and in no case later than 60 calendar days from the discovery of the breach.  Please note, other laws including state reporting requirements and individual reporting may have earlier timeframes.

As required under § 13402 of the HITECH Act, HHS must post a list of the breaches affecting 500 or more individuals which is also reported to congress.  For assistance with HIPAA reporting requirements, please contact Kinney & Larson LLP.   
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By Phil Larson

It is sometimes said that "no good deed goes unpunished."  When we look at the context of employer  wellness, I am reminded of this point, especially in light of recent federal caselaw on this topic.  

Employer provided wellness is seen as a good thing, often designed to improve health and to provide an added benefit from an employer to an employee.  Unfortunately, the legal landscape when it comes to wellness was drafted years ago and we are left with a minefield of compliance hurdles for entities to remember when designing their wellness program.  The legal issues include but are not limited to federal and state privacy requirements, nondiscrimination, the Americans with Disabilities Act (ADA), the Genetic Information Nondiscrimination Act (GINA), the Affordable Care Act (ACA), the Employee Retirement Income Security Act (ERISA), Consolidated Omnibus Budget Reconciliation Act (COBRA), and federal and state tax laws to name a few.     

Federal caselaw on this topic can also remind us that fixing improperly designed wellness programs can be difficult with a broad array of penalties available to plaintiffs or for government enforcement actions.  As wellness is often tied to a major health plan by the employer, the health plan compliance requirements can come into play.  Some recent litigation on this point provides just some of the remedies that may be required with improperly run wellness programs:

1.   ​Awarding attorneys fees, litigation expenses and costs.  This is an important concern for many ERISA cases and leaves open the possibility that even a small issue may entail these large costs when dealing with employee benefits.  

2.   Correcting claims over multiple years.  Employers may be forced to pay for claims going back many years or to re-adjudicate past claims. 

3.   ​Reimbursements over multiple years.  Separate than a claim for services, Employers may be forced to make injured parties whole for their loss (e.g. repaying a tobacco surcharge) going back many years. 

4.  Disgorgement of unjust enrichment or profits.  Employers may be required to undue any unjust enrichment or profits resulting from the conduct determined out of compliance.  Courts struggle with determining this point but it is allowed and requested by plaintiffs.   

5.   Awarding interest.  Employers may be forced to make injured parties whole for their loss including interest going back many years.

6.  Independent Fiduciary.  Employers may be forced to pay reasonable costs and expenses of an independent fiduciary to re-adjudicate claims or correct errors.

7.   Injunction.  Employers may be stopped from further actions that impose compliance concerns.  ERISA can even allow for the removal of "fiduciaries" preventing them from making decisions over the plan.  

8.  Penalties and fees.  Several penalties and fees may exist with improperly run wellness including fines ranging from $100+ per day for each affected individual depending on the compliance topic or penalties for improper tax reporting.  Yes, that employer provided FitBit, cash, or gym membership reimbursement under the wellness program can be taxable (see IRS Chief Counsel Memorandum here discussing cash or cash like wellness incentives).  Other federal penalties and fees can even include damage for emotional harm or punitive damages (see EEOC guidance on employment discrimination including the American Disabilities Act or ADA here).  To make matters worse, some penalties are considered excise taxes which may not be tax deductible and ERISA fiduciaries can be personally liable for breaching their duties under the plan.  

9.   Other Relief.   Courts are given broad discretion to undue wrongs in ERISA related cases, including making an employer pay for a benefit that did not exist for the plaintiff.  In one recent federal case, the employer did not provide a Summary Plan Description required under ERISA to inform participants of a benefit.  In that case, the court awarded the full benefit to the claimant when the benefit was later needed under an "equitable relief" theory.  See Snitselaar v. Unum Life Ins. Co. of America, No. 17-014 (N.D. Iowa Jan. 22, 2019). 

10.  Brand Impact.  Finally, entities should always consider the impact on your business name for improper wellness compliance.  Sometimes, this is the worst and most punitive of all the wrongs and the most difficult to repair. It can take years to build a brand, but a moment to tarnish it.        
   
Employer wellness remains a complicated area for employers, health plans, vendors, and insurers.  Entities should tread carefully--what may be seen a small wellness program can have drastic impact on your brand or result in damages spanning multiple years or involve corrected tax returns.  Entities should also consider who is liable in their contracts or service agreements for compliance but some harms like brand impact or lost trust of your employees are difficult to remedy.    

By Phil Larson

On Tuesday April 24th, federal agencies published several forms of guidance dealing with the Mental Health Parity and Addiction Equity Act or MHPAEA.  The guidance applies to most major medical plans (but not retiree medical) and shows that the agencies in charge of enforcement (Health and Human Services, Department of Labor, and Treasury) continue to take the MHPAEA seriously.  As you might guess, the topic of mental health and substance abuse (and those benefits) is heightened in light of violent events in the national news and related political topics.   The recent guidance includes the following topics:
 
Proposed Q&As Part 39 on MHPAEA.  These proposed Q&As run through several examples of noncompliance and remind entities about the disclosure obligations associated with the MHPAEA or ERISA.  Hot button topics include (a) various restrictions for eating disorders (e.g. residential treatment, in-patient, or out-of-network); (b) reimbursement rates and defining mental health or substance abuse benefits; (c) dosage limits with prescription medications, (d) step-therapy protocols or fail-first policies, (e) defining experimental or investigative treatment exclusions, and (f) network adequacy standards and accuracy of network provider directories (e.g. summary plan description or SPD requirements).  Many of the identified problems can be summarized by an unequal application of a plan term or policy toward mental health or substance abuse as compared to ordinary medical or surgical benefits.  These examples also remind us that “the devil is in the details.”       

Updated Sample Form to Request Evidence of MHPAEA Compliance.  This form is updated and can be used for “parties” to request additional information under the plan for compliance--from employer sponsored plans or the insurer.  The form includes examples of items individuals may request their plan to provide within 30 calendar days:

• Provide the specific plan language regarding the limitation and identify all of the medical/surgical and mental health and substance use disorder benefits to which it applies in the relevant benefit classification;
• Identify the factors used in the development of the limitation (examples of factors include, but are not limited to, excessive utilization, recent medical cost escalation, high variability in cost for each episode of care, and safety and effectiveness of treatment);
• Identify the evidentiary standards used to evaluate the factors;
• Identify the methods and analysis used in the development of the limitation; and
• Provide any evidence and documentation to establish that the limitation is applied no more stringently, as written and in operation, to mental health and substance use disorder benefits than to medical and surgical benefits. 

Self-Compliance Tool.  As directed by Section 13001(a) of the 21st Century Cures Act, this publicly available tool may be used to improve compliance with MHPAEA. The Department will update the self-compliance tool every 24 months to provide additional guidance on MHPAEA’s requirements, as appropriate.

​Various Agency Reporting Documents.  In addition to the above items, HHS and DOL also provided links to several items showing their increased enforcement.  This includes a DOL Report to Congress: Pathway to Full Parity, DOL FY 2017 Enforcement Fact Sheet, HHS Section 13002 Action Plan for Enhanced Enforcement, and a HHS published listening session for parity enforcement with involved stakeholders.  
  
Several important related issues identified in these documents includes exclusions, remedies and reporting.  First, the agencies state once more that it is NOT a direct violation to have a general exclusion (e.g. bipolar disorder) as these are not treatment limitations.  Second, if a MHPAEA problem is found, the remedy will be to remove the offending provisions and re-process those claims correctly.  Such reprocessing can be global for identified providers which means your plan may have corrections even without an audit.  In a time where where plans often have deductibles, copays, and out-of-pocket maximums, this is no simple task.  Lastly, while these documents did not seem to reference it, there is also a potential excise tax penalty under the Code up to $100 per day per affected individual.  Tied to this, plan sponsors may also need to consider whether federal reporting is required under IRS Form 8928 for any discovered violations under the MHPAEA. 
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​Entities may wish to discuss with their partner vendors how they may ensure limits under the plan coverage meets these requirements and if they have information necessary to respond to future requests for additional information.  Of the 187 investigations conducted by the DOL in 2017 where MHPAEA applied, the DOL cited 92 violations for MHPAEA noncompliance.  About two years ago, tri-agency guidance in the form of Q&As Part 31 were released also dealing with MHPAEA enforcement.  A summary of that older but related guidance is available here. 

By Phil Larson

The short answer is no.  Individuals who have contributions to an HSA for the calendar year are required to file Form 8889 with their IRS Form 1040.  Individuals who have attached forms are not eligible for the EZ Form.  Technically Form 8889 is also required if there are distributions in the tax year.

Form 8889 should identify all contributions, including employer contributions if any made for the year.  This should even include contributions made in a subsequent year which are designated for the prior year (similar to an IRA contribution made before you file your taxes but identified as a prior year contribution).    

Please note contributions an employee elects through payroll are usually pre-tax contributions from their employer and should not be included on line 2 of Form 8889.  Box 12 on the W-2 will show all contributions the employer made to the HSA (including the employee pre-tax contributions if any).  Individuals who have employer contributions, can use the amount shown on Box 12 from your W-2 to fill out line 9 of Form 8889.  Forms 8889 and 1040 are available at www.irs.gov or 1-800-tax-form.

Employers or entities involved in HSA offerings should be aware of some of the tax issues and forms involved with HSAs.  If you need assistance on the legal issues surrounding HSAs, please contact Kinney & Larson LLP.  
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By Phil Larson

Many entities understand the Americans with Disabilities Act or ADA prohibits discrimination against individuals on the basis of disability in regards to employment compensation and other terms, conditions, and privileges of employment.  This is found under title I of the ADA and includes ‘‘fringe benefits available by virtue of employment, whether or not administered by the covered entity.’’  The ADA Title I also restricts the medical information employers may obtain from employees by generally prohibiting disability-related inquiries or requiring medical examinations.  42 U.S.C. 12112(d)(4)(A).  The statute further provides an exception to the prohibition of disability related inquiry or medical exams for voluntary employee health programs, which includes many workplace wellness programs. 

A wellness program that is an employee health program may be part of a group health plan or may be offered outside of a group health plan or group health insurance coverage.  Common examples include: a health risk assessment (HRA) or medical questionnaire; medical examinations; screening for high blood pressure, cholesterol, or glucose; classes to help employees stop smoking or lose weight; physical activities in which employees can engage (such as walking or exercising daily); coaching to help employees meet health goals; and/or the administration of flu shots. 

Section 102 of the ADA provides that any information relating to a medical condition of an employee obtained by an employer during “voluntary medical examinations, including voluntary work histories, which are part of an employee health program available to employees at that work site,” must be “collected and maintained on separate forms and in separate medical files and [be] treated as a confidential medical record.” 

To state a viable claim under the ADA’s confidentiality provisions, a plaintiff has to allege (1) the employer obtained the medical information through employment-related medical examinations and inquiries; (2) the information was disclosed by the employer and not treated confidentially; and (3) the employee suffered a tangible injury as a result of the disclosure.  Please note, caselaw has held emotional injury as a recognizable injury.

Employers and wellness program providers must take steps to protect the confidentiality of employee medical information provided as part of any employee health program or for other employment areas (like FMLA, medical leave, and workers compensation).  Based on recent comments from the EEOC, here are some things to remember for ADA confidentiality:   

Training.  
It is critical to properly train all individuals who handle medical information about the requirements of the ADA and, as applicable, HIPAA’s privacy, security, and breach requirements and any other privacy laws.

Policies.
Employers and program providers should have clear privacy policies and procedures related to the collection, storage, and disclosure of medical information.

Protections.  
On-line systems and other technology should guard against unauthorized access, such as through use of encryption for medical information stored electronically.  The protections also apply whether the employee is at work or ranting on social media after hours.  

Breach Investigation and Reporting.  
Breaches of confidentiality should be reported to affected employees and should be investigated.  Recent guidance from the EEOC says reporting should be "immediate" and investigations should be "thoroughly" performed.  

Discipline.  
Employers should make clear that individuals responsible for disclosures of confidential medical information will be disciplined and should consider discontinuing relationships with vendors responsible for breaches of confidentiality.  Such discipline should include the potential dismissal for those that disclosed information improperly. 
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Job Responsibilities, Vendors and Firewalls.
Individuals who handle medical information that is part of an employee health program should not be responsible for making decisions related to employment, such as hiring, termination, or discipline.

Use of a third-party vendor that maintains strict confidentiality and data security procedures may reduce the risk that medical information will be disclosed to individuals who make employment decisions, particularly for employers whose organizational structure makes it difficult to provide adequate safeguards. If an employer uses a third-party vendor, it should be familiar with the vendor’s privacy policies for ensuring the confidentiality of medical information.

Employers that administer their own wellness programs need adequate firewalls in place to prevent unintended disclosure. If individuals who handle medical information obtained through a wellness program do act as decision-makers (which may be the case for a small employer that administers its own wellness program), they may not use the information to discriminate on the basis of disability in violation of the ADA. 

Notice. 
Starting in 2017, in order to meet the "voluntary" requirement for a wellness program that includes a disability related inquiry or medical examination, a new ADA notice must be included explaining many of these points above.  This notice is required with or without an incentive to participate in the wellness program.  A sample notice is available from the EEOC, but we recommend some reasonable edits before using this sample.       

If you need help understanding these rules, please contact Kinney & Larson LLP.  

By Phil Larson

When you are thinking of your health and welfare benefit programs, an often misunderstood or missed program may include the cafeteria plan or section 125 plan.  A cafeteria plan is a separate written plan maintained by an employer for employees that meets the specific requirements and regulations of section 125 of the Internal Revenue Code.

These are often used to provide many tax incentivised benefits (including FICA, FUTA, Medicare tax or income tax withholding) for many kinds of programs like health flexible spending accounts, adoption assistance, dependent care accounts, pre-tax premiums for medical, dental, vision, vacation buy/sell, and even health savings accounts.

Cafeteria plans provide a very unique way to allow a choice between cash and some of the nontaxable benefits without that "choice" causing taxation.  This means employees can help pay for some or all of these benefits with many of the tax savings.  These tax savings help the employer as well as the employee, their spouse or dependents.       

The IRS recently announced several information letters on cafeteria compliance specifically focussing on health flexible spending accounts.  Some noteworthy items include:
 
CLAIMS PROCESSING: 
Health FSAs must adopt procedures to verify claims with (1) an independent third-party verifying the expense, and (2) employee certification that any expense being reimbursed has not already been reimbursed and the employee will not seek reimbursement from any other health benefit plan.  
 
AMOUNT OF INFORMATION: 
Participants must provide sufficient details of the service or product to allow the health FSA administrator to verify that the service or product is a qualifying medical expense. The rules require that the information from a third party describe the medical service or product, the date the service or product was provided, and the amount of the expense.  Just because the participant paid a bill is not enough and paying for future care is not allowed.   
 
DATA PROTECTIONS APPLY: 
Information about health care submitted to health FSA administrators as part of a request for reimbursement is generally protected health information subject to the same protections against disclosure and system-security requirements as information submitted to health insurance plans.  This means HIPAA privacy and security applies (and breach notification under HITECH).  These same protections may also apply to HSAs if the program substantiates HSA claims under the medical plan (meaning the medical plan verifies the medical expense for the HSA vendor).   
 
PENALTIES AND FAILURE TO DOCUMENT: 
The IRS affirms that if the health FSA violates the requirements under section 125 for cafeteria plans, all elections under the cafeteria plan may potentially result in income to employees.  Numerous rules exist for section 125 plans, including detailed documentation requirements.       

FUTURE CHANGES LIKELY:
Many of the 2016 information letters were addressed to members of congress.  This can often mean lawmakers are looking at potential changes.  Also, both parties and candidates for president have expressed interest in dependent care.  Lastly, health care and taxes continue to be a hot topic at any level.  A little known fact is that cafeteria plans make up the single largest impact of the entire tax code.  This is primarily due to the fact that employee pre-tax elections continue to increase substantially for health care coverage.

​Given the gravity of the issues identified above, entities would be wise to verify that their forms or processes include these points and to verify the indemnity provided by their vendors who support such claims processing.  If you need assistance with any of these points or cafeteria plans generally, please contact Kinney & Larson LLP.    

By Phil Larson

On May 17th, 2016, the Equal Employment Opportunity Commission (EEOC) announced new rules dealing with the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA).  
These rules are complex but at least one new compliance obligation for employers will include a new ADA wellness notice.  This notice will be required on January 1, 2017.  

First a little background information may be helpful.  The ADA Title I generally prohibits discrimination against individuals on the basis of a disability for employment.  This includes compensation, benefits, and other terms, conditions, or privileges of employment. 42 U.S.C. 12112(a); 29 CFR 1630.4(a)(1)(vi).  Title I of the ADA also applies to employment agencies, labor organizations, and joint-labor management committees. See 42 U.S.C. 12111(2), (4), (5), 12112(b).  One protection of the ADA is it restricts the medical information employers may obtain from employees by generally prohibiting disability-related inquiries or medical examinations.  This is a broad restriction, as an example, a health risk assessment would be considered a disability related inquiry or medical exam.  Importantly, the statute however provides an exception to this rule for "voluntary" employee health programs, which include many workplace wellness programs.  42 U.S.C. 12112(d)(4)(B).  

​The voluntary requirement term has been expanded by the rules now requiring a new notice.  More specifically, the EEOC stated:

"For these wellness programs to be deemed voluntary, a covered entity must provide a notice—in language reasonably likely to be understood by the employee from whom medical information is being obtained—that clearly explains what medical information will be obtained, how the medical information will be used, who will receive the medical information, the restrictions on its disclosure, and the methods the covered entity uses to prevent improper disclosure of medical information."  Thee EEOC also published a sample notice for employer sponsored wellness programs at the following link.  EEOC sample wellness notice.  

It is important to note, this new wellness notice will apply regardless of certain facts or conditions:   

1.  The new notice applies to an employer wellness program which contains a disability-related inquiry and/or a medical exam regardless if it is administered by the employer or their vendor.  

2.  The new notice applies to all wellness programs that include disability-related inquiries and/or medical examinations whether they are offered only to employees enrolled in an employer-sponsored group health plan, offered to all employees regardless of whether they are enrolled in such a plan, or offered as a benefit of employment by employers that do not sponsor a group health plan or group health insurance. 

​3.  The new notice applies whether or not the employer has any employee with a disability under the ADA.  See 42 U.S.C. 12112(d)(4)(A) (stating that a covered entity ‘‘shall not require a medical examination and shall not make inquiries of an employee as to whether such employee is an individual with a disability or as to the nature or severity of the disability, unless such examination or inquiry is shown to be job-related and consistent with business necessity’’).

4.  Finally, the new notice applies with or without an incentive for the wellness program.  The final rule clarifies that the requirement to provide a notice applies to all wellness programs that ask employees to respond to disability-related inquiries and/or undergo medical examinations. 

Please note, this blog item focused specifically on the broad application of the new ADA notice. The rules around wellness however are growing in complexity, with analysis under federal health reform, the ADA, GINA, and HIPAA to name a few.  GINA will also have a notice/authorization for some wellness programs extended to spouses effective in 2017.  Compliance with one law does not necessarily mean compliance with another.  If you have legal questions on wellness generally, please contact Kinney & Larson LLP.    

By Phil Larson

As an employer trying to get medical coverage for employees, you may find yourself coming across minimum participation rules for health coverage.  Minimum participation rules can be described as a percentage of your eligible employees who must choose coverage.  These limits are often done to prevent adverse selection--or the case where only the sick people in the population choose the coverage.  Put another way, insurance is rated for sick and healthy participants contributing into the pot, if only the sick people choose it, rates can look very different and a carrier may not want to offer such coverage.

Each carrier may have its own version of minimum participation requirements but most if not all include a majority of the eligible employee population.  This can be difficult for some employers, especially those with lower paid employees or employees who are younger and do not envision much medical care in their future.  Asking some employees to take two hundred dollars a month out of their paycheck can prove challenging, even with the individual mandate.

A little known fact is that the Affordable Care Act (ACA) changed these rules significantly in the small group and large group insurance markets for employers.  The following rules may come up when dealing with a carrier who is discouraging enrollment for an employer based on size of the employee enrollment.  This can happen with smaller employers and even very large employers that are attempting to obtain coverage in one particular jurisdiction in the country for a smaller employee count.  

GUARANTEED ISSUE:

The new federal rules require available insurance entities to provide coverage in the large group market, even mid-year--and that coverage cannot be prevented by minimum participation or minimum contribution rules.  In the small group market, insurance entities cannot enforce these limits during a special one month window of November 15th through December 15th each year.   This is mandated under the “guaranteed availability” or “guaranteed issue" rules of the ACA §1201, which amended §2702 of the Public Health Services Act.  Some regulatory guidance includes the following:

In the final rules released in February 2013 on this issue, HHS stated in the preamble “...permitting issuers to deny coverage altogether to a small employer with between 50 and 100 employees based on a failure to meet minimum participation or contribution requirements could subject such employer to a shared responsibility payment under section 4980H of the Code for a failure to offer coverage to its employees.”  HHS final regulations also state at 147.104(b)(1): “In the case of health insurance coverage offered in the small group market, a health insurance issuer may limit the availability of coverage to an annual enrollment period that begins November 15 and extends through December 15 of each year in the case of a plan sponsor that is unable to comply with a material plan provision relating to employer contribution or group participation rules. . . ”

Also in February 27, 2013, HHS seemed to say in their comments to the final health insurance market rules that while open enrollment and special enrollment periods are still allowed, the ACA §2702 contains no exception to guaranteed availability based on a failure to meet minimum contribution or minimum participation requirements.  See §2702(b)(1).    

In addition, the Department of Treasury February 2014 final regulations on the employer responsibility requirements responded to comments on this issue, confirming that minimum participation should not prevent employers from offering health coverage:

"Commenters expressed concern about potential liability under section 4980H in the case of an applicable large employer that cannot obtain or maintain coverage for its employees because the employer cannot satisfy a health insurance issuer’s minimum participation requirements. In the large group market, a minimum participation requirement cannot be used to deny guaranteed issue. For small employers, such as relatively small applicable large employers, final regulations issued by HHS provide that an issuer must guarantee issue coverage to a small employer during an annual, month-long open enrollment period regardless of whether the small employer satisfies any minimum participation requirement.” 

Lastly, informal comments from HHS seems to say that premium pricing which is set too high or excessive (possibly because of very low participation) can also be viewed as a way to prevent coverage and consequently run afoul of these rules.   

GUARANTEED RENEWAL:

A separate rule is also found under ACA §1201, which amended §2703 of the Public Health Services Act and provides that coverage must be renewed under certain conditions each year.  Technically, the rules around guaranteed renewal appear to be different from guaranteed issue when reading the statute and regulatory guidance.  This means an insurance carrier may not have to renew coverage for failing minimum participation or contribution rules at the end of the coverage year.  However, it seems to be the position of HHS that each plan option of the carrier is subject to guaranteed issue (above) so a carrier with multiple plan options may have to allow enrollment into a separate option(s) if this loophole is used to cut off coverage at renewal.  Often the difference between options is nothing more that a change in deductibles or copay.         

OTHER NONDISCRIMINATION RULES:

Last but not least, carriers must avoid discriminatory marketing practices or benefit designs that can be construed as a failure to comply with the guaranteed availability requirements.  In response to comments, HHS revised 45 CFR § 147.104(e) of their final rule "to make clear that a health insurance issuer and its officials, employees, agents and representatives must not employ marketing practices or benefit designs that will have the effect of discouraging the enrollment of certain individuals in health insurance coverage."  This applies to insurers in the group or individual market and prevents discrimination based on the degree of medical dependency or other health conditions.  This standard is also tied into the prohibition on discrimination with respect to essential health benefits in 45 CFR §156.125, the non-discrimination standards applicable to qualified health plans in the Marketplace identified under 45 CFR §156.200(e), and the marketing standards for qualified health plans found in 45 CFR §156.225.
 
These rules can be complicated, if you need assistance with these rules or the ACA generally, please contact Kinney & Larson LLP. 
 

Please click here for a recent memo on this topic.  This memo was also published in the April 25th BenefitsLink newsletter.  

By Phil Larson

Just this week, the IRS provided additional questions and answers on employer payment plans where employers provide reimbursements to employees for individual health insurance premiums either in the Marketplace, Exchanges or otherwise.  This guidance once again clarifies several key points.  

Employer Payment Plans Do Not Satisfy ACA Requirements
The IRS explains that employee reimbursements for individual health policies will be considered a "group health plan" and generally fail to satisfy the group health plan requirements under the Affordable Care Act (ACA).  For example, these programs fail the preventive care mandates and the prohibitions on annual limits for group health plans (among other things).  Sometimes these are referred to as part of the "market reform' requirements for health coverage.  The employer cannot argue the purchased policy meets these plan requirements because no integration is allowed with individual insurance coverage.  This means the "reimbursement" on its own must satisfy these requirements which it cannot do.  

Different Facts Yield Same Results
The prohibitions are the same and do not change if (1) the employer is subject to the large employer rules under the ACA or not (but see transition rule below for small employers), (2) the reimbursement is paid with pre-tax or after-tax dollars, (3) it is for all or part of the health cost, (4) it is a reimbursement to the employee or a premium paid directly by the employer to the carrier.  In all of these cases, the penalties can still apply.  

Taxation of the Benefit Did Not Change
Interestingly enough, the tax rules around these programs did not specifically seem to change.  Prior tax rules always seemed to allow these medical reimbursements, even tax free in many cases.  See Rev. Rul. 61-146.  Instead, the relatively new ACA requirements tied to "group health plans" creates the concern.  The IRS specifically states that "Rev. Rul. 61-146 does not address the application of the market reforms and should not be read as containing any implication regarding the application of the market reforms."    

What May Be OK  
An arrangement where the employee may have "after-tax" amounts applied toward non-endorsed health coverage or take that same amount in cash compensation is not an employer payment plan subject to these prohibitions.  In short, a payroll practice to send employee cash to a third party (that the employee can instead simply take in cash) is not a group health plan of the employer--if the standards of the DOL’s regulation at 29 C.F.R. §2510.3-1(j) are met.  

Relief may also be available for certain S-Corporations as described in IRS Notice 2015-17.  In addition, certain other plans if "excepted" from the market reform requirements may also still be OK.  See Code § 9831(b), ERISA § 732(b), PHS Act §§ 2722(b) and 2763.  For example, plans with fewer than two employees (like a retiree only plan) are not subject to the preventive care or annual limit prohibitions of the ACA because they qualify as excepted benefits.  Some other examples of an excepted plan can include many limited scope dental, vision and flexible spending accounts (FSAs) which are still common today.

If you are self-employed and purchase health insurance coverage for yourself and your family, you will still be eligible for the self-employment health insurance tax deduction.  You may claim the deduction regardless of whether you purchase coverage in the individual market or the small group market.  However, if you purchase coverage in the individual Marketplace and claim the premium tax credit on your tax return, the amount of the premium reimbursed by the credit may not also be deductible.  See TD 9683 and Revenue Procedure 2014-41 for specific rules on how the premium tax credit is coordinated with the self-employment health insurance deduction.  

Lastly, certain grandfathered programs set up under an HRA in effect on January 1, 2013 may be OK and reimbursements tied to excepted benefits under HIPAA may be OK (e.g. reimbursements for limited scope vision and dental).   Also, a program integrated with another group health plan that meets all requirements of the code may avoid these prohibitions because the combined benefit can satisfy these requirements.  The integration rules are complex however and outside of the scope of this summary.    

Self-Employed Coverage
While this article is about employer coverage, if you are self-employed and purchase health insurance coverage for yourself and your family, you may be eligible for the self-employment health insurance tax deduction.  This is true if you purchase coverage in the individual market or in the small group market.  However, the rules do not allow double dipping with Marketplace credits.  If you receive premium tax credits and purchase coverage in the individual Marketplace, the amount of the premium reimbursed by the credit may not be deducted. 

Amount of the Penalty
From the IRS viewpoint, failing the market reform rules can cost up to $100/day per applicable employee (totaling $36,500 per year).  This penalty is found under 26 USC 4980D.  This section is used for other penalties for group health plan compliance failures.  Please keep in mind that excise taxes are normally not deductible making this penalty even higher.  The employer or other persons responsible for providing or administering benefits under a group health plan must file Form 8928 to pay these taxes.  This is a self-reporting obligation.      

Transition Rules
On February 18, 2015, the IRS issued Notice 2015-17, which provides transition relief from the excise tax under § 4980D for failure to satisfy the group health plan requirements in certain circumstances. Special transition rules may also apply for employer healthcare arrangements that constitute (1) employer payment plans, as described in Notice 2013-54, if the plan is sponsored by an employer that is not an Applicable Large Employer (ALE) under Code § 4980H(c)(2) and §§54.4980H-1(a)(4) and -2; (2) S corporation healthcare arrangements for 2-percent shareholder-employees; (3) Medicare premium reimbursement arrangements; and (4) TRICARE-related health reimbursement arrangements.  If all the requirements are met, this relief either applied from 2014 to June 30th, 2015 or all of 2015 depending on which transition relief is used.  The relief did not apply to stand alone HRAs or HRAs that reimburse expenses other than insurance premiums.          

Not New Guidance.
The IRS, DOL and HHS have been saying these points since September 2013 in Notice 2013-54 and in several subsequent forms of guidance.  See IRS Notice 2015-17 and DOL Technical Release 2013-03; January 2013 DOL and HHS issued FAQs on the application of the Affordable Care Act to reimbursements; and Nov. 6, 2014, DOL issued additional FAQs on the application of the Affordable Care Act to certain arrangements. [Update: the Office of Chief Counsel of the IRS also published an information letter 2016-0019 stating that these arrangements do not comply with the ACA market reform requirements and that they disagree with the schemes that are being promoted to reimburse individual health policy premiums.  Additionally, the 21st Century Cures Act now allows small employers to provide Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) in very limited instances provided several conditions are met]. 

These rules are difficult to navigate and the summary above is abbreviated for length.  If you need help understanding these requirements or the ACA generally, please contact Kinney & Larson LLP.     

By Phil Larson

As the internet takes holds of items beyond your computer, tablet or smartphone, it was just a matter of time before medical care became intertwined.  And as usual with any booming industry, we see new laws developing and with it confusion on how to apply old laws.  

You might not know this, but telemedicine is here and growing fast.  It may not be listed in you Certificate of Coverage, Summary Plan Description, or Summary of Benefits, but it is a developing system by which medical care is delivered.  What is not always clear is how it is defined.  Currently several different definitions exist for "telemedicine" and new entities are changing the names they operate under to provide these services.  The American Telemedicine Association describes telemedicine as "the use of medical information exchanged from one site to another via electronic communications to improve a patient's clinical health status."  

Telemedicine applies to a broad range of medical, including primary care, specialist referral, remote patient monitoring, and health education.  It is not just traditional health care either.  Dentistry, counseling, physical and occupational therapy, home health, chronic condition monitoring, disaster management, education and even veterinary services are now involved.

In Minnesota, two new laws will be coming into play for health care and telemedicine.  This includes MN Statute 62A.67 which applies to commercial health insurance in the state and MN Statute 256B.0625 Subdivision 3 that applies to Medicaid in Minnesota.  The commercial insurance requirements will be effective in 2017 and the Medicaid provisions are effective now in 2016.  Both laws will make it easier for telemedicine to apply to health care programs and requires payment for telemedicine under these programs in certain cases.  Even the federal health insurance program under Medicare allows some form of telemedicine, but it is more limited.  

Several other laws can also come into play for employers that provide health benefits with telemedicine, especially under self-insured programs where the employer is responsible for compliance under the plan.  This includes but is not limited to several requirements under the Affordable Care Act (ACA), Employee Retirement Income Security Act (ERISA), Consolidated Omnibus Budget Reconciliation Act (COBRA), Mental Health Parity Addiction Equity Act (MHPAEA), and the Health Insurance Portability and Accountability Act (HIPAA) to name a few.  For example, if there is a copay, those copays must be applied to the out-of-pocket maximum limits under the ACA, be disclosed in plan materials, and the value of such coverage should be reported with the W2 reporting of health coverage from employers (if the value is separate than the reported premium). Several unique contracting requirements can also apply if you are working with a telemedicine vendor to add this coverage to existing programs.     

If you have questions around the rules for implementing telemedicine benefits, please contact Kinney & Larson LLP.       

By Phil Larson

You might know that the Affordable Care Act (ACA) has complex new reporting requirements for large employers and issuers of Minimum Essential Coverage (MEC).  This reporting will be used for several important ACA topics including but not limited to: (1) the individual mandate; (2) eligibility for premium tax credits under the exchange or marketplace; and (3) the large employer penalties under 4980H for not offering coverage for full-time employees or offering the wrong form of coverage for full-time employees.  

The ACA reporting questions are complex and new issues can surround multiemployer plan reporting.  The IRS defines a multiemployer plan as a plan maintained pursuant to one or more collective bargaining agreements and to which more than one employer is required to contribute.  For 2015 coverage (with reporting to be completed in early 2016), a special transition rule applies for multiemployer coverage making it easier to report this coverage for the large employer.

The transition relief requires that contributions required by collective bargaining agreement or related participation agreement for the employee to a multiemployer plan be for MEC that is affordable and provides minimum value, and that their dependents also be offered MEC.  If all of that is true, the employer will be deemed to have made an offer of health coverage for that employee (despite the fact that the multiemployer plan either makes this coverage available or will make it available).  Put another way, this means employers can avoid potential §4980H penalties with respect to full-time employees they make contributions for (despite the fact that the employer may not actually provide the required health coverage).

For purposes of the 1095-C Form, the new final instructions state that an employer using the multiemployer arrangement interim guidance can use code 1H (no offer) for any month for which it enters code 2E (multiemployer plan relief) on line 16, whether or not the employee was actually eligible to enroll in coverage under the multiemployer plan.  In these cases, the employer does not need to report enrollment information on 1095-C, Part III.  Instead it is likely the multiemployer plan will report enrollment on its 1095-B.   

It is also important to make sure that the employer's ACA reporting forms still show this as an "offer of coverage" by the employer (despite the transition relief of code 1H as no offer).  This will be done by including these offers for purposes of column (a) of Part III on 1094-C.  In simple terms, these individuals count for determining whether or not the employer offered coverage to a specific percentage of its full-time employees (70% this year and 95% next year).  This calculation will be important because if you do not provide coverage to a high percentage of your full time employees, the employer can be subject to the higher "no offer" penalty under 4980H.  

To summarize, the reporting outlined above for Part II of 1095-C ensures the employer is not subject to a 4980H(b) penalty for these employees, while the reporting shown in Part III of 1094-C helps against the 4980H(a) penalty.  The rules around reporting are complex, if you have questions on ACA reporting or the ACA generally, please contact Kinney & Larson LLP.     
  

By Phil Larson

As you might know, HIPAA has very specific requirements that may apply to your organization if you are a covered entity under HIPAA, work with health information that came from a covered entity or receive health information that a covered entity authorized you to receive.  This tangled web is pulling in more and more entities.  For example, if you sell candy canes, a hospital may ask you to mail these to some of their patients.  Believe it or not, the hospital providing the mailing list and address to the candy manufacturer now makes that entity subject to HIPAA privacy.  If that entity prints and disposes of this data using confidential trash collection, that disposal company can also be subject to HIPAA.    

Understanding HIPAA can be complex.  Understanding various risks under HIPAA can be even more complex.  This blog item will focus on three different "risks" under HIPAA.  

RISK ANALYSIS 

A HIPAA risk analysis is found in HIPAA section 164.308(a)(1)(ii)(A). It is considered one of the foundational building blocks of any HIPAA security program.  HHS, the federal agency in charge of HIPAA privacy and security may sometimes refer to this as a risk assessment.  The risk analysis requires entities to conduct an accurate and thorough assessment of the potential risks and vulnerabilities to the confidentiality, integrity, and availability of electronic protected health information held by the entity.  Elements of a proper risk analysis includes identifying where all your protected information is, where does it come from, protections you have in place, and what are the human, natural and environmental threats to your data.

The risk analysis will actually help entities understand and evaluate other HIPAA compliance obligations and what they should do about it.  For example, the bigger the risk, the more protections may be needed for the "reasonable and appropriate" standard under HIPAA.  In simple terms, this analysis will help entities determine several related areas of HIPAA compliance, including personnel screening, data backup, encryption, authentication, and transmission protections.  

Your risk analysis should be documented and subject to periodic review.  It is not a one time process.    

RISK MANAGEMENT

Once your risk analysis is complete, a HIPAA risk management program must be established under HIPAA section 164.308(a)(1)(ii)(B).  The risk management process can be seen as the process to respond to the risk analysis, reducing risk to a reasonable and appropriate level and maintaining that level going forward in time.  

Big picture, the risk management program will respond to different levels of risk with potential "fill the gaps" to reduce that risk.  This part of your program can include:  updating technology, new policies or procedures, new processes, new training, etc.  Just like before in the risk analysis, these mitigation techniques should be documented and subject to periodic review as well.  

RISK ASSESSMENT

Last but not least, a HIPAA risk assessment will be needed anytime there is improper acquisition, access, use or disclosure of protected information subject to HIPAA.  Some entities may refer to this as a breach assessment and they are used to determine when breach reporting is required under HIPAA.  

In simple terms, almost any impermissible event(s) with protected health information is presumed to be a breach unless the covered entity or business associate demonstrates that there is a low probability that the protected health information has been compromised based on a risk assessment of what happened.   These risk assessments should include: (1) the nature and extent of the information involved, including the types of identifiers and the likelihood of re-identification; (2) who used the protected health information or to whom the disclosure was made; (3) whether the protected health information was actually acquired or viewed; and (4) the extent to which the risk to the protected health information has been mitigated.

It is important to note that breaches can occur without proof of access, meaning people do not have to actually see the information.  If protected information is left unprotected, that can be breach on its own. Additionally, a breach can occur even though no entity violated HIPAA (e.g. theft).  This risk assessment helps entities analyze when or if the breach is reportable and the entire process should be documented.  If you are a large entity covered by HIPAA, you should have performed one of these already unless you operate in a mistake free world.     

Understanding these "risks" can be challenging but are extremely important for entities.  If you need assistance with any of these requirements or HIPAA generally, please contact Kinney & Larson LLP.            
     

By Phil Larson

You might know that currently more people are enrolled in HSAs than are enrolled in all federal and state run exchange health plans.  HSAs continue to increase as a health plan offering in many parts of the U.S. with lower cost trends, unique tax rules, and more opportunity for participants to obtain financial benefits for their own health care decisions.  

Several new legal changes in the last three months may impact how these programs are run. 

PREVENTIVE CARE:  
New final regulations were announced in August 2015 that clarify the items or services that qualify as preventive care.  These regulations are required for many health plans under the Affordable Care Act §2713, but not so called grandfathered health plans.  This guidance was after new federal FAQs (part XXVI) on this ACA requirement released in May 2015 also clarifying some of these requirements.    

For HSA purposes, IRS Notice 2013-57 provided that HSAs may still provide items or services required under the ACA §2713 below the deductible and not risk losing their eligible status.  This means the new preventive care rules and guidance above may apply and not impact a persons HSA eligibility.   

The new preventive care regulations will apply to plan years beginning after 9/24/15--which means 1/1/16 for plans operating under a calendar year.  

ELIGIBILITY: 
A recent bill signed into law called the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 also changed HSAs.  Specifically, this bill amended the tax code to allow Veteran Affairs coverage so it will not impact the eligibility of HSA participants.  The new language of the code reads as follows:

An individual shall not fail to be treated as an eligible individual for any period merely because the individual receives hospital care or medical services under any law administered by the Secretary of Veterans Affairs for a service-connected disability (within the meaning of section 101(16) of title 38, United States Code). [Additionally, guidance from IRS Notice 2015-87 clarified that as a rule of administrative simplification, for purposes of this rule, any hospital care or medical services received from the VA by a veteran who has a disability rating from the VA may be considered to be hospital care or medical services under a law administered by the Secretary of Veterans Affairs for service- connected disability.]

Prior to this change, Veteran Affairs coverage used in the last three months impacted participant eligibility for HSAs.  This new eligibility requirement will apply in 2016.  

IMBEDDED INDIVIDUAL DEDUCTIBLES:  
Another recent change impacts how plans will operate their out-of-pocket maximums including the corresponding High Deductible Health Plan (HDHP) that is needed for HSA eligibility.  In a nutshell, HSA plans will be operating with a new rule for individuals who are enrolled in the HDHP.  See blog post dated 6/15 for further details and links on this new requirement.  This new HDHP plan requirement will apply in 2016.  

GARNISHMENT:  
Caselaw also continues to evolve on HSAs including a recent case out of Colorado's highest court which provided that HSAs do not fall within the characterization of an retirement plan in order to shield the HSA from a creditors claims.  The court ruled that because these programs can be used at any time during the account holder's lifetime, therefore they are not "retirement plans" under the Colorado's garnishment exclusion. See Roup v. Commercial Research, LLC (June 1, 2015).     

The rules around HSAs are complex and continue to evolve.  For legal questions on HSAs, please contact Kinney & Larson LLP.  

By Phil Larson

The complexity around health plan out-of-pocket limits will increase in 2016 due to some recent regulations from HHS and recent FAQs from Health and Human Services, Treasury and the Department of Labor for the Affordable Care Act.

The ACA requirements include an out-of-pocket maximum for health plans subject to market reform provisions.  This is found under §2707(b) of the ACA.  This requirement is similar to the requirements under the Health Savings Account (HSA) rules but follow a different adjustments for inflation.  See prior blog post dated 5/13/14 for more details for these rules.  

Until recently, many people thought you must follow either a single level maximum (for single coverage) or a family level maximum (for anything above single coverage).  HHS proposed rules discussed "clarifying" this standard.  The new guidance, in the form of final rules, points out that the self-only maximum applies to each individual, regardless of whether the individual is enrolled in single coverage or family coverage.  This new clarification will apply to plan or policy years in 2016.  See final HHS Notice of Benefit and Payment Parameters for 2016 (2016 Payment Notice) (80 FR at 10824) and FAQs on the ACA Part XXVII.

This now means health plans subject to market reform will need to apply two different out-of-pocket maximums depending on the coverage level.  To make matters worse, health plans also subject to the HSA tax rules for eligibility (commonly referred to as High Deductible Health Plans or HDHP) will need to apply different maximums than health plans just subject only to the ACA market reform rules.  To illustrate this further, please see the attachment below.  [2017 limits were just announced in late November as part of the HHS Notice of Benefit and Payment Parameters for 2017.  This new guidance will require the following cost-sharing limits for plans subject to ACA market reform provisions:  the 2017 maximum annual limitation on cost sharing would be $7,150 for individual coverage and $14,300 cumulative for family coverage.] 

If you need assistance understanding these plan design rules, and which plans these rules apply to, please contact Kinney & Larson LLP.  

By Phil Larson

On April 17th, 2015, the EEOC released new proposed regulations on wellness programs, specifically focusing on the application of the Americans with Disabilities Act (ADA) with wellness incentives linked to a group health plan.  The guidance is timely given some recent actions by the EEOC against employers for their wellness programs.  

Wellness programs are very common for employers and group health plans, with a recent study showing almost 70% of large employers offering some form of incentive to encourage wellness participation.  Often, these are used to promote employee or participant health, reduce health care costs, and prevent medical conditions.  To encourage participation, employers, providers, administrators, plans and plan sponsors may offer incentives to participate or to achieve certain health outcomes.  In either case, there are a number of legal issues to consider when designing these programs and the EEOC new proposed rules add to those obligations.  

The ADA is a very broad rule, applying generally to the terms of employment including benefits.  Several new items may be highlighted in the recent proposed rules.  

1.  SAFE HARBOR NO MORE.  
The EEOC position is that wellness programs must comply with these incentive rules to be permissible.  Their position is that a broad based safe harbor as found in Seff v. Broward County, 778 F. Supp. 2d 1370 (S.D. Fla. 2011), affirmed, 691 F.3d 1221 (11th Cir. 2012) is not the proper basis to determine permissible wellness incentives. 

2.  BROAD BASED 30% LIMIT.  
The proposed regulations require that all wellness incentives be no more than 30% of the applicable employee only coverage limit.  Separate incentives must be combined together and the limit is applicable for participation based wellness (e.g. please fill out this list of questions) and outcomes based wellness (e.g. please achieve this healthy result).    

3.  30% LIMIT DOES NOT CHANGE WITH COVERAGE LEVELS.  
Unlike the Health Insurance Portability and Accountability Act (HIPAA) wellness rules, this limit is only on the employee level of coverage.  This means if the employee coverage costs $2,000 per year, the limit is $600 regardless if the family coverage is $10,000 or higher.  This effectively lowers the amount of per-person incentives a plan can offer for spouses, domestic partners, and adult children.  

4.  NEW NOTICE REQUIREMENTS.  
In order to meet the voluntary requirement of the program, a covered entity must provide a notice clearly explaining what medical information will be obtained, how the medical information will be used, who will receive the medical information, the restrictions on its disclosure, and the methods the covered entity uses to prevent improper disclosure of medical information.  Special care may need to be given for any future changes to these disclosures, as is the case when wellness programs evolve into new programs.  

5.  NO DISABILITY RELATED INQUIRY MEANS NO ADA 30% LIMIT.
Not every wellness program must comply with the limit.  If the program is merely educational, without asking for medical information of the individual or their family, these kinds of programs are not subject to these new proposed incentive rules.  For example, paying participants to listen to or attend a webinar on health eduction does not trigger these new rules.  In addition, a program that merely asks employees whether or not they use tobacco (or whether or not they ceased using tobacco upon completion of the program) is not an employee health program that includes disability-related inquiries or medical examinations.  However, paying an incentive to walk a certain amount of miles, may trigger other rules like the HIPAA wellness rules.        

6.  REASONABLE ACCOMMODATION IS BROADER THAN THE 30% LIMIT.
The ADA's requirement to provide reasonable accommodations will apply to all employee incentives even those that do not ask for medical information.  Reasonable accommodations includes modifications and adjustments that enable employees to enjoy ‘‘equal benefits and privileges of employment.’’  This can be a very difficult standard to determine sometimes. The "Fact Sheet" also released by the EEOC even includes alternatives to blood tests, sign language interpreters, and providing documents in large print or Braille when warranted.   

7.  COMPLIANCE WITH ONE LAW DOES NOT MEAN COMPLIANCE FOR ANOTHER.  
The EEOC is very clear that just because a wellness programs meets compliance with one area of the law, that does not mean the program complies with other areas of the law.  Other applicable laws to a wellness program can include taxes, Title VII discrimination, age discrimination, GINA, HIPAA Nondiscrimination, HIPAA Privacy, Security and Breach Notification.    

8.  MUST BE REASONABLY DESIGNED TO PROMOTE HEALTH OR PREVENT DISEASE.
In order to meet the standard, the program must have "a reasonable chance of improving the health of, or preventing disease in, participating employees, and must not be overly burdensome, a subterfuge for violating the ADA or other laws prohibiting employment discrimination, or highly suspect in the method chosen to promote health or prevent disease."  This calls into question some programs that do not provide feedback or use the information to design specific heath programs.  

9.  NEW CONFIDENTIALITY REQUIREMENTS.
The ADA also includes a confidentiality provision for medical information of employees separate than HIPAA Privacy.  The proposed rule adds a new subsection to the ADA confidentiality requirements. This new rule says that a covered entity only may receive information collected by a wellness program in aggregate form that does not disclose, and is not reasonably likely to disclose, the identity of specific individuals except as is necessary to administer the plan.  The EEOC states that administrators acting as agents of employers have obligations to ensure this provision is met in addition to the employer.  The EEOC also states that employers may generally comply with this new provision by following the HIPAA privacy rules for group health plans, but if personally identifiable health information is provided, a HIPAA certification may be needed.      

10.  GINA NONDISCRIMINATION IS COMING.   
This proposed rule also does not address the extent to which Title II of the Genetic Information Nondiscrimination Act (GINA) affects these programs.  For example, one important issue is an employer’s ability to condition incentives on a family member’s participation in a wellness program. The fear is that these may be in violation of GINA's family medical history provisions.  The guidance points out that GINA will be addressed in future EEOC rule making.

11.  ADDITIONAL COMMENTS REQUESTED. 
The EEOC specifically asked for additional comments on several other potential points to these rules.  This  applying a 9.5% affordable limit from the Affordable Care Act (ACA), certifications from medical professionals to obtain incentives as a reasonable alternative to providing data, de-minimus exceptions to these rues, requiring written confirmations regarding voluntary requirements from participants, the application of the ADA to incentives outside of group health plans, any other methods to ensure compliance, and practical ramifications to these changes.  The EEOC requests comments by June 19th, 2015.

If you need help understanding all the wellness rules including the new proposed rules on wellness incentives, please contact Kinney & Larson LLP.   

By Phil Larson

Just before Valentines day, the Department of Labor (DOL), Health and Human Services (HHS), and the Treasury announced additional guidance in the form of Q&As for the Affordable Care Act (ACA) compliance.  This guidance focusses on the definition of "excepted benefits" which is relevant for compliance with many requirements under the Public Health Services Act (PHSA), Health Insurance Portability and Accountability Act (HIPAA), Employee Retirement Security Act (ERISA), Tax rules (Code) and the ACA.  

The two Q&As focus on one of the excepted benefits for "supplemental health insurance."  This exception applied only where benefits are provided under a separate policy, certificate, or contract of insurance and are either: Medicare supplemental health insurance (also known as Medigap), Tricare supplemental programs, or “similar” supplemental coverage provided to coverage under a group health plan.

Prior guidance clarified what may be similar and therefore qualify as an excepted benefit under this specific exclusion:

1. The policy, certificate, or contract of insurance must be issued by an entity that does not provide the primary coverage under the plan;
2. The supplemental policy, certificate, or contract of insurance must be specifically designed to fill gaps in primary coverage, such as coinsurance or deductibles;
3. The cost of the supplemental coverage may not exceed 15 percent of the cost of primary coverage; and 
4. Supplemental coverage sold in the group insurance market must not differentiate among individuals in eligibility, benefits, or premiums based upon any health factor of the individual (or any dependents of the individual).  
 
The agencies also will propose regulations further defining #2 above to allow coverage as filling in the gaps only if the benefits covered by the supplemental insurance product are not an essential health benefit (EHB) in the State where it is being marketed.  This provision alone would rule out preventive care only plans as preventive care must be an EHB in all states.  This would be true of ALL benefits under the program.   If any benefit in the coverage is an EHB in the State where it is marketed, the insurance coverage would not be an excepted benefit under the intended proposed regulations, and would have to comply with the applicable provisions of the PHSA, HIPAA, ERISA, Code and the ACA. 

If you have questions on the ACA or other compliance issues above, please contact Kinney & Larson.  

By Phil Larson

2015 will be a new year for individuals to understand the new penalty requirements under federal law for not obtaining minimum essential coverage and for tax returns related to the new requirements under the Affordable Care Act (ACA).  Three new ACA reporting requirements for 2015 will be to report your health coverage, report any exemption for not obtaining health coverage, and to report information on government provided premium tax credits, if any.  

Individual Reporting of Requirement to Obtain Health Coverage:

The ACA includes the individual shared responsibility provision, which requires taxpayers and their family to have qualifying health care coverage for each month of the year, qualify for a coverage exemption, or make a shared responsibility payment as an additional tax penalty.  

If taxpayers and their dependents had minimum essential coverage for each month of the year, the taxpayer will simply check a box indicating the coverage with their tax return. No further action is required if you meet this requirement.  For many, this will simply be checking a box under line 61 of the Form 1040 when they file their federal income tax return.  Individuals are treated as having minimum essential coverage for the month as long as the individuals are enrolled in and entitled to receive benefits under a plan or program identified as minimum essential coverage for at least one day during that month.
 
If taxpayers or any dependents did not maintain minimum essential coverage for each month of their tax year and did not qualify for a coverage exemption, they must make an individual shared responsibility payment with their federal tax return.  This will be listed as "Other Taxes" and for many will also be identified on line 61 of Form 1040. (This will also appear on line 11 of the 1040EZ and line 38 of the 1040A).   
The amount of the penalty varies by individual and will be determined monthly.  

Calculating the Amount of Penalty:

Taxpayers will owe 1/12th of the annual shared responsibility payment for each month they or their dependent(s) do not have coverage and do not qualify for a coverage exemption. For 2014, the annual penalty amount is the greater of: 

• One percent of the household income (modified adjusted gross income or MAGI) that is above the tax return filing threshold for the taxpayer’s filing status, or the family’s flat dollar amount, which is $95 per adult and $47.50 per child (under age 18), limited to a family maximum of $285.  If a penalty applies, most filers will pay the 1 percent penalty calculation.  For example, for a single person whose modified adjusted gross income is $37,000, the penalty would be $269 ($37,000 – $10,150 = $26,850 x 1percent = $269).

• For 2015, the penalty increases to $325 per adult or 2 percent of income, and in 2016 it will be the greater of $695 or 2.5 percent of income.

The shared responsibility payment is also capped at the national average premium for a bronze level health plan (around $9,800).  Taxpayers must know their household income and applicable income tax return information to accurately calculate the amount owed.  Taxpayers can use the worksheets located in the Instructions to Form 8965 (see below) to determine this amount.

Open Enrollment Special Rules:

If an individual enrolls in a plan through the Marketplace prior to the close of the initial open enrollment period in 2014, when filing a federal income tax return in 2015 the individual will be able to claim a hardship exemption from the shared responsibility penalty for the months prior to the effective date of the individual’s coverage, without the need to request an exemption from the Marketplace.  

As a separate rule for 2015, all federal exchanges and most if not all state exchanges will provide a new period of time to enroll in the exchange coverage for uninsured individuals who are just learning of their penalty.  This will extend the 2015 open enrollment window from March 15th to April 30th, 2015.  

Exemption for Individual Penalty to Obtain Health Coverage: 

If you do not have minimum essential coverage for yourself and everyone else in your tax household, and you want to claim a coverage exemption, you can file Form 8965 for coverage exemptions as an attachment to your tax return.  For example, if you are claiming an exemption because coverage was not obtained for less than 3 consecutive months during the year, then you would fill out Form 8965 using coverage code "B" as shown in the instructions.  This can be an attachment to your Form 1040, Form 1040A, or Form 1040EZ.

If you are unable to check the box on your Form 1040 series return indicating that every member of your tax household had minimum essential coverage in every month of 2014, you do not need to take any action to indicate that some members of your tax household had minimum essential coverage for some or all months in 2014.

If you are not required to file a tax return, your tax household is exempt from the shared responsibility payment and you do not need to file a tax return to claim the coverage exemption. However, if you are not required to file a tax return but choose to file anyway, claim the coverage exemption on line 7a or 7b of Form 8965.

Reporting Premium Tax Credits:

If you obtained qualified health plan coverage through either a federal or state run exchange and you intend to take a premium tax credit (or did so at enrollment), you will have to fill out Form 8962 with your tax return. 

You must file an income tax return and attach Form 8962 even if you are not otherwise required to file. You must file Form 1040, Form 1040A, or Form 1040NR.  This means an EZ form is not allowed.   

The filing requirement is true for the taxpayer and for individuals of the taxpayer's tax household.  If you are claimed as a dependent, the person who claims you will file Form 8962 to take the tax credit and, if necessary, repay excess tax credits for your coverage. The dependent(s) do not need to file Form 8962.

You will need Form 1095-A, Health Insurance Marketplace Statement, to complete Form 8962. The Exchange (or Marketplace) is required to provide or send Form 1095-A to the tax filer(s) identified in the enrollment application by January 31, 2015.  (The Government recently announced that some people will receive an incorrect Form 1095-A because they included the monthly premium amount of the second lowest cost Silver plan for 2015 instead of 2014.  They will be notified and asked to wait to file their taxes.  The potentially incorrect amount will show on Part III, Column B of form 1095-A--and could impact their tax calculations.  Corrected forms will be available in early March.  See update below on Notice 2015-30.)  

Correcting Premium Tax Credits:

In some cases, the Exchange may have determined your eligibility for 2014 premium tax credits using projections of your income and your number of personal exemptions when you enrolled in a qualified health plan.  If this information changed during 2014 and you did not promptly report it, the amount of credit paid may be substantially different from the amount of premium tax credit you can take on your tax return.  

Form 8962 is a way for the government to check that the premium tax credit was correct given your end of year income.  If you received an advanced credit that turns out to be too high, you have excess credits and you must repay the excess, subject to certain limitations.  If your premium tax credit is too low, you can reduce your tax payment or increase your refund by the difference.

[Update for 1/26/15 IRS Notice 2015-9.  This Notice provides special relief in 2014 only for taxpayers for late payment under §6651(a)(2) of a tax and underpayment of estimated tax under §6654(a).  It does not apply to the tax for failure to obtain health coverage.  Certain restrictions and filings will apply.  For underpayment notices, the taxpayer should respond to such notices with the following statement: “I am eligible for the relief granted under Notice 2015-9 because I received excess advance payment of the premium tax credit.”  For late payment relief, taxpayers should should check box A in Part II of Form 2210, complete page 1 of the form, and include the form with their return, along with the statement: “Received excess advance payment of the premium tax credit.”  It appears the tax for the reconciliation/repayment must still be paid subject to interest, it simply means the taxpayer does not pay an additional penalty for not paying on time.

Update for 4/2015 IRS Notice 2015-30. This Notice also provides relief in 2014 only for taxpayers who may have used the wrong Form 1095-A sent to them for the 2014 tax year.  This relief is from the penalty under section 6651(a)(2) of the Internal Revenue Code for late payment of a balance due, the penalty under section 6651(a)(3) for failure to pay an amount due upon notice and demand, the penalty under section 6654(a) for underpayment of estimated tax, and the accuracy related penalty under section 6662. This relief applies only for the 2014 taxable year and may require additional disclosed statements when filing your taxes or responding to IRS claims. ]

The ACA and the tax reporting rules will be new for everyone for 2014 filings made in 2015.  If you need assistance on ACA issues, please contact Kinney & Larson.  

By Phil Larson

The Department of Health and Human Services (HHS) continues to provide important reminders for covered entities and those businesses that receive protected health information (PHI) under HIPAA through recently announced settlement agreements.  

This month, Anchorage Community Mental Health Services, a nonprofit providing behavior health care services agreed to settle a potential HIPAA violation for 2,743 patients and their electronic PHI.  Malware on the provider system lead to a breach notification from compromised IT resources.  

While Anchorage Community Mental Health Services had HIPAA policies, an investigation by HHS concluded they were not followed.  The security incident was the direct result of the provider failing to identify and address basic risks, such as not regularly updating their IT resources with available patches and running outdated, unsupported software.  This meant their system was more susceptible to malware and other risks.

The provider settled for $150,000, the agreement also includes a corrective action plan and requires the provider to report on the state of its compliance to OCR for a two-year period. The Resolution Agreement can be found on the OCR website at:

Read the Resolution Agreement

This settlement is important because it shows that it is not enough to have all the right policies.  Those policies must be followed and systems reviewed for unmatched vulnerabilities and unsupported software that can leave PHI unprotected.  As the settlement reminds us, HIPAA is an ongoing scheme, not just a "one and done" compliance program.  If you need assistance with HIPAA, please contact Kinney & Larson.              

By Phil Larson

The recently released frequently asked questions (FAQs) provide more insight into the Affordable Care Act (ACA) rules around annual cost-sharing limits imposed for certain health plans.  Once a participant reaches an annual cost share limit, the participant is supposed to have 100% coverage under the plan for in-network covered services or items.  These limits are also referred to as maximum out-of-pocket limits (MOOP).  

The MOOP for next year will be $6,600 for single coverage and $13,200 for family coverage (defined as anything but single coverage).  Please note, Health Savings Accounts (HSAs) have separate rules on these limits.  

The guidance focussed primarily on the application of referenced based pricing with the MOOP, but the guidance says it applies to "similar network designs."  Reference based pricing is where a plan pays a fixed amount for a particular procedure (for example, a knee replacement), which certain providers will accept as payment in full.  Previous guidance noted that there is a concern that this pricing method may run afoul of the MOOP, but allowed it for large group market and self-insured group health plans as long as the plan or issuer uses a reasonable method to ensure that it offers adequate access to quality providers.  

This new guidance indicates that the departments will consider all the facts and circumstances when evaluating whether it is a reasonable method. This includes an analysis on the (1) types of service, not to be used for situations where participants do not have enough time to choose providers (2) access to an adequate number of providers, considering wait times and geographic limits (3)  standards and procedures to ensure quality, (4) easily accessible exception process for participants who want to choose another provider, and (5) recommended disclosures (both automatic and on request) as detailed under this FAQ.  

The agencies reserve the right to provide additional guidance after observing reference based pricing in the market and clarify that this guidance does not signify compliance with other ACA requirements (like, preventive care, emergency services and essential health benefits for non-grandfathered plans in the individual and small group markets).  Similar network designs should also consider this guidance.  Examples of similar designs may even include tiered-provider networks.   

To view a list of FAQs on the ACA, the DOL has an ACA implementation page listing these at the following:

• DOL List of ACA Implementation FAQs 

If you need help understanding these rules or other ACA compliance obligations, please contact Kinney & Larson.      

By Phil Larson

Have you analyzed whether or not your retiree coverage may need minimum essential coverage reporting for 2015?  While many parts of the Affordable Care Act (ACA) specifically excludes retiree only coverage, the new requirements to report minimum essential coverage under the Internal Revenue Code §6055 does not include such an exception.  

As a reminder, the §6055 reporting applies to issuers (e.g. HMO) and employers and other entities that sponsor self-insured medical programs that qualify as minimum essential coverage.  This reporting will important as it will be used by the IRS to verify the individual mandate, premium subsidy eligibility for exchange coverage, and the employer responsibility rules under Internal Revenue Code §4980H (also called the employer pay or play rules).    

The minimum essential coverage reporting rules clearly state that retiree coverage is included in the reporting (as minimum essential coverage).  However, the preamble to the final regulations, the actual regulations, and the recently released questions and answers on this topic say that say that minimum essential coverage that supplements a primary plan of the same plan sponsor OR that supplements government-sponsored coverage (like Medicare) will be “supplemental” coverage and not subject to this reporting.   

This seems to imply that most retiree coverage is excluded (if it supplements Medicare) but early retiree coverage or HRA only plans (which may not supplement Medicare) may still need to be included in this reporting if the program qualifies as minimum essential coverage.

It will be important for entities that need to perform this reporting to determine which plans apply.  If you need assistance with understanding these requirements or other ACA requirements, please contact Kinney & Larson.   

By Phil Larson

A sometimes surprising fact is that just a name of a person can be protected health information under the Health Insurance Portability and Accountability Act (HIPAA).  

This is because protected health information can be just the fact that someone received services at a medical provider or health plan.  For example, I have an appointment on Monday with my Dentist.  HIPAA does not require that the information include the type of services I need or the medical condition I have in order to be protected.   In fact, the data may be protected even without the name.  For example, an address list of people who received services would also fall under protected health information just as would a list of name(s).   

Customer lists for providers are essentially a list of individuals who use medical services at their facility and should be protected information.  Protections include all of the privacy requirements and if the data is held electronically, all of the physical, administrative, and technical requirements for the data as well. 

Entities should be mindful of this fact and especially when they send out mass mailings as postcard reminders.  A subcontractor for the Maryland's Developmental Disability Administration (DDA) recently learned this lesson.  In early 2014, the subcontractor mailed postcards to approximately 2200 individuals to remind them to fill out the satisfaction survey for the DDA.  The postcard was not enclosed in an envelope and therefore the name of the person receiving DDA services was publicly viewable.  The DDA was made aware of this and contacted the vendor promptly who is in process of notifying the affected individuals and updating their policies for this deficiency.

HIPAA can be complex, and sometimes the data is still covered even without a name or other medical information.  If you need assistance understanding HIPAA or have questions with where it applies, please contact Kinney & Larson LLP.     

By Phil Larson

2015 will bring about new math for the Affordable Care Act (ACA) also called Obamacare.  These new numbers are meant to reflect changes over time, and should be monitored closely for communications, administration, training and other compliance needs of your organization.  

This is not all of them, but many important mathematical changes will occur in 2015 including:

New Employer Mandate Affordability Calculation:  The employer mandate is a complicated set of rules for certain defined large employers.  These rules involve the offer of the correct form of health plan coverage for  certain full-time employees at certain times.  The rules do not technically "require" health plan coverage, instead, employers may find themselves subject to an excise tax if they (1) do not offer health plan coverage , (2) offered the wrong coverage or (3) missed a certain amount of their full-time employees (or dependent children) provided other conditions are met.  One condition to offering the right coverage is that it must be affordable.  Affordability for the Employer Mandate is based on on single coverage, for the lowest plan offered.  The test for 2014 was 9.5% of income.  The test for 2015 will be 9.56%. [Please note, the safe harbor regulations tied to this change also need to be amended to reflect the new number in order for it to apply.]   

New Employer Mandate Penalty Calculation:  If a large employer finds themselves subject to the employer mandate rule described above, then they need to calculate their excise tax.  This tax will be a monthly calculation on either of one or two formulas.  The first formula is for a large employer that does not provide health plan coverage for its full-time employees, the second formula is for a large employer that does but either missed a few or failed under the affordability test (described above) or another test related to minimum value.  The first test is basically a $2,000 times each full-time employee calculation.  The second test is a $3,000 times each full-time employee that receives a premium tax subsidy (described below). These penalty amounts are expected to change respectively in 2015 to $2,120 and $3,180.    

New Individual Mandate Affordability Calculation:  Separate than the employer mandate above, there is another rule under the ACA for individuals and their responsibility to obtain minimum essential coverage or pay an fine on their tax return.  There are several rules tied to this requirement but one is that it will not apply if the coverage available to them is not "affordable" per the individual mandate rule.  The test for 2014 was 8.0% of income but will change to 8.05% in 2015.

New Patient Centered Outcomes Research Institute (PCORI) and Transitional Reinsurance Program (TRP) Fee Numbers:  The PCORI fee is an IRS fee and the TRP fee is an HHS fee based on the number of covered lives in a given health program. The PCORI fee will last for 7 years and the TRP fee will last for 3 years, both fees can adjust annually.  The PCORI fee is expected to raise with national health expenditure numbers.  As originally planned, the TRP fee will be lowered to $44 per covered life for 2015 and expected to be even lower in 2016.       

New Out of Pocket Limits for Health Plans:  Health plans must maintain a cap on participant out of pocket expenses for in-network qualified medical expenses.  Two separate limits exist for this, one for so called High Deductible Health Plans (HDHPs) used with HSAs and one under the Affordable Care Act.  Please see separate blog post on this ACA issue for 2015 changes.  Please note, many HSA rules can change annually but the blog item is specific to the ACA out of pocket limit for 2015. There is also a separate limit for some stand alone pediatric dental that is tied to essential health benefit requirements.  The 2015 dental rule will be $350 for one child and $700 for two or more, but these numbers can vary with some states.

New Plan Deductible Maximums:  These rules set the maximum deductible a health plan may use in the individual markets (this originally included small group markets but it was later repealed).  These numbers are indexed to inflation and subject to change each year.  The 2015 numbers are expected to be $2,050 for self-only coverage and $4,100 for coverage with two or more.    

New FSA Maximum Amount:  The ACA also imposed a new limit on the maximum amount an individual may use under the employer's health flexible spending account (commonly called HFSAs or FSAs).  The original amount of $2,500 is subject to federal adjustment each year.  I do not believe the numbers have been released yet for 2015 but this number could change. [Update: New inflation indexed numbers were posted 10/31/14 to be $2,550 in 2015.  This is an allowed amount and not required to be at this amount.]     

New Premium Tax Subsidy Income Calculation:  Certain individuals who meet federal eligibility requirements may also get a premium tax subsidy for health plan premiums on the exchange.  [There are some competing federal cases on whether or not the exchange must be state run in order to qualify but as of now, all exchanges are eligible for premium tax subsidies].  One element of this eligibility is tied to household income, with subsidies allowing people to obtain health insurance with caps at a percentage of household income.  The subsidy amount is based on the second-lowest-cost (silver) plan offered through a state health benefit exchange.  The lower the income, the lower the cap on the premium they must pay, with the lowest cap set at 2.01% of household income. If a person makes more than 400% of the federal poverty line, they are not eligible for federal tax subsidies.  

The maximum income limit was tied to the 9.5% rule above (to be 9.56% in 2015).  Accordingly, the new rules for 2015 allow increases for various income points up to the maximum 9.56% percentage cap. The 2015 subsidy calculations will use the following premium caps for household income as a percentage of the federal poverty line:

Less than 133%---2.01%
At least 133% but less than 150%---3.02% to 4.02%
At least 150% but less than 200%---4.02% to 6.34%
At least 200% but less than 250%---6.34% to 8.10%
At least 250% but less than 300%---8.10% to 9.56%
At least 300% but not more than 400%---9.56% 

It will be important for organizations to understand that these rules, and the math used by them, can change yearly.  If you need assistance with any of these or the ACA generally, please contact Kinney & Larson.  

By Phil Larson

An interesting point for some plans and their compliance is that the plan may need to follow certain limits on the health plan coverage under the plan.  This is sometimes referred to as the out-of-pocket maximum.  The federal government generally defines an out-of-pocket maximum in their uniform glossary that accompanies the Summary of Benefits and Coverage (SBC) as the following: 

The most you pay during a policy period before your health insurance or plan begins to pay 100% of the allowed amount. This limit never includes your premium, balance-billed charges or health care your health insurance or plan doesn’t cover.  

A confusing point on this however is that there will be two different limits to consider for some plan compliance starting in 2015.  One rule deals with Health Savings Accounts (HSA) and one rule deals with the Affordable Care Act (ACA).   

• HSA LIMIT:  First, HSAs have has a maximum out-of-pocket for the corresponding High Deductible Health Plan (HDHP).  This is one of the required elements of meeting eligibility to contribute to an HSA, namely that the HDHP plan enrollment meets certain threshold amounts including a maximum out-of-pocket.  This only applies to HDHP requirements related to HSA eligibility.  It also covers all in-network benefits under the plan.    
  

• ACA LIMIT:  Second, the ACA currently has a maximum out-of-pocket for plan qualification status under federal law.  This section cited the HSA rules in the Code, but used a different methodology to adjust those numbers in the future.  In addition, this limit only applies to the Essential Health Benefits under the plan which may not include all in-network coverage.  Last but not least, this rule is subject to Grandfather status, meaning that if the plan is Grandfathered in accordance with the ACA, it is exempt from the maximum out-of-pocket amounts.    
  

Technically speaking, it appears an HSA plan must follow both, while a non-HSA plan will only follow the ACA limit.  Both sets of rules also define the limit in terms of single coverage (meaning coverage for one person) or family coverage (meaning any coverage above one person).  Please see the following chart attempting to highlight some of these differences including the limits for 2014 and 2015.  

If you have questions on the ACA or HSAs, please contact Kinney & Larson.