HRB 63 - Sub-Regulatory Guidance and FAQs Issued
Released January 25, 2013 I Download as a PDF January 25, 2013 --
As has been true since the enactment of the Affordable Care Act (ACA), the governing agencies are using their authority to issue sub-regulatory guidance, often in the form of questions and answers, to provide guidance on how the government believes regulations will be issued. To this end, FAQs About Affordable Act Implementation Part XI
have just been issued. Of particular note are:
Notice of Exchange
The law requires employers to issue a Notice to employees explaining:
- The existence of the Exchange
- If the employer’s health plan provides less than minimum value, the individual may be entitled to government assistance for purchasing coverage through the Exchange
- If the employee chooses to purchase coverage through the Exchange, he/she may lose any employer contribution toward employee coverage.
This Notice was to be provided to employees by March 1, 2013. The Department of Labor has stated that the requirement to issue the Notice is delayed until future regulations are issued. It is expected that these regulations will be issued in late summer or early fall – closer to the time that Exchanges will be open for business.
Stand-Alone Health Reimbursement Arrangements
One of the provisions of the Affordable Care Act is that a health plan can impose no lifetime, and eventually, no annual limits on essential health benefits. A question has risen as to the applicability of the no limit requirement on Health Reimbursement Arrangements (HRAs) (see HRB 39 – Relief for Stand-Alone Health Reimbursement Arrangements). The Department of Labor has indicated that it expects to issue guidance clarifying the types of HRAs that will be considered integrated, and therefore not subject to the no-limit provision. Specifically, the Department expects to issue guidance stating that an HRA used to fund individual policies, including employer sponsored individual policies purchased with HRA dollars will not qualify as an integrated plan. What this means is that these types of HRAs would be subject to the no lifetime or annual limit requirement. Further, the Department states that it expects to issue guidance stating that, to be integrated, the HRA participant must be enrolled in the related comprehensive health plan in order for the HRA to be exempt from the no lifetime and annual limit requirement.
Finally the guidance clarifies that amounts credited in a standalone HRA prior to January 1, 2014, can continue to be used to reimburse medical expenses. In a nutshell, what this guidance suggests is that only integrated HRAs, i.e., an HRA that is used in conjunction with a comprehensive health plan and only covers participants enrolled in the comprehensive health plan will be viable in 2014 and beyond. Other types of HRAs would have to comply with the no annual or lifetime limit requirements applicable to other comprehensive health plans.
Patient-Centered Outcomes Research Fee
As a reminder, the Affordable Care Act imposes a per-covered-life Patient-Centered Outcomes Research fee (PCOR) to fund the Patient-Centered Outcomes Research Trust Fund. This fee commences for plan years ending after September 30, 2012 and continues through plan years ending before October 1, 2019 (see CBIZ Health Reform Bulletin 60, Patient-Centered Outcomes Research Fee) and CBIZ Health Reform Bulletin 49, Fees on Health Insurance Policies & Self-Insured Plans: Patient-Centered Outcome Research Trust Fund). Generally, the government has indicated that this fee cannot be paid from plan assets. The newly issued guidance addresses the specific issue of multi-employer and limited other circumstances in which the plan trustees have no existence other than for the specific purpose of providing benefits In these very limited circumstances, the Department of Labor has indicated that the PCOR fee can be paid from plan assets. But again, in all other instances, the PCOR cannot be paid from plan assets.
Fixed Indemnity Plans
The Department of Labor has issued several FAQs relating to fixed indemnity plans. Generally, a fixed indemnity plan in its purest sense is one that reimburses a fixed amount upon the occurrence of an event, such as a hospitalization, without regard and in no way tied to actual receipt of care. These types of plans generally are not subject to ACA nor are they subject to HIPAA. The Department of Labor indicates in these FAQS that the marketplace is attempting to circumvent this rule by calling plans fixed indemnity plans when in fact reimbursement is made or is otherwise tied to actual receipt of care. In effect, the Department has indicated that it will double down its efforts with state insurance departments to make certain that the intent of the Affordable Care Act is not thwarted through these types of arrangements. This is just another example of how the government is trying to stay ahead of creative methods of trying to circumvent the law.
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.
The information contained herein is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations. The information contained herein is provided as general guidance and may be affected by changes in law or regulation.
The information contained herein is not intended to replace or substitute for accounting or other professional advice. Attorneys or tax advisors must be consulted for assistance in specific situations. This information is provided as-is, with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.
As required by U.S. Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained herein is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service.