Healthcare Reform
IRS Releases 2018 Draft Instructions for Forms 1094-B, 1095-B, 1094-C and 1095-C
On Sept. 10, 2018, the IRS released a draft version of the instructions for Forms 1094-B and 1095-B, which are used by insurers and small self-insured employers to report that they offered MEC . These instructions are largely unchanged from the 2017 version. The one change mentioned is that insurance carriers are now encouraged (but not required) to report catastrophic health plan coverage offered through the Marketplace.
On Sept. 11, 2018, the IRS released a draft version of the instructions for Forms 1094-C and 1095-C, which are used by large employers to comply with Section 6056 reporting under the PPACA. The instructions are largely unchanged from the 2017 versions. The Plan Start Month in Part II of the Form 1095-C continues to be an optional field. Employers relying upon the multiemployer arrangement interim guidance will continue to report 1H (no offer of coverage) on Line 14 of the Form 1095-C, with Line 15 blank and code 2E on Line 16.
The forms must be filed with the IRS by Feb. 28, 2019 if filing by paper and April 1, 2019 if filing electronically. The Forms 1095-B and 1095-C must be distributed to applicable employees by Jan. 31, 2019. 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.
We'll keep you updated of any developments, including release of the finalized forms and instructions.
2018 Forms 1094-B and 1095-B Draft Instructions >>
2018 Forms 1094-C and 1095-C Draft Instructions >>
CMS Releases Technical Guidance on the HHS-Administered Federal External Review Process
On Sep. 11, 2018, CMS issued Technical Guidance 01-2018, which updated the requirements for group health plans and health insurance issuers that are subject to the HHS-administered federal external review process.
As background, non-grandfathered group health plans and health insurance issuers offering non-grandfathered group or individual coverage must comply with the applicable external review process in their state if that process meets the standard established by the National Association of Insurance Commissioners (NAIC). If the state external review process does not meet this standard, or if the plan or issuer is not subject to state insurance regulation, then those group health plans and health insurance issuers must still implement an effective external review process meeting those same standards. The Code of Federal Regulations establishes the federal external review process for this purpose.
Insured coverage not subject to an applicable state external process and self-insured non-federal governmental plans may elect to use the federal Independent Review Organization (IRO) external review process or the HHS-administered federal external review process as outlined in the guidance.
The guidance updates previous guidance (provided in January 2017) because the federal contractor that administers the process has begun to accept requests for external review through an online portal. As such, the guidance informs plans and issuers that their notices to plan participants must be updated to inform them that there are now three options for requesting an external review (mail, fax or through the online portal).
Plan sponsors who are not subject to state insurance regulation or plan sponsors located in states where the state external review process does not meet the NAIC standard can use this guidance to implement the HHS-administered external process.
Federal Updates
OCR: August 2018 Cyber Security Newsletter for HIPAA-Covered Entities
The HHS Office of Civil Rights (OCR) released its August 2018 Cyber Security Newsletter, which focuses on considerations for securing electronic media and devices. As a reminder, HIPAA-covered entities and business associates are required to implement policies and procedures to limit physical access to their electronic information systems and the facilities in which they are housed. Often, employer plan sponsors consider their HIPAA security obligations only in regards to their servers and office desktop computers. Consequently, they overlook the risks associated with devices such as laptops, smartphones and tablets as well as electronic media including hard drives, USB drives, CDs and DVDs, tapes and memory cards.
The newsletter offers practical recommendations to covered entities on how to safeguard electronic PHI (ePHI) stored on such devices and media. Covered entities should remember to:
- Implement a policy and procedure to track the location, movement, modifications or repairs and disposition of devices and media throughout their lifecycle
- Train workforce members, including management, on the proper use and handling of devices and media to safeguard ePHI
- Implement appropriate technical controls including access controls, audit controls and encryption
Employer plan sponsors who are responsible for the safeguarding of ePHI for their group health plans should review the newsletter and revise their policies and procedures as necessary.
OCR August 2018 Cyber Security Newsletter >>
IRS Publishes Updated Form 5558
The IRS recently published an updated version of Form 5558, Application for Extension of Time To File Certain Employee Plan Returns (Rev. September 2018). As background, employers use Form 5558 to request an extension of time to file Form 5500, Annual Return/Report of Employee Benefit Plan, the short Form 5500-SF and Form 5500-EZ. If filed, Form 5558 provides a 2 1/2 month extension to the due date for those forms. Form 5558 can also be filed for extensions for Form 8555-SSA, Annual Registration Statement Identifying Separated Participants with Deferred Vested Benefits, and Form 5330, Return of Excise Taxes Related to Employee Benefit Plans.
According to the "What's New" section of the updated Form 5558, separate Forms 5558 must be filed for each type of return for which an extension is being sought. Previously, employers could file one Form 5558 to request several different return filing extensions. The updated Form 5558 also states that no signature is required when filing extension forms for Forms 5500 and 8955-SSA, but that one is required when filing extensions forms for Form 5330.
Employers should review the updated Form 5558 and familiarize themselves with the changes, particularly where they may have been filing a single Form 5558 for multiple plans in the past. The updated form should be used for Form 5558 extensions filed in September 2018 and onward.
Retirement Update
IRS Releases 2019 Draft of Form 1099-R
On Sept. 7, 2018, the IRS released a draft of the 2019 Form 1099-R for distributions from pensions, annuities, retirement or profit-sharing plans, IRAs and insurance contracts. This form is sent to participants who withdraw or transfer funds from a number of sources related to retirement and other qualified plans. It reports the gross amount of the distribution, the taxable amount reportable as income and the federal and state withholding amounts. So, each person who withdraws at least $10 from a retirement account, such as a traditional IRA, must receive a Form 1099-R.
The 2019 draft forms are virtually unchanged from the 2018 Form 1099-R. Keep in mind that the draft forms should not be filed for 2019; instead, the IRS will publish final forms at a later date. Even though Forms 1099-R are routinely prepared by the fund custodian of the retirement and qualified plans, employees may have general questions involving the employer's retirement plans or about the purpose of the form. Employers should familiarize themselves with these forms.
Announcements
Reminder: Calendar Year SAR Must Be Distributed by Sept. 30, 2018
Plans that are subject to ERISA and Form 5500 filing must distribute the Summary Annual Report (SAR) to participants within nine months of the end of the plan year; thus, a calendar year plan is required to distribute the SAR for the 2017 plan year by Sept. 30, 2018. If the plan applied for an extension to the Form 5500 filing, the SAR is then due within two months following that filing.
The SAR is a summary of the plan's information reported on the Form 5500. If a plan isn't subject to Form 5500 filing, then it's exempt from the SAR notice requirement -- this would include church plans, governmental plans and unfunded or insured plans with fewer than 100 participants. Also, large, unfunded self-insured plans are exempt from the SAR requirement even though they are subject to the Form 5500 filing requirement.
Model language is available for SAR preparation. Please ask your advisor for assistance. For additional information, see the frequently asked question featured in this edition of Compliance Corner.
It's MLR Rebate Time Again!
The ACA requires insurers to submit an annual report to HHS accounting for plan costs. If the insurer doesn't meet the medical loss ratio standards, they must provide rebates to policyholders. Rebates must be distributed to employer plan sponsors between Aug. 1, 2018, and Sept. 30, 2018. Employers should keep in mind that if they receive a rebate, there are strict guidelines as to how the rebate may be used or distributed.
For more information, please contact your advisor for a copy of " Medical Loss Ratio Rebates: A Guide for Employers " or " Medical Loss Ratio: PPACA's Rules on Rebates. "
Reminder: Medicare Part D Notice to Employees Deadline Is Oct. 14, 2018
Employers must notify individuals who are eligible to participate in their medical plan whether the plan's prescription drug coverage is "creditable" or "non-creditable" as compared to Medicare Part D coverage.
As a reminder, the Medicare Part D notice of creditable coverage should be distributed to employees by Oct. 14, 2018. This notice serves to put Medicare-eligible individuals on notice as to whether or not their employer group coverage is creditable. That information is necessary to help such individuals avoid paying higher premiums (also known as late enrollment penalties) for Medicare Part D coverage.
Employers should consult with their service providers to determine whether their coverage is creditable using either the simplified determination method or an actuarial analysis. Also keep in mind that CMS provides a model notice for employers.
FAQ
What should employers consider with respect to the Summary Annual Report (SAR)? To whom and how must it be distributed, and when is it due?
The SAR is an annual summary of the latest Form 5500 for a group health plan. So, a SAR is required only where the plan is subject to Form 5500 filing requirements. If a plan isn't required to file a Form 5500, then a SAR is not required. Under the DOL SAR regulations, a totally unfunded welfare plan, regardless of size, need not provide SARs (even though large, unfunded welfare must file a Form 5500). In contrast, large insured plans are subject to the SAR requirement. Employers with self-insured plans should work with outside counsel in determining if they are funded because large funded self-insured plans are subject to the SAR requirements. Generally, an unfunded plan means that benefits are paid out of general assets and that no plan assets are maintained. Segregating participant contributions from an employer's general assets could result in plan assets and thus a funded plan.
For those subject to the SAR requirement, the plan administrator must distribute a SAR to all plan participants covered under the plan within nine months of the end of the plan year. The SAR is only required to be distributed to plan participants who are enrolled at the time of the SAR distribution. For this purpose, a participant is defined as an employee or former employee (e.g., retiree, COBRA beneficiary) who's actually enrolled on the plan -- not terminated employees who are no longer covered. Also, it doesn't include the participant's beneficiaries (spouses or dependents).
SARs must be distributed two months after the Form 5500 filing deadline. For calendar year plans with a July 31 Form 5500 deadline, the SAR must be distributed by Sept. 30, which is fast approaching. If an extension of time to file the Form 5500 was granted, then the SAR deadline is two months after the extension date.
As far as the distribution method, mail is always an acceptable form of delivery. Email is also generally acceptable, so long as the DOL safe harbor on electronic distribution is followed. Essentially, employees must have computer access (e.g., a work email or a work computer station) as an integral part of their job, or they must give permission to receive communications at a separate email address. The employee also needs to have the ability to receive a hard copy of the SAR without additional cost. Employers using email delivery should use return-receipt features to maintain proof of delivery.
Lastly, the SAR can't simply be posted on a company internal website; the employer must also send an email explaining what the document is, the importance of the document, where it can be located on the internal website, and the right for the employee to request a paper copy (and how to make that request).
State Updates
Delaware
Stop-Loss Policies Extended to Small Employers
On Sept. 4, 2018, Gov. Carney signed HB 406 into law, which became effective on the date of signing. The new law permits stop-loss coverage to be purchased by small employers with more than five eligible employees, the majority of whom are employed within Delaware on at least 50 percent of working days in the preceding calendar quarter. The law previously prohibited insurers from selling stop-loss coverage to small employers with 15 or fewer employees.
Pharmacy Gag Clauses Prohibited
On Aug. 28, 2018, Gov. Carney signed HB 425 into law. The new law prohibits contracts between pharmacies and pharmacy benefit managers from containing what's commonly referred to as a gag clause. A gag clause prohibits a pharmacy from informing a consumer that they have options related to their prescription -- specifically, purchasing the prescription for a retail price that's lower than the price offered through their health insurance plan.
Under the new law, which applies to contracts entered into or renewed on or after Aug. 28, 2018, a pharmacy is permitted to:
- Provide an insured with information regarding the retail price of a prescription drug or the amount of the cost share under the insured's health insurance policy; and
- Discuss with an insured information about a more affordable, therapeutically equivalent prescription drug and selling that drug to the insured
Coverage for Pediatric Autoimmune Neurophsychiatric Disorders
On Aug. 28, 2018, Gov. Carney signed HB 386 into law. Group health insurance policies issued or renewed on or after that date must provide coverage for the treatment of pediatric autoimmune neuropsychiatric disorders associated with streptococcal infections and pediatric acute onset neuropsychiatric syndrome. Treatment coverage must specifically include the use of intravenous immunoglobulin therapy.
Prior Authorization Requirements Restricted for Certain Prescriptions
On Aug. 28, 2018, Gov. Carney signed HB 441 into law, which became effective on the date of signing. The new law prohibits pharmacy benefit managers from requiring a prior authorization for an initial prescription for a narcotic or benzodiazepine drug that's prescribed in an emergency situation for 72 hours or less. An emergency is defined as a situation that will result in the loss of life, limb or organ function.
Additionally, the new law prohibits a pharmacy benefits manager from requiring a prior authorization for a prescription medication related to a chronic or long-term condition more frequently than once per 12 months. For this purpose, the prescription medication must be necessary for the life of the patient.
New York
New York Updates PFL Rates and Maximum Employee Contributions for 2019
On Aug. 31, 2018, New York's Dept. of Financial Services (DFS) published the NY Paid Family Leave (PFL) rates for the 2019 calendar year. Effective Jan. 1, 2019, the maximum benefit will go from 50 percent to 55 percent of the employee's average weekly wage, and up to 55 percent of the statewide average weekly wage for up to 10 weeks of leave (an increase from eight weeks for 2018). The 2019 premium rate for PFL benefits will increase to 0.153 percent of the first $70,569.72 of an employee's annual earnings, for a maximum per employee premium of $107.97 per year. In comparison, the 2018 rate is 0.126 percent of the first $67,907.84 of an employee's annual earnings, for a maximum per employee premium of $85.56 per year.
As background, NY's PFL program became effective on Jan. 1, 2018 and states that eligible employees in NY may take time off to bond with a new child, care for a family member with a serious health condition or handle personal matters arising from an immediate family member being called to active duty in the Armed Forces of the U.S. The law requires DFS, by Sept. 1 of each year, to publish the rate for the policy period beginning on the following Jan. 1 and also set the maximum employee contribution rate for PFL for the upcoming calendar year. This decision supplements an earlier update provided by the DFS on March 31, 2018, that increased the NY State Average Weekly Wage (NYSAWW, to which NY PFL premium caps and benefit levels are tied) from $1,305.92 (in 2018) to $1,357.11 (in 2019). For 2019, the annualized equivalent is $70,569.72; for 2018, that equivalent is $67,907.84.
Importantly, and looking at practicalities, for PFL claims that commence during 2019, the benefit percentage payable in connection with the claims will increase from 50 to 55 percent, and the benefit duration will increase from eight to 10 weeks (less any PFL time taken within the prior 52-week look-back period), regardless of whether the qualifying event occurred in the prior year. This is especially important to note in connection with employees who may qualify for baby bonding PFL based on a birth, adoption or foster placement that occurs in 2018 but who choose to begin their baby bonding PFL on or after Jan. 1, 2019. To help explain, PFL leaves that commence in 2018 are subject to the applicable 2018 benefit limits, regardless of whether the leave continues into 2019. One exception to that rule applies when there's a gap of more than three months between the end of one period of PFL leave and the start of the next period of PFL leave for the same qualifying event.
NY employers should be mindful of the continued requirement to comply with the state's PFL law for 2019 and coordinate with their PFL carrier to provide the requisite PFL coverage. Employers can use DFS's Model Language for Employee Materials in updating employee handbooks and other communications. Ultimately, employers should work with outside counsel in developing their overall leave policy in conjunction with the requirements of NY PFL.
DFS Publication >>
NY PFL Model Language for Employee Materials >>
Rhode Island
Rhode Island Provides Good Faith Waiver to Employers Under New Leave Act
On Aug. 23, 2018, the Rhode Island Dept. of Labor and Training announced that they will waive the administrative penalties until Jan. 1, 2019, for an employer that mistakenly denies benefits that are required to be offered under the new leave act. Specifically, employers that mistakenly deny paid sick and safe leave benefits could be spared penalties if they acted in good faith and have appropriately compensated affected employees and taken corrective action.
As background, Gov. Raimondo signed the Healthy and Safe Families and Workplaces Act (HSFWA) into law, requiring employers with at least 18 employees to provide paid sick and safe leaves to covered employees. Employers with fewer than 18 employees must provide unpaid sick and safe leaves. The law phases in over three years, starting with the ability for covered employees to take up to 24 hours of leave in 2018, up to 32 hours in 2019 and 40 hours of paid leave thereafter. The law took effect on July 1, 2018.
The law states that employers in violation of the sick and safe leave law may be found liable for a penalty of $100 for the first offense and penalties of $100-$500 for subsequent offenses.
Vermont
DFR Publishes Emergency Rule Concerning MEWAs and AHPs
On Aug. 1, 2018, the Vermont Dept. of Financial Regulation (DFR) published a new rule to protect Vermont consumers and promote the stability of Vermont's health insurance markets, to the extent permitted under federal law. The rule applies only to fully insured MEWAs (self-insured and partially self-insured are exempt) and dictates the licensure, solvency, reserve requirements and rating requirements.
The new rule states that an association or MEWA must obtain a license with the department to offer a fully insured health benefit plan to an employer that is either domiciled in Vermont or has its principal headquarters or principal administrative office in Vermont. The law details what's required for an application for license and that it expires 366 days after it is issued.
According to the rule, a fully insured association or MEWA must have a minimum surplus that is not less than (i) $250,000 (if insurer directly bills the consumer) or (ii) $500,000 (if the association bills its members and then remits the payments to the insurer), subject to the commissioner requiring additional surplus funds based on the coverages and exposures involved. The association and MEWA must also obtain a surety bond sufficient to cover 20 percent of its annual premium for Vermont members. According to DFS, the new rule applies to both in-state and out-of-state associations.
According to the rule, to meet the membership requirements, employer members of an association MEWA must meet Vermont's commonality-of-interest test. To do that, the employers must be in the same trade, industry, line of business or profession, OR each employer must have their principal place of business in the State of Vermont. In addition, an association or MEWA doing business in Vermont may not restrict membership to employers located within a particular geographic region of Vermont and must accept employers with a principal place of business located in any part of Vermont.
Importantly, the rule requires association MEWA plans to comply with many of the ACA requirements, including those relating to essential health benefits, cost-sharing limits, lifetime and annual dollar limits, the 60 percent actuarial value requirements, pediatric dental and vision coverage, and prohibitions on pre-existing condition exclusions. Such plans must comply with Vermont's insurance coverage requirements as well.
Finally, on rating, the association or MEWA may be rated based on collective group experience of its members, provided that each certificate holder and dependent is charged the same community rate. In addition, certain risk classifications are prohibited in rating employees and dependents, including demographic (age and gender rating), geographic area, health status, industry, medical underwriting and screening, experience, tier (except tiers related to family structure) or durational ratings.
Employers should work with outside counsel to better understand all of the factors that could potentially play into an association or MEWA plan.
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.