Temporary Guidance Issued on 90 Day Waiting Period Limit

New temporary guidance has been released regarding the 90-day maximum waiting period mandated by the Affordable Care Act (ACA). The ACA stipulates that for plan years beginning on or after Jan. 1, 2014, group health plans and group health insurance issuers may not apply any waiting period that exceeds 90 days.

This temporary guidance, Notice 2012-59, was issued on Aug. 31, 2012, and will remain in effect at least through the end of 2014.

According to the guidance, a waiting period is the period of time that must pass before coverage for an employee or dependent who is otherwise eligible to enroll under the terms of your plan can become effective. Employees and dependents are eligible when they have met your plan’s eligibility conditions, as specified in your plan’s terms.

Any eligibility condition that is based solely on the lapse of time cannot be longer than 90 days.

As long as a plan enables an employee

to elect coverage that would begin within the 90-day limit, the plan is not in violation of this stipulation. Therefore, a plan is not in violation merely because an employee takes time to elect coverage.

If your plan’s eligibility depends on a specified number of hours per pay period, and you are unable to determine whether a newly-hired employee will satisfy the requirements, the guidance states that you may take a reasonable period of time to determine whether the employee is eligible.

This measurement period will comply with ACA’s waiting period limit if coverage is made effective no later than 13 months from the employee’s start date, unless a waiting period of more than 90 days is imposed after the period.

For example situations or more information, contact Benefit & Compensation Specialists, PLLC

CDHP Satisfaction on the Rise

A recent report from the Employee Benefit Research Institute indicates that overall enrollee satisfaction with consumer-driven health plans (CDHPs) is rising.

The report states that while the percentage of traditional-plan enrollees who are extremely or very satisfied with their health plan overall is higher than for CDHP enrollees, it has declined from 67 percent in 2006 to 57 percent in 2011.

Conversely, the percentage of enrollees who are extremely or very satisfied with their CDHP plan has risen from 37 percent in 2006 to 46 percent in 2011.

Because attitudes toward out-of-pocket health care costs resemble the trends of overall health plan satisfaction, it is believed that out-of-pocket costs are primarily driving these trends in overall plan satisfaction.

Do you agree with the information above? Do you feel that CDHPs are still a viable option? If you have a CDHP, are your employees satisfied? Are your renewals more favorable than with your other health plans?

IRS Issues Guidance on Employer Penalties – Full-time Status and Using W-2 Wages

Effective for 2014, the Affordable Care Act (ACA) imposes “pay or play” requirements on large employers to encourage them to provide group health plan coverage for their employees. A large employer for this purpose is one that employed at least 50 full-time employees, including full-time equivalents, on business days during the preceding calendar year.

Large employers that do not offer any health coverage to all full-time employees or that offer health coverage to their full-time employees that is either unaffordable or does not provide minimum value may be subject to penalties. The penalty is known as a “shared responsibility payment.” The penalty is triggered if one full-time employee receives a premium tax credit or cost sharing reduction for coverage obtained through a health insurance exchange.

ACA defines a full-time employee as an employee who is employed on average for at least 30 hours of service per week. The definition of full-time employee is a key concept in determining to what extent an employer may incur a penalty under ACA’s “pay or play” rules.

On Aug. 31, 2012, the IRS issued Notice 2012-58 to describe safe harbor methods and rules that employers may use to determine which employees are treated as full-time employees for purposes of ACA’s shared responsibility provisions. IRS Notice 2012-58 also addresses a safe harbor based on Form W-2 wages for employers to use in determining whether their health coverage is affordable.

Employers may rely on the safe harbor methods and rules outlined in IRS Notice 2012-58 at least through the end of 2014. According to the IRS, employers will not be required to comply with any future guidance that is more restrictive on these issues until at least Jan. 1, 2015.

determining Employees’ full-time status

Safe Harbor for Ongoing Employees

For ongoing employees, employers will be able to use the safe harbor measurement and stability periods previously described by the IRS in Notice 2011-36 and Notice 2012-17. Under this approach, an employer determines each ongoing employee’s full-time status by looking back at a measurement period lasting between 3 to 12 consecutive calendar months, as chosen by the employer, to determine whether the employee averaged at least 30 hours of service per week during this period. The employer has the flexibility to determine the months in which the standard measurement period starts and ends, as long as the determination is made on a uniform and consistent basis for all employees in the same category.

If the employee worked at least 30 hours per week during the measurement period, he or she would be considered a full-time employee for a set period of time into the future, known as the “stability period.” The stability period must be at least six calendar months following the measurement period and must be at least as long as the measurement period. The employee would be treated as a full-time employee during the stability period, regardless of the hours worked during that period, as long as he or she remained employed.

If an employer determines that an employee did not work full-time during the measurement period, the employer may treat the employee as not a full-time employee during the stability period that follows (but is not longer than) the measurement period.

Because employers may need time between the measurement and stability periods to determine which ongoing employees are eligible for coverage and to notify and enroll employees, Notice 2012-58 employers may have an “administrative period” between the measurement and stability periods. The administrative period following a measurement period can last up to 90 days.

Also, subject to the rules regarding the relationship between the length of the measurement period and stability period, employers may use measurement and stability periods that differ either in length or in their starting and ending dates for the following categories of employees:

  • Collectively bargained employees and non-collectively bargained employees;
  • Salaried employees and hourly employees;
  • Employees of different entities; and
  • Employees located in different states.

Rule for New Employees Expected to Work Full Time

An employer will not be subject to a penalty for not offering coverage to new full-time employees during the first three calendar months of employment. This rule applies where an employee is reasonably expected at his or her start date to work full-time and the employer sponsors a group health plan and offers coverage to the employee at or before the conclusion of the employee’s initial three calendar months of employment.

Safe Harbor for New Variable Hour or Seasonal Employees

A new employee is a variable hour employee if, based on the facts and circumstances at the start date, it cannot be determined that the employee is reasonably expected to work on average at least 30 hours per week. Through at least 2014, employers are permitted to use a reasonable, good faith interpretation of the term “seasonal employee” for purposes of determining the amount of any employer penalty.

If an employer maintains a group health plan that would offer coverage to an employee only if he or she is determined to have full-time status, the employer may use an “initial measurement period” lasting between 3 and 12 months (the same as allowed for ongoing employees) to determine whether new variable hour or seasonal employees are full-time employees. The employer measures the hours of service completed by the new employee during the initial measurement period and determines whether the employee completed an average of 30 hours of service per week or more during this period. During this measurement period, the employer would not be subject to a shared responsibility penalty under ACA with respect to these employees.

As in the case of a standard measurement period, if an employee is determined to be a full-time employee during the initial measurement period, the stability period must be a period of at least six consecutive calendar months that is no shorter in duration than the initial measurement period and that begins after the initial measurement period (and any associated administrative period).

If a new variable hour or seasonal employee is determined not to be a full-time employee during the initial measurement period, the employer may treat the employee as not a full-time employee during the stability period that follows the initial measurement period. This stability period must not be more than one month longer than the initial measurement period and must not exceed the remainder of the standard measurement period (plus any associated administrative period) in which the initial measurement period ends.

Once a new employee who has been employed for an initial measurement period, has been employed for an entire standard measurement period, the employee must be tested for full-time status, beginning with that standard measurement period, at the same time and under the same conditions as other ongoing employees.

 affordability safe harbor

In Notice 2011-73 and Notice 2012-17, the IRS described a safe harbor for employers to use in determining whether their health coverage is affordable under ACA’s employer penalty rules. In Notice 2012-58, the IRS confirmed that employers may rely on this safe harbor at least through the end of 2012.

Income Taken Into Account

The affordability of any health coverage offered by a large employer is a key point in determining whether the employer will be subject to a shared responsibility penalty. According to the statutory language of ACA,  coverage is considered affordable if the employee’s required contribution to the plan does not exceed 9.5 percent of the employee’s household income for the taxable year. “Household income” was defined as the modified adjusted gross income of the employee and any members of the employee’s family, including a spouse and dependents.

Because employers may be largely unaware of the income levels of their employees’ family members, they could find it difficult to assess whether the coverage they offer would be considered affordable. To address this issue, the safe harbor measures the affordability of an employer’s coverage by reference only to an employee’s wages from that employer. Wages for this purpose would be the amount required to be reported in Box 1 of the employee’s Form W-2.

Eligibility for the Safe Harbor

To be eligible for the safe harbor, an employer must meet certain requirements:

  • The employer must offer its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an employer-sponsored plan; and
  • The employee portion of the self-only premium for the employer’s lowest cost coverage that provides minimum value (the employee contribution) must not exceed 9.5 percent of the employee’s W-2 wages.

If the employer satisfies both of these requirements for a particular employee, along with any other conditions for the safe harbor, the employer would not be subject to a penalty for providing unaffordable coverage with respect to that employee. This is the case even if the employee receives a premium tax credit or cost sharing reduction to purchase coverage through a health insurance exchange.

Timing of the Safe Harbor

Whether the safe harbor applies would be determined after the end of the calendar year and on an employee-by-employee basis, taking into account W-2 wages and employee contributions. However, an employer could also use the safe harbor prospectively, at the beginning of the year, by structuring its plan and operations to set the contribution for each employee at a level that would not exceed 9.5 percent of that employee’s W-2 wages for that year. Employers may also make adjustments for pay periods so that the employee contribution does not exceed 9.5 percent of the employee’s W-2 wages.

Safe Harbor Application

The affordability safe harbor would apply only for purposes of determining whether an employer’s coverage satisfies the 9.5 percent affordability test for purposes of the shared responsibility penalty under ACA. The safe harbor would not affect an employee’s eligibility for a premium tax credit, which would continue to be based on the affordability of employer-sponsored coverage relative to an employee’s household income.

This means that, in some instances, an employer’s offer of coverage to an employee could be considered affordable (based on W-2 wages) for purposes of determining whether the employer is subject to an penalty and the same offer of coverage could be treated as unaffordable (based on household income) for purposes of determining whether the employee is eligible for a premium tax credit.

Temporary Guidance Issued on 90-day Waiting Period Limit

For plan years beginning on or after Jan. 1, 2014, the Affordable Care Act (ACA) prohibits group health plans and group health insurance issuers from applying any waiting period that exceeds 90 days. ACA’s 90-day waiting period requirement does not require an employer to offer coverage to any particular employee or class of employees, including part-time employees. It only prevents an otherwise eligible employee (or dependent) from having to wait more than 90 days before coverage under a group health plan becomes effective.

In 2011, the Departments of Labor (DOL), Health and Human Services (HHS) and the Treasury (Departments) invited comments on ACA’s 90-day waiting period limit. The Departments are working to develop regulations that address the 90-day waiting period requirement.

On Aug. 31, 2012, the IRS issued Notice 2012-59 in conjunction with the DOL and HHS to provide temporary guidance on the 90-day waiting period limit. The temporary guidance will remain in effect at least through the end of 2014. According to Notice 2012-59, if more guidance is issued on the 90-day waiting period limit for periods after 2014, plans and issuers will be given adequate time to comply with any additional or modified requirements.

waiting period

A group health plan or issuer may not impose a waiting period that exceeds 90 days. A waiting period is the period of time that must pass before coverage for an employee or dependent who is otherwise eligible to enroll in the plan becomes effective. An employee or dependent is eligible for coverage when he or she has met the plan’s eligibility conditions, such as being in an eligible job classification or achieving job-related licensure requirements specified in the plan’s terms.

Under ACA, eligibility conditions that are based solely on the lapse of time are permissible for no more than 90 days. Other conditions for eligibility are permissible under ACA, as long as they are not designed to avoid compliance with the 90-day waiting period limit.

Also, if a plan allows an employee to elect coverage that would begin on a date that does not exceed the 90-day waiting period limit, ACA’s 90-day waiting period limit is considered satisfied. Thus, a plan or issuer does not violate ACA merely because employees take additional time to elect coverage.

The following examples from Notice 2012-59 illustrate how these rules work:

Example 1

Facts: A group health plan provides for coverage to begin on the first day of the first payroll period on or after the date an employee is hired and completes the plan’s enrollment forms. Enrollment forms are distributed on an employee’s start date. Employee A is hired and starts on Oct. 31, which is the first day of the payroll period. On Nov. 2, A completes and files all of the plan’s necessary enrollment forms. A’s coverage under the plan becomes effective on Nov. 14, which is the first day of the first payroll period after A completes the enrollment forms.

Conclusion: In this example, under the plan’s terms, coverage may become effective as early as Oct. 31, depending on when A completes the plan’s enrollment forms. Under the terms of the plan, when coverage becomes effective is dependent solely on the length of time taken by A to complete the enrollment materials. Thus, the plan complies with ACA’s 90-day waiting period limit because, under the terms of the plan, A may elect coverage that would begin on a date that does not exceed the 90-day waiting period limit.

Example 2

Facts: A group health plan limits eligibility for coverage to full-time employees. Coverage becomes effective on the first day of the calendar month following the date the employee becomes eligible. Employee B begins working full time for the employer on April 11. Prior to this date, B worked part time for the employer. B enrolls in the plan and coverage is effective May 1.

Conclusion: In this example, the period from April 11 through April 30 is a waiting period. The period while B was working part time is not part of the waiting period because B was not in a class of employees eligible for coverage under the terms of the plan while working part time. Full-time versus part-time status is a bona fide employment-based condition that is not considered to be designed to avoid compliance with the 90-day waiting period limit.

variable hour employees

A special rule applies if a group health plan conditions eligibility on an employee regularly working a specified number of hours per pay period (or working full time), and it cannot be determined that a newly hired employee is reasonably expected to regularly work that number of hours per period (or work full time). In this type of situation, the plan may take a reasonable period of time to determine whether the employee meets the plan’s eligibility condition. This may include a measurement period that is consistent with the time frame permitted for making this same determination under ACA’s shared employer responsibility provisions.

Under ACA’s shared employer responsibility rules, employers have the option of using a safe harbor look-back measurement period of up to 12 months to determine whether certain types of new employees are full-time employees, without being subject to a penalty under ACA’s shared responsibility provisions for that period with respect to those employees. An employer may use this measurement period for purposes of complying with ACA’s 90-day waiting period limit for variable hour employees, even if it is not a “large employer” subject to ACA’s shared responsibility provisions.

The time period for determining whether a variable hour employee meets the plan’s eligibility condition will comply with ACA’s 90-day waiting period limit if coverage is made effective no later than 13 months from the employee’s start date, except where a waiting period that exceeds 90 days is imposed after the measurement period. If an employee’s start date is not the first of the month, the time period can also include the time remaining until the first day of the next calendar month.

Notice 2012-59 provides the following examples for the special rule for variable hour employees:

Example 3

Facts – Under an employer’s group health plan, only employees who work full time (defined under the plan as regularly working 30 hours per week) are eligible for coverage. Employee C begins work for the employer on Nov. 26 of Year 1. C’s hours are reasonably expected to vary, with an opportunity to work between 20 and 45 hours per week, depending on shift availability and C’s availability. Thus, it cannot be determined at C’s start date that C is reasonably expected to work full time.

Under the terms of the plan, variable hour employees, such as C, are eligible to enroll in the plan if they are determined to be full time after a measurement period of 12 months. Coverage is made effective no later than the first day of the first calendar month after the applicable enrollment forms are received. C’s 12-month measurement period ends Nov. 25 of Year 2. C is determined to be full time and is notified of C’s plan eligibility. If C then elects coverage, C’s first day of coverage will be Jan. 1 of Year 3.

Conclusion – In this example, the measurement period is not considered to be designed to avoid compliance with the 90-day waiting period limit (and is, thus, permissible) because the plan may use a reasonable period of time to determine whether a variable hour employee is a full-time employee if the period of time is consistent with the timeframe permitted for this determination under ACA’s employer shared responsibility provisions. In this circumstance, the time period for determining whether an employee is full time will not be considered to avoid the 90-day waiting period limit if coverage can become effective no later than 13 months from C’s start date, plus the time remaining until the first day of the next calendar month.

Example 4

Facts – Employee D begins working 25 hours per week for the employer on Jan. 3 and is considered a part-time employee for purposes of the employer’s group health plan. The employer sponsors a group health plan that provides coverage to part-time employees after they have completed a cumulative 1,200 hours of service. D satisfies the plan’s cumulative hours of service condition on Dec. 15.

Conclusion – In this example, the cumulative hours of service condition with respect to part-time employees is not considered to be designed to avoid compliance with the 90-day waiting period limit. Accordingly, coverage for D under the plan must begin no later than the 91st day after D works 1,200 hours. However, if the plan’s cumulative hours of service requirement was more than 1,200 hours, the Departments would consider the requirement to be designed to avoid compliance with the 90-day waiting period limit.

eligibilty for premium assistance

ACA created premium tax credits and cost sharing reductions to help eligible individuals and families purchase health insurance through an Affordable Insurance Exchange (Exchange). By reducing a taxpayer’s out-of-pocket premium costs, the assistance is designed to make coverage through an Exchange more affordable. The Exchanges are scheduled to become operational in 2014, with enrollment beginning Oct. 1, 2013.

To receive the premium assistance a taxpayer must enroll in one or more qualified health plans through an Exchange and must meet certain eligibility criteria. For example, one criterion is that the taxpayer cannot be eligible for minimum essential coverage. “Minimum essential coverage” includes coverage under a government-sponsored health program, such as the Medicare or Medicaid programs or employer-sponsored minimum essential coverage.

Notice 2012-59 provides that an employee (or related individual) is not eligible for minimum essential coverage under the plan, and may be eligible for a premium tax credit or cost-sharing reduction, during any period when coverage is not offered. This includes any measurement period or administrative period prior to when coverage takes effect. Thus, all employees, whether full time, part time or variable, who are not offered the opportunity to enroll in health coverage by their employer will be eligible to receive premium tax credits and cost-sharing reductions for Exchange coverage if they meet other conditions for receipt of the assistance.

employer shared responsibility penalty

Under ACA’s “pay or play” requirements large employers that do not offer health coverage to their full-time employees or that offer health coverage to their full-time employees that is either unaffordable or does not provide minimum value may be subject to a penalty. This penalty is also called a “shared responsibility payment” under ACA.

On Aug. 31, 2012, the IRS issued Notice 2012-58, which describes safe harbor methods and rules that employers may use to determine their liability under ACA’s shared responsibility rules at least through the end of 2014. Under these rules, if an employee is reasonably expected at his or her start date to work full time, an employer that sponsors a group health plan and offers coverage to the employee at or before the conclusion of the employee’s initial three calendar months of employment will not be subject to a shared responsibility penalty under ACA for not offering coverage during the initial three months.

 Source: Departments of Labor, Health and Human Services and the Treasury

HHS Adopts Final HIPAA Standard for Health Plan Identifier

The Health Insurance Portability and Accountability Act (HIPAA) requires the Department of Health and Human Services (HHS) to adopt standards for certain transactions to promote the efficient and uniform transmission of health information. One of the standards is a unique identifier for health plans. The health care reform law, the Affordable Care Act (ACA), requires HHS to implement a standard for health plan identifiers by Oct. 1, 2012. HHS announced a final rule adopting the health plan identifier standard on Aug. 24, 2012.

HEALTH PLAN IDENTIFIER

Currently, health plans are identified in HIPAA standard transactions using multiple identifiers that differ in length and format. Without a standard identifier for health plans, health care providers experience transaction routing problems, transactions being rejected due to insurance identification errors and difficulty determining patient eligibility.

Under the final rule, the standard identifier for health plans will be a 10-digit, all numeric code similar to a credit card number. According to HHS, the health plan identifier will mainly benefit health care providers, while health plans will bear most of the costs of implementing the standard.

The deadline for health plans, except small health plans, to obtain their unique identifiers is Nov. 5, 2014. Small health plans (those with those with annual gross receipts of $5 million or less) have an additional year to comply, until Nov. 5, 2015. By Nov. 7, 2016, all covered entities must use the HIPAA health plan identifier in standard transactions involving health plans that have an identifier.

RELATED CHANGES

The final rule adopts an optional data element that would serve as an identifier for entities that are not health plans or health care providers but that perform health plan functions and need to be identified in a standard transaction. This would include, for example, health care clearinghouses, third party administrators (TPAs) or repricers.

The final rule also adds to the rules for the health care provider identifier by requiring certain providers not covered by HIPAA’s standard transaction requirements to obtain and disclose an identifier if they write prescriptions. Health care providers would have until May 6, 2013 to comply with this additional requirement.

In addition, the final rule delays the deadline for covered entities to comply with the updated set of diagnosis and procedure codes known as the International Classification of Diseases, 10th Edition (ICD-10) by one year, from Oct. 1, 2013, until Oct. 1, 2014. According to HHS, the extra year will give providers and other covered entities more time to prepare and fully test their systems to ensure a smooth and coordinated transition among all industry segments.

FUTURE GUIDANCE

HHS plans to issue additional regulations under HIPAA’s administrative simplification provisions to address standards and operating rules for claims attachments. It also plans on issuing guidance on the ACA requirement that health plans certify their compliance with HIPAA’s standards and operating rules. Under ACA, the first deadline for certifying compliance with certain HIPAA standards and rules is Dec. 31, 2013.

Source: Department of Health and Human Services