Released May 7, 2014 I Download as a PDF
May 7, 2014 -- In recent days, the government agencies responsible for administering the Affordable Care Act (ACA) have issued a number of pieces of guidance and tools to assist in the further implementation of the law.
Choice of Marketplace Coverage or COBRA Continuation Coverage
In response to opportunities available through the Marketplace, both the Departments of Health and Human Services (HHS) and Labor (DOL) announced, on May 2, 2014, issuance of revised model COBRA forms and a revised CHIP premium assistance notice, as well a special enrollment opportunity for individuals on COBRA.
Revised Model COBRA and CHIP Forms
Generally, the revised COBRA and CHIP notices explain, in greater detail, the availability of coverage through the marketplace and potential availability of premium assistance.
Of particular note, the COBRA election notice describes a 60-day enrollment window for choosing marketplace coverage, measured from the date of employment termination. If an individual does not take advantage of the 60-day window, then the next enrollment opportunity for marketplace coverage would be during the annual open marketplace enrollment period.
Once COBRA coverage terminates, the COBRA continuee would be eligible to enroll in the marketplace through a special enrollment period, even if the marketplace open enrollment period has ended. COBRA continuees are also permitted a special enrollment period in which to switch to marketplace coverage if they incur another qualifying event such as marriage or birth of a child. Individuals signing up for marketplace coverage rather than COBRA coverage cannot switch to COBRA under any circumstances.
The notice also explains how an individual could enroll in another group health plan, such as through a spouse’s group health coverage as long as the individual requests enrollment within 30 days of the loss of coverage. If the individual elects COBRA rather than enrolling in the other coverage, he/she will have another opportunity to enroll within 30 days of losing COBRA coverage.
The revised notice also includes factors for weighing the options in coverage such as premium provider networks, drug formularies, severance payments, service areas and other cost-sharing considerations.
While it is not mandatory to use these revised model notices, if they are used in good faith, it will be deemed compliance with the notice requirement. All three revised model notices are available via the DOL’s website (http://www.dol.gov/ebsa/):
Special Enrollment Opportunity for Individuals on COBRA
HHS appears to be concerned that individuals currently on COBRA may not have understood their rights to enroll in the marketplace. Therefore, a special enrollment opportunity has been made available to individuals currently on COBRA continuation coverage to switch to marketplace coverage. This special enrollment 60-day window expires on July 1, 2014. To take advantage of this special enrollment opportunity, HHS suggests COBRA continuees contact the Marketplace call center (1-800- 318-2596) to activate the special enrollment period and to inform the call center that they are calling about their COBRA benefits and the marketplace. Once determined eligible for the special enrollment period, these individuals can then view all available plans and continue the enrollment process either via phone or by creating an account on healthcare.gov website. It should be noted that this special enrollment opportunity applies for purposes of the federal marketplace. It is not fully clear whether it would apply to state-run marketplaces.
Implementation FAQs
The 19th set of implementation FAQs address the revised COBRA notices, as above, as well as clarifies certain matters relating to cost sharing requirements, preventive services, excepted FSA plan status and summaries of benefits and coverage.
Cost-Sharing Matters
For plan years beginning in 2014, the ACA imposes cost-share restrictions on essential health benefits provided by non-grandfathered group health plans. Specifically, the out-of-pocket limits are, for 2014, the same as the out-of-pocket limits applicable to high deductible health plan (HDHP) coverage used in conjunction with a health savings account (HSA). For 2014, the annual out-of-pocket limits applicable to both insured and self-funded plans offered through and outside the Marketplace are $6,350 for single coverage and $12,700 for coverage for more than one. In 2015, the out-of-pocket limits will be tied to a premium adjustment percentage, calculated according to Health and Human Services (HHS) guidelines. HHS has proposed the annual limitation on out-of-pocket costs for 2015 would be $6,600 for self-only coverage and $13,200 for family coverage. These limits are slightly different than those allowed by HDHP coverage tied to an HSA.
As a reminder, a law enacted last month repealed the ACA’s deductible restriction imposed on small employer plans retroactive to the ACA’s enactment (see CBIZ Health Reform Bulletin, Elimination of Deductible Limits in Small Employer Sponsored Plans, 4/4/14).
The FAQs address how plans calculate out-of-pocket limits to particular issues; specifically:
- Balanced billing. A network-based health plan can count out-of-pocket spending for non-network items or services toward the annual out-of-pocket maximum, as long as it uses a reasonable method for doing so.
- Generic vs. Brand Name Drugs. As part of an essential health benefit package, if a plan covers generic drugs with a separate option to obtain a brand-named drug by paying a higher cost-share, the difference in plan cost between the generic and brand name drug does not have to be counted toward the annual out-of-pocket maximum.
Preventive Services
Under ACA, group health plans must provide coverage for certain preventive health services, as well as recommended evidence-based items or services, without imposing any cost sharing requirements when the services are delivered by in-network providers. The FAQ clarifies that if a recommendation or guideline fails to specify the frequency, method, treatment, or setting for the provision of that service, then the plan can use reasonable medical management techniques to determine any such coverage limitations.
With regard to preventive coverage for tobacco cessation, the DOL would consider the following services to meet the preventive service standards of tobacco use counseling and intervention:
- Screening for tobacco use; and,
- For those using tobacco products, at least two tobacco cessation attempts per year. A “cessation attempt” means four tobacco cessation counseling sessions (minimum 10 minute duration) plus a 90-day trial of prescribed FDA-approved tobacco cessation medications.
FSA Plans with carry-forward feature retain excepted status
Certain salary reduction flexible medical spending account (FSA) plans are excepted (exempt) from the ACA, as well as the HIPAA portability rules, as long as the FSA plan:
- Only reimburses dental or vision expenses;
- Covers fewer than two participants who are active employees; or
- Meets a maximum benefit test, i.e., the maximum benefit available cannot exceed two times the salary reduction election; or, the salary reduction election plus $500, whichever is greater. In addition, the FSA must meet an availability test, i.e., participants in the FSA must also be eligible for a health plan that is subject to ACA and HIPAA.
In October, 2013, the Internal Revenue Service issued guidance modifying the use-it or lose-it rule applicable to FSA plans to allow up to $500 of unused dollars to be carried forward and used in the next plan year (see IRS Guidance Modifies the Use-it or Lose-it Rule and Permits a Status Change Event for Marketplace Enrollment, Benefit Beat, 11/5/13).
The DOL confirms in its FAQ that if an excepted FSA plan adopted a $500 carry-forward feature, it would not impact its status as an excepted plan.
Summary of Benefit and Coverage
About a year ago, the DOL and HHS released an updated Summary of Benefits and Coverage (SBC) template to be used for the second year of compliance, defined as coverage beginning on or after January 1, 2014 and before January 1, 2015 (see Updated Summary of Benefits and Coverage (SBC) Guidance and New FAQs, 4/25/13). The newly released FAQ states that until future guidance is issued, plans can continue to use these ‘second year applicability’ templates and uniform glossary to meet their compliance obligations.
In addition, good faith compliance with all SBC requirements remains in effect, even though they were only supposed to be in effect for a certain period of time.
New SHOP Tools to assist Small Businesses
The Small Business Health Options Program (SHOP) Marketplace tailors to those employers with 50 or fewer full-time equivalent employees (FTEs). The Healthcare.gov website has two new tools to assist small employers in providing an estimate of their potential tax credit for providing health coverage to their employees, as well as a tool to assist in calculating whether the employer meets the employee threshold criteria to participate in the SHOP. Following are links to these tools:
Marketplace Reporting Obligations – Advanced Tax Credits
The IRS issued regulations addressing reporting and disclosure obligations of marketplaces relating to individuals receiving advance tax credits toward payment of their health coverage.
In a nutshell, a marketplace is required to report to the IRS on a monthly and annual basis, information relating to individuals who enroll in qualified health plans through the marketplace, including premium amounts and advanced tax credit payments paid for coverage under the particular plan. In addition, a marketplace is required to provide an annual statement to these enrolled individuals containing the same type of information for purposes of satisfying their own tax filing obligations. A marketplace can use the Form 1095–A (or other IRS-designated form) as the disclosure statement, and must furnish the statement on or before January 31st of the year following the calendar year of coverage.
About the Author: Karen R. McLeese is Vice President of Employee Benefit Regulatory Affairs for CBIZ Benefits & Insurance Services, Inc., a division of CBIZ, Inc. She serves as in-house counsel, with particular emphasis on monitoring and interpreting state and federal employee benefits law. Ms. McLeese is based in the CBIZ Leawood, Kansas office.
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