Healthcare Reform
IRS Releases Final Instructions for Forms 1094-C, 1095-C, 1094-B and 1095-B
The IRS recently released final Forms 1094 and 1095 (B and C) and instructions related to IRC Sections 6055 and 6056 reporting. The 2018 forms and instructions appear to have no substantial changes from the 2017 versions.
As a reminder, Forms 1094-B and 1095-B (the forms used for Section 6055 reporting) are required of insurers and small self-insured employers that provide MEC. These reports will help the IRS administer and enforce the ACA's individual mandate for 2018. Form 1095-B, the form distributed to the covered employee, will identify the employee, any covered family members, the group health plan and the months in 2018 for which the employee and family members had MEC under the employer's plan. If the plan is fully insured, Form 1094-B identifies the insurer (for a fully insured plan) or the employer (for a self-insured plan) and is used by the insurer to transmit corresponding Forms 1095-B to the IRS.
In addition, the ACA requires all employers with 50 or more full-time equivalent employees to file Forms 1094-C and 1095-C with the IRS and to provide statements to employees to comply with IRC Section 6056 (intended to help the IRS enforce the ACA's employer mandate). Specifically, large fully insured employers will need to complete and submit Forms 1094-C and 1095-C (Parts I and II). Large self-insured employers, which are subject to both Sections 6055 and 6056, may combine reporting obligations by using Form 1094-C and completing all sections of Form 1095-C (Parts I, II and III). Small self-insured employers would need to file Forms 1094-B and 1095-B. In addition, employers with grandfathered plans must comply with the reporting requirements.
The 2018 final forms and instructions appear to have only minor changes compared to the 2017 forms. Highlights of the changes are as follows:
- 1094-B - Appears unchanged.
- 1094-C - Appears unchanged.
- 1095-B - Appears unchanged.
- 1095-C - Line 1 in Part I and Column (a) in Part III provide dividers for the entry of the individual's first name, middle initial and last name. This new layout will likely ensure all Forms 1095-C are completed with an identical name structure, thus leading to more uniformity and fewer TIN issues.
- Instructions - Penalty amounts for reporting failures reflect indexed increases. The penalties for failure to comply have increased from $260 to $270 per failure. This means that an employer who fails to file a completed form with the IRS and distribute a form to an employee/individual would be at risk for a $540 penalty. Notably, however, the instructions don't refer to proposed regulations that we reported about in the June 14 edition of Compliance Corner that would require aggregation of most information returns when determining the 250-return threshold for mandatory electronic filing.
Lastly, the due dates for 2018 employer reporting are:
- Jan. 31, 2019 to provide 2018 information returns to employees or responsible individuals.
- Feb. 28, 2019 for paper filings with the IRS of all 2018 Forms 1095-C or 1095-B, along with transmittal Form 1094-C or 1094-B. Employers filing fewer than 250 forms may file either by paper or electronically.
- April 1, 2019 for electronic filings with the IRS of all 2019 Forms 1095-C or 1095-B, along with transmittal Form 1094-C or 1094-B. Employers filing 250 or more forms are required to file electronically with the IRS.
Employers should become familiar with these forms in preparation for filing information returns for the 2018 calendar year. In addition, despite the repeal of the individual mandate penalty in 2019, large employers will still need to continue to offer affordable, minimum value coverage to all full-time employees and prepare to comply with employer reporting requirements as to 2018 coverage.
Form 1094-B >>
Form 1095-B >>
Form 1094-C >>
Form 1095-C >>
B Form Instructions >>
C Form Instructions >>
Federal Updates
IRS Outlines FY 2019 Compliance Strategies and Priorities
On Oct. 4, 2018, the IRS issued a Program Letter outlining its compliance strategies and priorities for fiscal year 2019. They include:
- Determining whether workers have been misclassified as independent contractors rather than employees. While this is primarily an employment law issue, it can impact employee benefits. An employer who has misclassified an employee as an independent contractor could have liability under ERISA for excluding an otherwise eligible employee from coverage under the group health plan. Also, an applicable large employer must offer coverage to substantially all full-time employees working 30 hours or more per week. If employers misclassify workers as independent contractors and exclude them from group health plan eligibility, employers could be opening themselves up to risk, specifically under employer mandate Penalty A.
- Verifying that retirement plans are following correct distribution procedures
- Contacting employer plan sponsors who fail to file a Form 5500
- Examining 403(b) and 457 plans for compliance related to universal availability, excessive contributions and catch-up contributions
- Continuing to pursue referrals received from internal and external sources that allege possible noncompliance by a retirement plan
- Hiring 40 new revenue agents to process the applications that determine the exempt status of submitting organizations
While it may be helpful for employers to see the areas where the IRS will focus their enforcement efforts in fiscal year 2019, compliance in all areas related to employer sponsored plans should always be a priority.
Unauthorized Disclosure of PHI Leads to Nearly $1 Million in HIPAA Settlements
On Sept. 20, 2018, the HHS and OCR announced a settlement with the Boston Medical Center, Brigham Women's Hospital and Massachusetts General Hospital totaling $999,000 in penalties for compromising the privacy of protected health information (PHI) during the filming of a documentary. In this breach, OCR alleged that these hospitals allowed ABC television network to film a documentary series without first obtaining authorization from patients. As part of the settlements, each hospital must create a corrective action plan that includes implementing a staff training on the topic and developing policies and procedures around photography, video and audio recording. The policies must include how to evaluate and approve requests from the media to film areas that aren't otherwise open to the public.
As background, OCR guidance doesn't allow health care providers to invite or allow media personnel into treatment or other areas of their facilities where patients' PHI will be accessible in written, electronic, oral, or other visual or audio form, or to otherwise make PHI accessible to the media, without prior written authorization from each individual who is or will be in the area of whose PHI otherwise will be accessible to the media. Only in very limited circumstances does the HIPAA privacy rule permit health care providers to disclose PHI to members of the media without prior authorization signed by the individual. A similar (but more substantial) fine was imposed by OCR against New York Presbyterian hospital back in 2016 for a similar TV series with the same network.
Though each hospital denied wrongdoing and argued that they did receive consent from the patients, the OCR disagreed and stated that they will not permit covered entities to compromise their patients' privacy by allowing news or television crews to film the patients without their authorization.
While employers don't need to take any action based on this new assessed penalty, it's a good reminder that PHI can come in many forms and all covered entities should be diligent to ensure HIPAA compliance.
Retirement Update
IRS Releases Form 8955-SSA
On Sept. 26, 2018, the IRS published the 2018 draft form related to Form 8955-SSA, Annual Registration Statement Identifying Separated Participants with Deferred Vested Benefits. As background, Form 8955-SSA is used to report information about participants who separated from service during the plan year and are entitled to deferred vested benefits under the retirement plan.
The information in this form is given to the Social Security Administration (SSA), and the SSA provides that information to separated participants when they file for Social Security benefits.
On Oct. 4, 2018, the IRS also released the 2018 draft instructions for the Form 8955-SSA. They don't highlight any changes in the updated forms.
Employers should review this draft form in preparation for filing the 2018 Forms 8955-SSA.
IRS Updates EPCRS Guidance
On Sept. 28, 2018, the IRS released Revenue Procedure 2018-52, which incorporates changes to the Employee Plans Compliance Resolution System (EPCRS). As background, EPCRS allows retirement plan sponsors to take IRS-sanctioned steps to correct administrative and operational failures in plans. This Rev. Proc. modifies and supersedes Rev. Proc. 2016-51.
This Rev. Proc. mainly updates guidance to include the changes made to the EPCRS procedures over the last few years. Most notably, the IRS will now require employers submitting voluntary correction program (VCP) applications to do so electronically via www.pay.gov . In transitioning to this policy, the IRS will begin to accept the electronic applications on Jan. 1, 2019. However, employers will be allowed to file electronically or file a paper submission until March 31, 2019.
This Rev. Proc. is effective Jan. 1, 2019. Employers seeking to take advantage of the EPCRS should familiarize themselves with this guidance to ensure they understand the changes in the process.
FAQ
When an employee takes sick leave that isn't covered under FMLA, how long must the employer allow the employee to stay on the health plan?
When FMLA isn't an issue - either because the employer isn't subject to it or because the employee isn't eligible - there is no federal requirement to continue an employee's health benefits while the employee is out on the non-FMLA leave. However, sometimes there are state laws that will mandate certain leave be provided, and require that health coverage be continued.
Generally, insurance contracts include "actively at work" policies that stipulate how long an employee can be on non-FMLA leave before they becomes ineligible for health coverage. Many insurance contracts make employees ineligible for coverage once they have been out on non-FMLA leave for a period of 30 days or more. The employer should keep that in mind for these employees as well, because the employees' coverage could be limited by the eligibility terms of the insurance contract (or self-insured plan document).
If the insurance contract and plan document don't include such an "actively at work" clause, then the employer should review their policies to be consistent with what's provided to employees on other types of unpaid leave. For example, if benefits continue for employees on sabbatical or personal leaves of absence, then the employer would probably want to do the same thing with employees who take non-FMLA medical leave. This is especially the case if the employee is taking leave due to a disability. The employer wouldn't want to be at risk of violating the Americans with Disabilities Act or HIPAA's nondiscrimination rules related to medical conditions and disability.
The employer should also consider any state or local requirements to continue coverage. While many states don't give any additional protection outside of FMLA, other states do.
Finally, an employer who ceases to offer coverage to an employee taking leave should be sure to offer COBRA when the employee's coverage is terminated (assuming the employer is subject to COBRA). Since the employee would be experiencing a reduction in hours and a loss of coverage, they would be eligible for COBRA. As such, the employer would need to send the employee a COBRA election notice once their coverage was terminated. This would give the employee the opportunity to elect COBRA for the maximum coverage period.
State Updates
Delaware
Mandated Coverage for In Vitro Fertilization and Other Fertility Services
On Oct. 9, 2018, the Department of Insurance issued Revised Bulletin 103. The bulletin clarifies that all individual and group health insurance policies issued in Delaware on or after June 30, 2018 must provide coverage for certain fertility care services:
- In vitro fertilization services for individuals who suffer from a disease or condition that results in the inability to procreate or to carry a pregnancy to live birth
- Standard fertility preservation services for individual who must undergo medically necessary treatment that may cause iatrogenic infertility (an impairment due to surgery, radiation, chemotherapy or other medical treatment)
These benefits must be provided to all participants including spouses and dependents.
Revised Regulations Related to MEWAs
On Sept. 1, 2018, the Department of Insurance issued emergency regulations related to multiple employer welfare arrangements (MEWAs). The regulations were effective upon signing and will apply to any association health plan (AHP) that that covers a Delaware resident.
A fully insured association must be licensed with the Department. In order to obtain a license, the association must submit the following to the Department:
- Biographical information of all principals, officers, directors and trustees
- Identification of all participating employers
- Identification of third party administrators
- Eligibility requirements for association membership
- Description of association's member benefits
- Copy of the association's by-laws, articles of incorporation or trust instrument
- Copy of contracts between the association and insurers to provide health care benefits in DE
- Any marketing or advertising materials used by the association
- Most recent audited financial statements
- Copy of the most recently filed Form M-1
- Proof of minimum surplus in the amount of $500,000
- Proof of surety bond in the amount of $500,000 to ensure the association's obligations to health plan members
- $1,000 filing fee
Additionally, the association must submit the following to the Department annually:
- Proof of health insurance coverage
- Demographic information of third party administrators
- Notice of any changes to previously filed information (such as changes to trustees, officers, insurance coverage, plan document, by-laws, marketing material and so on)
- Most recent audited financial statements
- Documentation of preceding year's and upcoming year's annual premiums
- Proof of a surety bond sufficient to cover at least 20% of annual premium for DE members
- $150 filing fee
The association must:
- Exist for at least 5 years
- Be formed and maintained for purposes other than insurance
- Not condition membership on any health status related factor
The member employers must be in the same industry or have their principal place of business in DE. The AHP can't restrict membership to a particular part of the state.
The association may be rated on the collective group experience with each subscriber receiving the same community rate. The following rating factors are prohibited:
- Age
- Gender
- Health status, including pre-existing conditions
- Industry
- Medical underwriting and screening
The AHP must provide coverage for all DE mandated benefits and essential health benefits. The coverage must be in compliance with the ACA's cost sharing limits, prohibition on lifetime and annual dollar limits and 60 percent actuarial value.
The regulations also addressed self-insured AHPs. Until revised regulations are issued, self-insured AHPs will be subject to all of the state's insurance requirements including licensure as an insurer, mandated benefits, financial reserves and reporting.
Maine
Guidance for Short-Term Health Insurance
On Sept. 20, 2018, Superintendent Cioppa released Bulletin 431 to remind carriers and producers issuing policies in Maine of the state insurance requirements for short-term health insurance. This bulletin was intended to remind carriers doing business in the state that state law isn't preempted regarding short-term health insurance and, thus, carriers doing business in ME must continue to comply with state law.
As background, the federal government issued a rule in Aug. 2018 that extended the initial contract term of short-term policies issued on or after Oct. 2, 2018, to be no more than 12 months while limiting renewals or extension of such policies to no more than 36 months. Similar to the federal rule, ME law limits a short-term policy to a term that is less than 12 months. However, in ME, short-term policies are nonrenewable and the combined term of successive short-term policies can be no more than 24 months, regardless of whether the policies are issued by the same carrier or a different carrier.
The bulletin also mentions that although federal law doesn't require short-term policies to meet the essential health benefit requirements of the ACA, these policies are still subject to ME's mandated benefits for individual health insurance. In addition, short-term policies are subject to more requirements for health plans in ME, such as preventive health services and the prohibition against aggregate dollar limits on coverage.
The bulletin highlights that short-term policies may be appropriate for some consumers, but producers should keep in mind that the federal regulation expressly describes short-term coverage as "a type of health insurance coverage that was primarily designed to fill temporary gaps in coverage that may occur when an individual is transitioning from one plan or coverage to another plan or coverage." A producer has a duty of competence to ensure that consumers considering these policies are fully advised of the terms, benefits and limitations of the coverage.
This bulletin was for informational purposes only and employers need not take any action at this time. The intent was to remind carriers that ME insurance law continues to apply to short-term health insurance and carriers must factor in ME policies before issuing a product in response to the federal guidelines.
Maryland
Male Sterilization Coverage Under HDHPs
On April 10, 2018, Gov. Hogan signed SB 137 into law and it became effective upon signing. The new bill permits high deductible health plans (HDHPs) issued in Maryland to apply male sterilization expenses to the deductible. As background, effective Jan. 1, 2018, all policies issued in MD had to provide coverage for male sterilization without applying the cost to the deductible. However, this caused a problem for the HDHPs as the IRS clarified in March, 2018, through IRS Notice 2018-12: male sterilization didn't fall under the preventative care category and such coverage would have to be subject to a deductible or the HDHP would fail to be HSA qualified.
There is transition relief in place until Dec. 31, 2019 that permits HSA eligible individuals to have coverage under an HDHP that applies no cost sharing to male sterilization. The relief simply stated it applied to periods prior to 2020. This seems to indicate that the relief applies on a tax year basis and not on a plan year basis. Thus, some carriers are starting to apply male sterilization to the deductible for policy years beginning on or after Jan. 1, 2019. This is so that the HDHP may maintain its qualified status for the months of the policy year that run into 2020 (for example, a policy year that begins Feb. 1, 2019 and ends Jan. 31, 2020).
Importantly, SB 137 includes a provision that if the IRS includes male sterilization as a preventive care expense in the future, then the SB 137 amendment permitting HDHPs to apply male sterilization to the deductible would automatically be void.
This material was created by PPI Benefit Solutions to provide accurate and reliable information on the subjects covered but should not be regarded as a complete analysis of these subjects. It is not intended to provide specific legal, tax or other professional advice. The service of an appropriate professional should be sought regarding your individual situation. PPI does not offer tax or legal advice. "PPI®" is a service mark of Professional Pensions, Inc., a subsidiary of NFP Corp. (NFP). All rights reserved.