HRB 129 - 1) Indexed MEC Adjustments; 2) PCOR Fee Reminder; 3) Revised Expiration Date for Model Marketplace Notices; and 4) Coverage of Preeclampsia Screening (article)
Released on June 13, 2017 I Download as a PDF
Indexed Adjustments for Minimum Essential Coverage (MEC)
Certain Affordable Care Act (ACA) standards are subject to inflationary adjustments. To this end, the IRS released Revenue Procedure 2017-36 which provides indexed adjustments to required contributions relating to minimum essential coverage beginning in 2018, as follows;
- Affordability Standard – Employer Shared Responsibility Mandate
Of particular note for employers subject to the ACA’s employer shared responsibility mandate, those who fail to offer minimum essential coverage to their full-time employees or fail to offer adequate and affordable coverage may be subject to an excise tax if at least one of its employees qualifies for premium assistance through a marketplace. Coverage under an employer-sponsored plan is deemed affordable to a particular employee if the employee's required contribution to the plan does not exceed 9.56 percent (indexed for 2018; down from 9.69 percent in 2017) of the employee's household income for the taxable year, based on the cost of single coverage in the employer’s least expensive plan.
If an employer does not know an individual’s household earnings, it can use one of three safe harbors for purposes of determining affordability; they are:
- A Form W-2 determination in which the employer’s lowest cost self-only coverage providing minimum value does not exceed 9.69 percent (indexed for 2017; 9.56 percent for 2018), of the employee’s Form W-2 wages (Box 1) for the calendar year.
- A rate of pay method in which the minimum value cannot exceed 9.69 percent (indexed for 2017; 9.56 percent for 2018), of an amount equal to 130 hours, multiplied by the employee’s hourly rate of pay as of the first day of the coverage period. For salaried employees, the monthly salary is used instead of the 130 hour standard. An employer can apply this method to hourly employees if they experience a reduction in pay during the year; however, this methodology cannot be used for commissioned sales people.
- A Federal poverty line (FPL) standard in which cost of single coverage does not exceed 9.69 percent (indexed for 2017; 9.56 percent for 2018) of the individual federal poverty line rate for the applicable calendar year, divided by twelve. An employer is permitted to use the poverty guidelines in effect six months prior to the beginning of the plan year. The Department of Health and Human Services released the 2017 FPL standards in January, 2017 (see HHS Releases 2017 Federal Poverty Guidelines, Benefit Beat, 2/15/17).
- Hardship Exemption. The required contribution percentage by individuals for MEC 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 a certain percentage of household earnings. For 2017, the required contribution percentage is 8.16 percent of household earnings for purposes of exemption from the individual shared responsibility requirement. In 2018, the percentage will decrease to 8.05 percent. 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.
- Premium Tax Credit. The following contribution percentages are used to determine whether an individual is eligible for affordable employer-sponsored MEC for the 2017 and 2018 tax years:
| Household income percentage of Federal Poverty Line) | Initial Percentage 2017 | Final Percentage 2017 | Initial Percentage 2018 | Final Percentage 2018 |
| Under 133% | 2.04% | 2.04% | 2.01% | 2.01% |
| Between 133% and 150% | 3.06% | 4.08% | 3.02% | 4.03% |
| Between 150% and 200% | 4.08% | 6.43% | 4.03% | 6.34% |
| Between 200% and 250% | 6.43% | 8.21% | 6.34% | 8.10% |
| Between 250% and 300% | 8.21% | 9.69% | 8.10% | 9.56% |
| Between 300% and 400% | 9.69% | 9.69% | 9.56% | 9.56% |
PCOR Annual Fee Reminder
July 31st is fast approaching and it’s time to begin planning payment of the ACA’s Patient-Centered Outcomes Research (PCOR) fee. Virtually, all health plans, whether insured or self-funded, are subject to these fees. The PCOR fee is assessed on the average number of lives covered under the policy or plan. For policy and plan years ending between October 1, 2016 and October 1, 2017, the fee is $2.26 per covered life. For plan years ending between October 1, 2015 and October 1, 2016, the fee was $2.17.
The fee is to be paid once a year in connection with IRS Form 720, Quarterly Federal Excise Tax Return. For insured plans, the insurer is obligation to file the Form 720 by July 31st following the close of the policy year. For self-funded plans, the plan sponsor is obligated to file the Form 720 by July 31st of the calendar year following the plan year end.
As a reminder, the PCOR fee is an employer responsibility and cannot be paid from plan assets, including participant contributions.
For additional information about the PCOR fee, see IRS webpage, Questions and Answers and Chart of Plans Subject to the Fees.
Model Notice of Marketplace Options – Revised Expiration Date
The ACA requires all employers to provide a Notice of Marketplace Options to their employees explaining the pros and cons of buying coverage through the marketplace. The notice of marketplace options must be provided to all new hires including full-time and part-time employees, without regard to eligibility status for the health plan, within 14 days of date of hire.
There are two different versions of the model notice – one to be used by employers who offer health coverage to some or all employees, and the other version is to be used by employers who do not offer health coverage. These model notices are subject to approval by the Office of Management and Budget (OMB) on a periodic basis. The OPM have recently approved another set of these model notices, which have now been re-issued to reflect a new expiration date of May 31, 2020. While the expiration date of the notices has been changed, there are no substantive changes made to the language contained in these model notices. The re-issued model notices are available in both English and Spanish, and can be viewed and/or downloaded from the Department of Labor’s website.
Preventive Services - Coverage of Preeclampsia Screening
The ACA requires health plans to cover certain preventive services, without imposing any cost-sharing requirements (co-pay, co-insurance, or deductible), when such services are delivered by in-network providers. The types of covered preventive services, some of which are recommended by the U. S. Preventive Services Task Force (USPSTF), are updated periodically. The USPSTF recently announced its recommendation on April 25, 2017 for screening pregnant women for preeclampsia with blood pressure measurements throughout pregnancy. This particular recommendation is graded with a B rating which means, generally, that compliance with the recommendation takes effect one year from the time it is issued. Thus, for plan years beginning on or after April 25, 2018, non-grandfathered group health plans must provide coverage of preeclampsia screenings for covered pregnant women. 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.