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January 11, 2017

HRB 125 - 5 Topics for ACA Guidance and Implementation (Article)

HRB 125 - 1)Updated Employer Shared Responsibility Guidance; 2) ACA Implementation Guidance; 3) Gender Identity Discrimination:  Preliminary Injunction Issued; 4) Final Rules - Premium Tax Credit; and 5) 2018 Benefit and Payment Parameters

Released January 10, 2017 I Download as a PDF


Updated Employer Shared Responsibility Guidance

The IRS recently updated their series of Questions and Answers (Q&As) relating to the ACA’s employer shared responsibility requirement, as well as the required reporting and disclosure obligations.


  • Employer Shared Responsibility Provisions Under the ACA.  All public and private employers employing 50 or more full-time equivalent employees on business days in the prior calendar year must offer minimum essential coverage (MEC) to their employees on an annual basis or risk the imposition of an IRC Section 4980H penalty.  For example, the number of employees employed in 2016 will determine employer size for 2017.  These Q&As provide a general overview of the employer shared responsibility requirements, how to identify full-time employees, what constitutes an offer of coverage, the affordability and minimum value standards, as well as the process for determining liability and calculation of the IRC Section 4980H penalties.


  • Reporting by Employers on Form 1094-C and Form 1095-C.  These Q&As provide additional information about completing the Forms 1094-C and 1095-C for calendar year 2016 that are required to be filed in 2017.  As a reminder, the Forms 1094 and 1095 must be filed with the IRS by February 28, 2017 (by March 31, 2017 if filing electronically). The Form 1095-C must be furnished to individuals by March 2, 2017.


  • Reporting Offers of Health Insurance Coverage by Employers (Section 6056).  Employers subject to the employer shared responsibility provisions are required to report their offers of health coverage to their employees.  This set of Q&As provide a more detailed explanation relating to who is required to report the offers, as well as the methods and timeframes for reporting the offers of coverage.


ACA Implementation Guidance

On December 20, 2016, the ACA tri-governing agencies (Departments of HHS, Labor and Treasury) issued an implementation FAQ.  Following is a brief summary of this guidance. 


Special enrollment for group health plans.  In accordance with this guidance, loss of individual market eligibility, including coverage purchased through a marketplace, qualifies as a HIPAA special enrollment event for group health plan coverage as long as the loss of coverage was not due to failure to timely pay premium, or fraud or misrepresentation by the individual.  As a reminder, special enrollment means that an individual can join the employer’s plan outside of the open enrollment period.

  • Coverage for women’s health preventive services

    • The ACA requires non-grandfathered plans in the individual and group markets to provide specified women’s health preventive services at no cost to plan participants. The types of preventive services to be covered are based on recommendations by several agencies, such as the U. S. Preventive Services Task Force (USPSTF) and the Health Resources and Services Administration (HRSA).  HRSA updated its Women’s Preventive Services Guidelines on December 20, 2016 (available at: http://www.hrsa.gov/womensguidelines2016/). These updated guidelines become applicable to both individual and group plans on the first plan year that begins on or after December 20, 2017 (January 1, 2018 for calendar year plans).


    • In a separate implementation FAQ released on January 9, 2017, the tri-governing ACA agencies affirm that religiously affiliated organizations and closely held corporations with religious objections to providing some or all of the contraceptive services can continue to utilize the existing self-certification process to opt out of providing this type of coverage.  This conclusion is drawn following the agencies’ review of over 54,000 responses received as a result of their solicitation for public input on the matter.


  • Qualified small employer HRAs.  As mentioned in our year-end Health Reform Bulletin 124, the recently enacted 21st Century Cures Act re-establishes the ability of small employers to provide their employees a stand-alone health reimbursement arrangement (HRA), known as a “qualified small employer HRA”.  A qualified HRA is an arrangement that:

  1. Is funded solely by a small employer who is exempt from the ACA’s employer shared responsibility requirements (employs fewer than 50 employees on business days during the preceding calendar year) and who does not currently offer health coverage;

  2. The arrangement provides, following the employee’s proof of coverage, for the payment or reimbursement of medical care expenses (as defined in IRC Section 213(d)), including premium for health coverage through the individual market, incurred by the eligible employee or his/her family members.  The annual amount of payments and reimbursements is capped at $4,950 for employee-only, or $10,000 for arrangements that provide for payments or reimbursements for the employee’s family members; and

  3. The HRA is available on uniform basis.


This law allows for the establishment of qualified HRAs beginning after December 31, 2016.


In addition, the Cures Act extended relief to HRAs in existence prior to this law’s enactment that would have otherwise been violative of the market provisions of the ACA; and thus, subject to the $100 per day penalty, per affected person (the IRC Section 4980D penalty) and required to report the violation on the Form 8928. The implementation FAQ issued December 20th affirms that the extended relief granted by the Cures Act applies to certain employer-paid arrangements that pay or reimburse individual health premium, or Medicare Part B or Part D premiums for plan years beginning on or before December 31, 2016.  This relief does not extend to stand-alone HRAs or other arrangements to reimburse employees for medical expenses other than insurance premiums that had not previously been granted relief.


With regard to individual premium paid by over-2% shareholder of an S-Corporation, the FAQ affirms reliance on the guidance provided in IRS Notice 2015-17.  In a nutshell, the relief granted in Notice 2015-17 provides that there would be no penalty for failure to comply with the ACA’s market provisions when an over-2% shareholder’s individual health premium is reimbursed.



Gender Identity Discrimination: Preliminary Injunction Issued

On December 31, 2016, a preliminary injunction was ordered by the U.S. District Court for the Northern District of Texas, temporarily suspending the requirement to comply with certain aspects of Section 1557 of the Affordable Care Act.  As background, Section 1557 of the ACA prohibits discrimination in the delivery of health services based on race, color, national origin, sex, age, or disability.  This preliminary injunction temporarily suspends the requirement for insurers, plans and health care providers to comply with gender identity component of the law.  Following issuance of the injunction, the HHS Office for Civil Rights has indicated that it will continue to enforce all other aspects of the law in accordance with the Court's decision.  At this point, it is unclear how much impact this preliminary injunction will have on health plans that have already implemented changes. 


As a reminder, employers including employer-sponsored self-funded health plans who do not receive federal funding, are not directly subject to Section 1557 of the ACA.  However, employers employing 15 or more employees, whether private or public sector, are subject to Title VII of the Civil Rights Act of 1964 which includes a prohibition against sex discrimination.  Further, federal contractors are subject to Executive Order 11246 which prohibits sex discrimination in employment by covered contractors.  For additional explanation of these rules, see our Benefit Beat article, Attention Self-funded Plan Sponsors: Be Aware of Potential Discriminatory Benefits (8/8/16).


Final Rules - Premium Tax Credit

On December 19, 2016, the IRS released final regulations relating to the premium tax credit applicable to individuals who enroll in individual marketplace coverage.  While these rules do not directly impact employers, one of the issues for employers subject to the ACA’s employer shared responsibility provisions who allow cash-outs relates to how affordability is determined when a cash-out option is available.  Unfortunately, the government has not yet provided final rules on this matter.  Thus, the prior guidance provided in IRS Notice 2015-87 and proposed regulations issued in July, 2016 (see CBIZ Health Reform Bulletin 120), remain in effect, as follows. 


For purposes of determining affordability, pursuant to which an employer offers health coverage, and if the employee declines the coverage, the employee would receive cash, depends on whether the opt-out arrangement is unconditional or conditional:

  • An unconditional opt-out arrangement, i.e., one in which the employee can decline the employer’s offer of coverage and take cash would result in affordability being determined by combining the employee’s cost of coverage plus the cash pay-out, without regard to proof of other coverage. For example, the employee’s cost of coverage is $100; the employee receives $200 for declining coverage. In this scenario, the affordability determination would be based on $300.

  • If the offer of coverage is conditional, i.e., contingent on proof of other coverage, the cash-out portion is not included in the affordability calculation, according to these regulations, but only if the conditional opt-out qualifies as an eligible opt-out. What this means is that the individual must attest to the fact that he/she and his/her “tax family”, i.e., all of whom the taxpayer is responsible for ensuring health coverage such as the spouse and/or dependents, have, in fact, other minimum essential coverage (MEC). The other MEC cannot be individual coverage or marketplace coverage. In effect, it must be, for example, coverage from a spouse’s employer.


As a reminder, the only way to offer a choice between qualified benefit, such as employer’s contribution toward health coverage and cash is through the terms of a written IRC Section 125 (cafeteria) plan. What this means that any opt-out arrangement must be documented in a Section 125 plan.


2018 Benefit and Payment Parameters

On December 22, 2016, the Department of Health and Human Services (HHS) published final rules, together with a Fact Sheet, relating to Benefit and Payment Parameters for 2018. These uniform standards are intended for health insurers and the marketplace to ensure health coverage options for consumers, as well as provide planning guidance for insurers and employers. Following are certain highlights of these rules that may be of interest to employers.


HHS Inflationary Percentage for 2018.  The Affordable Care Act directs the Secretary of HHS to determine an annual premium adjustment percentage that is used to set the rate of increase for three parameters detailed in the law.  For 2018, the premium adjustment percentage is approximately 16.17%, reflecting an increase of 2.6% from 2017. This percentage is calculated based on the projections of average per enrollee employer-sponsored insurance premiums from the National Health Expenditures Accounts that is calculated by the CMS Office of the Actuary. The percentage adjustment is applicable to:


  1. The maximum annual limitation on cost sharing.   The Affordable Care Act imposes certain cost-sharing restrictions, such as deductible and out-of-pocket limits on health plans. These annual out of pocket limits apply to insured plans offered through the marketplace, and insured and self-funded plans offered outside marketplace. Below are cost sharing limitations for 2016 through 2018:



Self-only Coverage


Other than Self-only Coverage












  1. The required contribution percentage by individuals for minimum essential health coverage for purposes of determining eligibility for a hardship exemption under the individual shared responsibility requirement (IRC Section 5000A). One of these exemptions occurs if the cost to the individual to purchase coverage exceeds 8,1% (for 2016; 8.16% for 2017) of household earnings. In 2018, the required contribution percentage will actually decrease to 8.05% of household earnings for purposes of exemption from the individual shared responsibility requirement. This affordability standard is distinct from the employer’s shared responsibility affordability standard and distinct from the affordability standard for being entitled to premium assistance.


  1. The assessable payment amounts under IRC Section 4980H(a) and (b) relating to employer shared responsibility. The chart below reflects the amount of penalties for purposes of calculating the ‘no coverage’ excise tax (IRC § 4980H(a)), and the ‘inadequate or unaffordable’ excise tax (IRC § 4980H(b)) for 2016 through 2018.  These are the excise taxes that could apply if an applicable large employer is found not to have offered health coverage to a full-time employee.


‘No Coverage’ Excise Tax

IRC § 4980H(a)

‘Inadequate or Unaffordable’ Excise Tax

IRC § 4980H(b)














Annual Open Enrollment Period.  For the 2018 plan year, the annual open enrollment period for obtaining coverage through the marketplace will run from November 1, 2017 through January 31, 2018.


Federal Exchange User Fees.  Insurers participating in the federal marketplace are subject to a user fee to help pay for the operational expenses of the marketplace. For 2016 and 2017, the user fee rate is 3.5% of the monthly premium charged by the insurer. Based on CMS’ enrollment and premium projections, the 3.5% user fee in 2018 will remain the same.


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 Kansas City 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.



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