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Hawaii Association of Health Plans

The Hawaii Association of Health Plans

HAHP provides valuable information to Hawaii health care consumers, legislators, and the media, including contact information for HAHP's member organizations and information on current health care issues.

FAQ


FAQs About Health Care Reform in Hawai‘i

  • Overview
  • Hawai‘i Health Connector
  • Individuals
  • Medicare
  • TRICARE
  • Small employer tax credit
  • Excepted Benefits
  • Coverage for Former Employees
  • Rescissions
  • Automatic Enrollment
  • Wellness Programs
  • Summary of Benefits and Coverage
  • Waiting Periods
  • PCORI Fee
  • Preventive Services
  • Transparency Reporting

This material is intended for general information purposes only and is not intended to be used as legal, financial or tax advice on any specific matter. This information is not a substitute for proper evaluation and advice by an attorney, financial consultant or certified public accountant regarding ACA regulations, compliance requirements, or facts and law applicable to any particular case.

 

OVERVIEW

Q:    What is the interaction of Hawai‘i’s Prepaid Health Care Act (PHCA) with the Affordable Care Act (ACA)?

A:   The State and Federal regulatory authorities have concluded that both laws apply. The ACA included language which preserved Hawai‘i’s Prepaid Healthcare Act ERISA exemption and Hawai‘i decided to use a state-based exchange model, in part to make sure that PHCA worked with the ACA. The Hawai‘i Health Connector has worked closely with the federal government to ensure that the health plans offered on the Hawai‘i Health Connector comply with the PHCA

Q:   Under the Affordable Care Act, there are various provisions that apply to group health plans and health insurers (known as Issuers under the ACA) and various protections and benefits for consumers that are effective or that will become effective very soon.  What is the federal government’s basic approach to implementation?

A:   The federal government is working with employers, Issuers , States, providers and other stakeholders to ensure compliance with the new law. They are also working with families and individuals to help them understand the new law and benefit from it.  Although ensuring compliance with the law is a high priority for the federal government, the approach to implementation emphasizes assisting (rather than imposing penalties on) those working to and to come into compliance with the new law.  This approach includes, where appropriate, transition provisions, grace periods, safe harbors, and other policies to ensure that the new provisions take effect smoothly, minimizing any disruption to existing plans and practices.

Q:   What is the average premium for the small group market in a state (or an area within the state)?

A:   The average premium is determined by federal Department of Health and Human Services (HHS). The instructions for IRS Form 8941 give the average premiums for each state.

Q:   What changes are large employers required to put into place to comply with the ACA?

A:   The employer mandate that would have directly impacted large group employers in 2014 has been delayed; therefore the only ACA provision that significantly impacts large groups in 2014 is the requirement that any “essential health benefits” that are covered under large group plans be covered at EHB levels; for example, these benefits cannot subject to dollar maximums.

Hawai‘i Health Connector

Q:   What is SHOP?

A:   SHOP stands for the Small Business Health Options Program.  It is the marketplace where small group employers (currently defined as employing fifty or fewer employees) can buy plans offered by the Hawaii Health Connector.

Q:   Will the pricing of health plans be different if I buy through the Hawai‘i Health Connector versus directly from plans outside of the Hawai‘i Health Connector? 

A:   According to new rules in the ACA, there will be no price difference for a health benefit plan bought through the Hawai‘i Health Connector and the same exact plan purchased through the insurance carrier outside of the Hawai‘i Health Connector. For example, a Kaiser plan will charge the same premium regardless of whether it is offered inside or outside of the Hawai‘i Health Connector.  Health plans not offered on the Hawai‘i Health Connector, still have to comply with ACA rules which change the way that premiums are calculated.

Q:   Do small businesses have to offer all products to their employees that are offered by the Hawai‘i Health Connector? 

A:   No, the business owner still makes the determination of what health insurance coverage is offered to their employees and how it is purchased (either directly from the Issuer or through the Hawai‘i Health Connector). Employers still retain their ability to choose which plans they offer even if purchasing through the Hawai‘i Health Connector. Hawai‘i’s employers still need to comply with Hawai‘i’s Prepaid Health Care Act which requires employers:

         Provide coverage for employees who work 20 hours or more a week for four weeks in a row

         Contribute at least half of the employee’s premiums for single coverage but employee can contribute no more than 1.5 percent of their wages

Health plans offered on the Hawai‘i Health Connector will comply with the PHCA. An employer needing to provide a PHCA compliant plan will select either an “A” or “B” status plan, much like they do today. If the employer decides to only offer coverage from a single Issuer (either HMSA or Kaiser), their employees will then be able to select all health plans offered by that Issuer.

Q:   Who can shop in the SHOP?

A:   In 2014, employers with 50 or fewer employees can opt to purchase their coverage through the SHOP.  In 2016, the employer size that can use the SHOP increases to 100 employees.  The proper way to count employment is to include all employees who are employed under a single Federal Tax ID number.  So, if your office is in Hawai‘i and the parent company office is located on the mainland and both offices fall under the same Federal Tax ID number, employment at both locations must be combined for purposes of meeting the employer size requirement.

Q:   How will the Hawaii Health Connector affect Hawaii employers with multi-state employees?

A:   Out-of-state employees added together with Hawaii-based employees, count together to determine whether or not an employer group meets the definition of “small group”. If the total employee count is 50 or less, only the Hawaii-based employees can be covered through SHOP coverage.

Q:   What happens if an employer has 48 employees in 2014 and uses the SHOP but has 55 employees in 2015. Is the employer barred from using the SHOP in 2015?

A:   The determination regarding an employer’s size is made at the time of enrollment/renewal. Recently published rules state that an employer that originally purchased coverage in the small group market and that increases in size beyond the definition of a small employer has the option of keeping the product it purchased in the small group market. Basically the law guarantees the employer the right to renew or continue in force the coverage it purchased in the small (or large) group market even though the employer ceases to be a small (or large) employer by reason of an increase (or decrease) in its number of employee.

Q:   Would an employer be allowed to limit the plan choices offered to employees? For example, offer only the lowest cost plan?

A:   When shopping on the Hawaii Health Connector, employers who need to provide coverage to their employees which complies with the Prepaid Health Care Act will first select either an “A” or “B” status plan (much like they do today). Once that has been selected an employer has the option to only offer plans from one Issuer (for medical coverage at this time, only HMSA and Kaiser will be offering plans on the Hawaii Health Connector). If an employer decides to only choose either HMSA or Kaiser for medical coverage, their employees would be permitted to choose any of the plans offered by that Insurer. If the employer wants to offer both HMSA and Kaiser, employees will be able to choose from all plans offered by both.

Q:   My 26 year old daughter moved to New York and is currently covered under my Hawaii health plan until she reaches age 27 in February 2014. What should I advise her to do when she becomes 27? Can she purchase an individual plan in Hawaii?

A:   Subscribers (i.e. your daughter) must reside in Hawaii to be eligible to purchase insurance coverage in Hawaii. Out-of-state residents should research which insurance options are available in their state of residence. One place for her to check would be the New York health care exchange at https://nystateofhealth.ny.gov/

Q:   I read in the news that premiums will not be aggregated in 2014, so if I want to purchase both Kaiser and HMSA coverage through the Connector, I will get two separate bills, one from each carrier.  Is this true?

A:   No, not in Hawai‘i.  The delays which have gained media attention only apply to the federally facilitated marketplaces or exchanges and the premium aggregation function will not be offered in 2014 in those federal Exchanges.  The Hawai‘i Health Connector is a state based exchange and will offer a premium aggregation service in 2014. This means that an employer could provide all health plans offered on the Connector to their employees and only receive one consolidated bill from the Hawai‘i Health Connector, no matter how many choices their employees make

Q:   How will additions and terminations be handled on the consolidated billing in Hawaii?

A:   For the SHOP portion of the Hawaii Health Connector, additions to a group health plan, such as adding a dependent or a new employee, will be handled much like they are today except that the employer will make these additions through the Hawaii Health Connector and not directly with the Issuers. The same goes for terminations, as employers will need to work directly with the Hawaii Health Connector to disenroll an employee who is no longer employed

Q:   Open enrollment will be conducted from October 1, 2013 to March 31, 2014.  If I decide to buy through the SHOP effective January 2014 and decide it isn’t a good idea for me/my business, can I change my mind?

A:   Yes, employers are not subject to the same open enrollment periods as individuals. Much like today, an employer could terminate an existing contract with an Issuer at any time during the year and switch to a different Issuer. Employers will be able to make these types of changes moving forward, even if choosing to purchase through the Hawai‘i Health Connector.

Q:   Are there special qualifying events that will permit me/my family to enroll outside of the Open Enrollment period? 

A:   Yes, special enrollment periods triggered by qualifying events will still be accommodated in the individual market. Individuals experiencing a qualifying event may enroll outside the open enrollment period if the individual:

         Gains a dependent (adoption, marriage, birth)

         Becomes a citizen

         Experiences an enrollment error

         Demonstrates Qualified Health Plan violated contract provisions

         Becomes newly eligible

         Experiences a permanent move

         Is an American Indian

         Experiences exceptional circumstances.

Q:   If my company has employees on Oahu and some/all of the neighbor islands and I purchase coverage through the SHOP, will my company’s premium rates vary depending on what island the employees reside? 

A:   No.  The entire state is considered a “single rating area” so different islands will not be rated differently. The decision to not break up the state’s rating areas by geography was made by the Insurance Division specifically to ensure rates were consistent regardless of which island a person resides on.

Q:   What is the toll free line to reach the Hawai‘i Health Connector customer service line? 

A:   The toll free number to reach the Hawai‘i Health Connector is (877) 628-5076.  The Hawai‘i Health Connector’s contact center has initially hired about 17 people and went “live” September 15, 2013.  During Open Enrollment, the contact center will be open 7 days per week from 8:00 a.m. to 8:00 p.m. Hawai‘i Time.  The Contact Center is located in downtown Honolulu.

Q:   What is an Assister? 

A:   The Hawaii Health Connector’s Marketplace Assister Program, known as Hii Ola, is responsible for educating people about the Hawaii Health Connector, helping them understand their health plan choices, and facilitating the selection of a plan that is right for them. Assisters (or kokua) are overseen by Island Leads who are responsible for certain geographic areas of the state. Statewide organizations were awarded grants to employ the kokua who will provide impartial information about Hawaii Health Connector plan options.  These requirements which Assisters must meet can be viewed at: https://www.statereforum.org/system/files/hi_marketplace_assister_-_hii_ola_program.pdf

Q:   Which organizations are participating in the Hi’i Ola Assister Program?

A:   Below is a list the organizations which were awarded grants to hire kokua:  

Kokua will help consumers on every island and will be working for the following organizations:

* County of Kauai Agency on Elderly Affairs
* Faith Action for Community Equity Maui
* Faith Action for Community Equity Oahu
* Hamakua Health Center, Inc.
* Hawai‘i Island Workforce & Economic Development Ohana, Inc.
* Hawai‘i Island HIV/AIDS Foundation
* Helping Hands Hawai‘i
* Hoola Lahui Hawai‘i
* Honolulu Community Action Program
* HOPE Services Hawai‘i, Inc.

* Hui Malama Ola Na Oiwi
* Hui No Ke Ola Pono
* Institute for Human Services, Inc.
* Ka
ʻu Rural Health
* Kalanihale
* Kanoelehua Industrial Area Association
* Kauai Economic Opportunity
* Ke Ola Mamo
* Koolauloa Community Health & Wellness Center
* Kokua Kalihi Valley Comprehensive Family Services
* Lanai Community Health Center
* Legal Aid Society of Hawai‘i
* Li
ʻs Company
* Molokai Community Health Center
* Na Puuwai, Inc.
* North Hawai‘i Community Hospital
* Project Vision Hawai‘i
* Rolf Advertising
* The ARC of Hilo
* The Bay Clinic, Inc.
* Wahiawa Center for Community Health
* Waianae Coast Community Mental Health Center, Inc.
* Waimanalo Health Center
* West Hawai‘i Community Health Center

Q:   Do you have to get a license or meet any educational requirements to be an Assister? 

A:   To be an Assister (kokua), you must attend and complete educational sessions offered by the Hawaii Health Connector. There are no licensure requirements to be a kokua.

Q:   Do employers have to post workplace notices about the Accountable Care Act? 

A:   Most Hawai‘i employers will be required to post a model Department of Labor notice on or before October 1, 2013. 

The notice can be viewed at: http://www.dol.gov/ebsa/pdf/FLSAwithplans.pdf. 

The ACA notice requirement is described at: http://www.dol.gov/ebsa/newsroom/tr13-02.html#footnotes.

Q:   How are premiums determined in the SHOP? 

A:   Due to new rating rules, individual and small employer health plans regardless of whether they are sold on the Hawai‘i Health Connector or not will only be rated by geographic area, age and tobacco usage. Premiums will only be determined by the age of those covered without any consideration being given their health status.  The federal government has published guidelines on how to determine the differences in premiums based on age and have created limits on premium variations. For example, a person aged 64 cannot be charged more than three times what a person aged 21 is charged.

Q:   A number of the employees in my company use tobacco regularly.  Will this affect the cost of insurance through the SHOP? 

A:   Possibly, if the employer and employee accurately self-report this.  Tobacco use may add an additional 50% to the cost of coverage for each self-reported tobacco user.  Tobacco cessation programs are available in SHOP coverage (and in all Prepaid coverage) to those individuals who identify themselves as tobacco users per the criteria in the coverage questionnaire on the SHOP web site. This tobacco rating also applies to any small employer or individual plan regardless of whether or not it is sold through the Hawai‘i Health Connector (not just SHOP plans).

Q:   Will the Hawai‘i Health Connector compensate agent and broker commissions/fees directly? 

A:   No, at this time the Hawai‘i Health Connector will not compensate agents and brokers directly.  Relationships between Issuers, employers and agents and brokers will remain much as they are today. Each business or individual utilizing an agent or broker will deal with their adviser directly. This issue is likely to be revisited by the Hawai‘i Health Connector and its Board of Directors.

Q:   Is the cost of insurance coverage going up in Hawai‘i as a result of paying for the Hawai‘i Health Connector?  

A:   Yes,  overall.  However, due to changes in rating methodology, some people may find that their premium rates will decrease, while others will find that they will increase.

The cost of health care coverage is increasing, due in part to fees assessed by the federal government on Issuers by the Hawai‘i Health Connector.  For those Issuers participating with the Hawai‘i Health Connector, the 2% Issuer fee will be included in future premiums. The 2% will be applied to individual coverage offered January 1, 2014 and to small groups effective July 1, 2014. At this time, the fee is only paid for by those Issuers who are offering plans on the Hawai‘i Health Connector.

Q:   Some of the advertising on TV says that the Hawai‘i Health Connector “has you covered”.  Is the Connector an insurance company?

A:   No, the Hawai‘i Health Connector is not an insurance company (a message they convey themselves).  The Connector is an electronic marketplace where individuals and small employers can choose to shop for and purchase health care coverage. No one has to purchase their coverage through the Hawai‘i Health Connector but it is the only way to obtain financial assistance to pay premium costs.

Q:   The advertising I’ve seen makes it sound as if I can’t buy insurance the way I’m used to buying it, directly from the insurer or through my agent/broker.  Is this true? 

A:   No, you will still be able to purchase health care coverage the way you do today.  The Hawai‘i Health Connector is an alternative purchasing method for small businesses and individuals.  You can still purchase health insurance coverage the way you have in years past.

Q:  The advertising I’ve seen seems to say that all of your health insurance options are available through the Connector.  Is this true? 

A:   No, not all Issuers who offer health care coverage locally today decided to participate in the Hawai‘i Health Connector.  Other health care coverage options are available through other Issuers including UHA, HMAA and the new Family Health Plan.  Although these Issuer’s health care coverage is not available through the Connector, their plans are available. To find out if they have a plan that is right for you either call them directly or contact them through your agent/broker.

Q:   Why aren’t UHA, HMAA and Family Health Plan available through the Hawai‘i Health Connector? 

A:   Issuers not participating with the Hawai‘i Health Connector today have likely made this decision based on many different factors. If it is important for you to understand why this is the case, please contact each Issuer directly and talk to one of their representatives.  Although they do not participate with the Hawai‘i Health Connector the health plans that they offer meet ACA and Prepaid Healthcare Act requirements for employer sponsored coverage.

Q:   Why aren’t any mainland-based health insurers participating in the Hawai‘i Connector in 2014? 

A:   Due to the uncertainty the new marketplaces bring, some mainland insurers are taking a wait-and-see approach to participating in a large number of exchanges.  This may be due to the risks involved in entering new markets when there may be pent-up demand for coverage by uninsured individuals who currently have a poor health status.  Also, in Hawai‘i a premium tax of 4.265% would be applied to any for-profit insurers entering the market, making their health plans more costly than those offered by tax-exempt non-profit insurers such as Kaiser and HMSA currently operating in the state.

Q:   Will the Hawaii Health Connector see more local and national carriers participating in the future? 

A:   It is unclear at this time if remaining local insurers will decide to participate with the Hawaii Health Connector. In coming years, the multi-state plans which are initially operating in 31 states across the country are required to eventually be present in all states over time.

Q:   Will doctors and other health-care providers will be required to accept patients who sign up for any insurance plan offered by the Hawaii Health Connector?

A:   Doctors and other healthcare providers are not required to participate in insurance plans offered on the Hawaii Health Connector, or any other private insurance plan for that matter.   Patients should verify that their doctor and other providers are participating in the insurance plan they wish to purchase. 

 

Individuals

Q:   I have a medical pre-existing condition that has prevented me from getting affordable individual insurance coverage for me and my family.  Will this still be true in 2014? 

A:   No.  Consideration of pre-existing conditions in issuing health care coverage is not permitted beginning in 2014.  Applying pre-existing conditions for children is already barred.

Q:   I am a sole proprietor and have a large family (a spouse and five children).  Will I have to pay more premiums because of my family size if I purchase coverage through the SHOP?

A:   Sole proprietors will be eligible to purchase coverage through the individual side of the Hawai‘i Health Connector. Purchasing through the Hawai‘i Health Connector is the only way a person or employer can qualify for a subsidy to assist in paying premiums. Under new ACA rules, families will only be charged a premium for the three oldest dependents under the age of 21 years old, regardless of how many dependents are in the family. 

Q:   As a healthy person under age 30, who is not offered prepaid health coverage through my employer since I only work part time, are their options that I can find to meet ACA requirements so I don’t have to pay a penalty? 

A:   Yes.  Catastrophic Coverage is available to individuals under 30 and to people meeting hardship exemption criteria (hardship conditions exemptions are administered by the Hawai‘i Health Connector).   Catastrophic coverage plans must at a minimum cover three primary care visits annually, preventative service with no copayments and essential health benefits after the individual meets their plan’s deductible.  The maximum deductible an individual can pay in 2014 is $6,350, and will increase by an inflation amount in years thereafter. It is important to note that subsidies cannot be applied to catastrophic plans so an individual should research whether it is financially beneficial to select a bronze level plan offered on the Hawai‘i Health Connector and potentially receive financial assistance to cover the cost of their premiums.

Q:   If I am self-employed and choose not to buy health insurance for me and my family, what penalty might I have to pay? 

A:   In 2014, the penalty is modest: $95 annual penalty for an adult and $47.50 per child up to a total of $285.00 per family, or 1% of total family income, whichever is greater.  This penalty increases significantly in 2015 and 2016. At this time, the only recourse for the Internal Revenue Service (IRS) to collect a penalty is by deducting the penalty amount from any tax refund the taxpayer may be receiving. If a taxpayer is not receiving a tax refund, the IRS will bill the taxpayer for the penalty amount; however, the IRS has limited recourse if it is not paid.

Q:   I don’t have insurance coverage and may meet the criteria to get help paying for my premium due to my low income level.  How do I find out if I qualify? 

A:   All individuals applying for advance payment tax credits (subsidies) and cost sharing reductions will be initially screened for Medicaid eligibility through the Department of Human Services (DHS).  If DHS determines you are not eligible for Medicaid, you will be directed to the Connector to apply for subsidies. There are many useful tools available to determine if you may be eligible for subsidies like this one: http://kff.org/interactive/subsidy-calculator/.

Q:   What are the family income requirements to qualify for an individual subsidy? 

A:  

Household Size

100%

133%

150%

200%

300%

400%

1

$13,230

$17,596

$19,845

$26,460

$39,690

$52,920

2

$17,850

$23,741

$26,775

$35,700

$53,550

$71,400

3

$22,470

$29,885

$33,705

$44,940

$67,410

$89,880

4

$27,090

$36, 030

$40,635

$54,180

$81, 270

$108,360

5

$31,710

$42,174

$47,565

$63,420

$95,130

$126,840

6

$36,330

$48,319

$54,495

$72,660

$108, 990

$145, 320

7

$40,950

$54,464

$61,425

$81,900

$122,850

$163,800

8

$45,570

$60,608

$68,355

$91,140

$136,710

$182,280

For each additional person, add...

$4,620

$6,145

$6,930

$9,240

$13,860

$18,480

 

Q:   Are there penalties that apply to people who receive subsidies inappropriately?

A:   Individuals must attest, under penalty of perjury, that they are not providing false or fraudulent information when supplying information to an exchange to screen for subsidies.  In addition to the existing penalties for perjury, the ACA applies penalties when an individual fails to provide correct information based on negligence or disregard of program rules or provides fraudulent information.  Moreover, the IRS will reconcile subsidies when individuals file their annual tax returns at the end of the year, and it will recoup overpayments and provide refunds when appropriate, subject to statutory limits.  These safeguards apply regardless of whether a state is responsible for running its own exchange (state based model) or if it is being run by the federal government (federally facilitated exchange or marketplace. Hawai‘i’s exchange, known as the Hawaii Health Connector, is a state based exchange.

Q:   Will dependents of an employee covered by an employer health plan be eligible for tax credits if they enroll in an HHC health plan?

A:   No, if dependents of an employee are offered “affordable coverage” (through their parent/guardian’s employer coverage) as defined by the federal government, the dependent will not be eligible to receive subsidies to purchase individual coverage on the Hawaii Health Connector. At this time the affordability measurement only applies to whether the coverage is affordable for the employee and not their entire family.

Q:   Will ACA individual tax credits continue indefinitely?

A:   At this time, there is no set expiration date for the individual subsidies, in the form of up front tax credits, made available to individuals. Employers who receive end of the year tax credits can receive these for a total of two (2) years ending in 2015.

Q:   Best Life and Guardian Life: what type of plans are they offering?

A:   Best Life and Guardian Life will both be offering stand-alone dental plans through the Hawaii Health Connector.

Q:   If an individual loses his or her job (and with it a health plan) after the open enrollment period ends, will he or she be able to get a new plan right away in the Hawaii Health Connector or is there a coverage gap until the next open enrollment period begins?

A:   If an individual loses a job outside of open enrollment, he or she will be able to get a plan right away in the Hawaii Health Connector.  While there is indeed an open enrollment period for individuals (this year, from October 1 to March 31), the health-care law allows people who have certain life-changing events to sign up outside of that period.  Loss of a job, death of a spouse, moving to a new state or having a baby count are some of what the law considers  to be life-changing events.

Q:   Can Americans living abroad participate?

A:   Americans who live abroad are generally discouraged from purchasing a plan under the Exchanges for two reasons.  First, the health insurance bought on the exchanges is unlikely to have coverage options outside the United States, so it won't help much with seeing a doctor.  Second, the individual mandate does not apply to Americans living abroad.

Q:   Can a person look at what's available on the Hawaii Health Connector by giving only date of birth and state of residence, or is full name and address required?

A:   Yes, the Exchanges run by the state and federal government will allow people to shop for plans on the exchange without answering too many questions beyond age and county of residence.  But to determine whether you qualify for federal subsidies, you will have to include your income information or an estimate of your income in 2014.

Q:   If someone qualifies for QUEST, can they still buy a policy through the Hawaii Health Connector?

A:   If someone qualifies for QUEST, they will be directed there, rather than the Hawaii Health Connector.  They can still buy a policy from an insurance company, but no subsidy will be available.

Q:   If someone has COBRA, how and when should they shop for insurance?

A:   As of October 15, consumers can shop for coverage on the new Hawaii Health Connector web site.  With the help of this web site, they will be able to see what health insurance would cost  them.  Then it'll be their decision whether they would rather buy inside the Hawaii Health Connector or maintain COBRA coverage.

Q:   The fine / tax in 2014 is much less than the cost of minimal health insurance so why would anyone want to buy insurance through the Hawaii Health Connector?

A:   Everyone knows someone who has been sick or in an accident and received huge health care bills.  While on the surface it may appear paying a $95 fine in the first year is the better deal, if someone gets hit by a car or develops a serious health problem, they will likely regret that decision. Individuals should  research the prices on the exchange, particularly the catastrophic option which would be the lowest monthly premium — these are designed for people who are  either younger than 30 years of age or have experienced a hardship (as defined by federal law). Catastrophic plans are best suited for individuals who are not chronically ill but want to be covered in case the unexpected happens.

Q:   If a child is covered under a parent’s policy and will turn 26 after the open enrollment season, should the child get his or her own policy during open season or wait until coverage terminates?

A:   Federal rules allow for certain people an exemption from the open enrollment period, if they have a life-changing event.  Losing one's health insurance coverage counts as one of those special events.  This means that the child would be able to enroll in coverage outside of the normal enrollment period.

Q:   Can a U.S. citizen sign up his whole family if one of those members is undocumented?

A:   Undocumented citizens are barred from QUEST and from buying coverage through the Hawaii Health Connector.  But that should not preclude the rest of the household from participating. The National Immigration Law Center is a great resource on immigration questions.

Q:   What is the role of the Equifax Workforce Solutions specialty consumer reporting agency in obtaining subsidized health insurance coverage from an Exchange?

A:   Page 3 of the basic application released by HHS says: "We need [your income] information to check your eligibility for help paying for health coverage if you choose to apply.  We'll check your answers using information in our electronic databases and databases from the Internal Revenue Service (IRS), Social Security, the Department of Homeland Security, and/or a consumer reporting agency.  If the information doesn't match, we may ask you to send us proof.”

Q:   Should people request a copy of the Equifax Workforce Solutions report prior to applying for subsidized insurance coverage?

A:   There is no need to get a credit report for obtaining coverage.  The federal government is utilizing the services of Equifax to collect annual income information on consumers to check people's eligibility for subsidies.  This may be helpful for people who don't pay taxes, since the IRS would not have their most recent income information.  The subsidies are based on estimated income for 2014, not current income, but if a person’s estimate varies widely from the latest data in the federal government data base, the Hawaii Health Connector will likely ask for more information to back up the claim.  Remember, if an income estimate later turns out to be too low (and the person get a bigger subsidy than should have been provided) he or she will have to pay the money back.

Q:   What are people on COBRA supposed to do?  Do they have to wait until the end of their COBRA coverage or can they end it at any time and go to a policy on the Hawaii Health Connector?

A:   In general, people who don't have an affordable offer of health insurance (anything that costs more than 9.5 percent of their income) are welcome to shop on the Hawaii Health Connector.  So if COBRA premiums are above that price, then they would not need to wait until COBRA runs out to shop on the marketplace.

Q:   If a person drops an individual health plan and goes without health insurance for three months at end of 2013, will this affect his or her choices in the insurance marketplace?

A:   No, dropping coverage will not affect plan choice in future open enrollment periods. Insurance plans are only allowed to use a few factors to determine premium, such as age and where a person lives.  Continuous coverage is not among them.

Q:   When does coverage through the Hawaii Health Connector start?

A:   This is an important question: While enrollment through the Hawaii Health Connector began on October 1, coverage will not start until January 1, 2014.  This is true whether a person buys a plan on October 1, November 1 or even December 1.  None of the coverage starts until January 1, 2014. So the plan will not take effect immediately, but up to three months after coverage is purchased.  If a person completes the application process by the 15th of December, coverage will be effective January 1.  After that, if a person completes the application process by the 15th of a month, coverage will be effective the first of the next month (for example, if an application is submitted on December 16th, that person’s coverage would be effective on February 1st).

Q:   When do you plan to change premium costs based on the age, tobacco use, family size, and geography?

A:   In accordance with ACA regulations, the new small group rating methodology will take effect for all policies issued with effective dates on or after 1/1/2014.

Q:   If a person is covered (as an employee or dependent) under an employer-sponsored plan, do they have to obtain their own policy or can they continue on under the employer plan?

A:   If a person is happy with their employer-based coverage, they don't have to do anything.

Q:   If a child is on QUEST but the parents have their own insurance, will the child lose QUEST and the parents have to purchase insurance for the child?

A:   No.  If a child is already on QUEST, nothing will change.  The health law expanded Medicaid eligibility since in most states only children, pregnant women and parents were eligible but childless working adults could not obtain QUEST coverage. . What's changing is that everyone under 138 percent of poverty level (about $13,230 for an individual in Hawaii) can qualify for Medicaid regardless of their age.  This part of the law was made optional by the Supreme Court so only about half the states are expanding in January.  Hawaii is one of the states that is expanding coverage.

Hawaii is expanding its Medicaid coverage by removing the asset limit of $5,000 for the QUEST population while still applying the QUEST income test.  This expansion could enable about 35,000 additional residents to be eligible for QUEST.  The asset limit above still applies to the “QExA” program, including those who are in nursing homes or alternative long term care setting.

Q:   If a person’s annual income fluctuates, what amount should he or she enter in the calculators?

A:   The federal government generally will ask a person to estimate what income he or she will make in the forthcoming year, which is tough for someone in a commission-driven industry.

One thing to know is that the initial estimate doesn't have to be the final say.  The federal government asks that if income ends up being higher or lower than what was expected, that the person go back and let them know, so they can adjust premium subsidies appropriately.  This is important because if the person doesn't do that, the federal government will likely recoup any excess subsidies in the tax return the next year.

Q:   This program looks very complicated.  Who has the time and the savvy to work through this bureaucratic labyrinth of plans graded as metals and prices that can change anytime?

A:   Although the program seems complicated, the Hawaii Health Connector offers many different options for consumers to obtain help in applying for coverage. The Hawaii Health Connector offers choices to help consumers determine what health plan would be best for them. Consumers need to not just consider the price of the plan but the level of coverage it offers.  For individual coverage, insurers can only make changes their prices once a year so consumers should check their coverage each year to make sure they are in the best plan.  The Hawaii Health Connector can assist consumers in locating appropriate assistance to determine the plan that is best for them.

Q:   Is the Hawaii Health Connector available for a senior citizen working via green card?

A:   A person who is in the country legally and is not eligible for coverage through an employer or enrolled in Medicare (or another government program), is eligible to obtain coverage through the Hawaii Health Connector.

 

MEDICARE

Q:   I have Medicare coverage.  Do I have to purchase my Medicare coverage through the Hawai‘i Health Connector?

A:   No, individuals who are currently receiving coverage through Medicare will not be affected by the ACA or the Hawai‘i Health Connector.  Medicare recipients do not need to do anything differently to keep their existing Medicare or their Medicare Advantage Plan coverage.

Q:   Will over-65 Medicare eligible and/or covered individuals qualify for Hawaii Health Connector individual coverage?

A:   No, recently released guidance from the federal government states that for those individuals who are receiving coverage through Medicare, they would be ineligible to purchase an individual plan through an exchange. CMS has ruled that doing so would be in violation of section 1882(d) of the Social Security Act which prohibits the sale and issuance of duplicate coverage to Medicare beneficiaries. Medicare FAQs state that Medicare beneficiaries need to know that if they have Medicare, a qualified health plan is “not appropriate for them” and goes on to say that if they are seeking supplemental coverage for their Medicare they should consult Medicare.gov about enrolling in a Medicare Advantage plan or purchasing a Medigap policy. It is still unclear if a Medicare eligible beneficiary who is not enrolled in Medicare coverage would be able to enroll in an individual plan through the Connector.

Q:   The media has said that people who are enrolled in Medicare don't have to do anything differently this year.  Why the qualification "this year"?  Does this mean that they will have to do something differently in the coming years?

A:   No, there is nothing that Medicare enrollees will have to do differently in any years going forward as a result of health care reform.  The media was probably trying to clear up some confusion about how the health-care law affects Medicare beneficiaries.

The bottom line:  Medicare enrollment will work the same way as it did last year, in this upcoming year, and the years after that.

Q:   If someone becomes eligible for Medicare in April of 2014, must he or she buy health insurance for the first quarter in order to escape paying a fine?

A:   Yes, to avoid a fine a person must buy coverage before the close of open enrollment on March 31, 2014.  But, some people are exempt from the mandate.  The mandate’s exemptions cover a variety of people, including: members of certain religious groups and Native American tribes; undocumented immigrants (who are not eligible for health insurance subsidies under the law); incarcerated individuals; people whose incomes are so low they don’t have to file taxes (currently $9,500 for individuals and $19,000 for married couples); and people for whom health insurance is considered unaffordable (where insurance premiums after employer contributions and federal subsidies exceed 8 percent of family income).

 

 

TRICARE

Q:   I currently have TRICARE coverage. Do I need to purchase minimum essential coverage from a health insurer or from the SHOP?

A:   The Affordable Care Act also known as the health care reform law, requires you to maintain basic health care coverage—called minimum essential coverage.

The TRICARE program is considered minimum essential coverage. If you’re using any of the following health plan options, you have the coverage required by the health care reform law:

·         TRICARE Prime

·         TRICARE Prime Remote

·         TRICARE Prime Overseas

·         TRICARE Prime Remote Overseas

·         TRICARE Standard and Extra

·         TRICARE Standard Overseas

·         TRICARE For Life

·         TRICARE Reserve Select (if purchased)

·         TRICARE Retired Reserve (if purchased)

·         TRICARE Young Adult (if purchased)

·         US Family Health Plan

You also have minimum essential coverage if you are covered by either of these transitional health plans:

·         Transitional Assistance Management Program (premium-free, 180 days)

·         Continued Health Care Benefit Program (if purchased, 18-36 months)

In the following scenarios, you don't have minimum essential coverage:

·         You are only eligible for care at military hospitals and clinics, and have no other TRICARE coverage.

·         You are only eligible to get care for “line of duty” injuries and illnesses, and have no other TRICARE coverage.

If you qualify for one of TRICARE’s purchased plan options, you only meet the requirements for minimum essential coverage if you purchase it.

Be sure to check that you’re getting the most affordable coverage for you and your family that best meets your needs. Compare TRICARE’s purchased plan options with your employer’s health insurance or other civilian options offered through the Hawaii Health Connector.

See this information and more at:  http://www.tricare.mil/Home/Welcome/About/MEC

 

 

This material is intended for general information purposes only and is not intended to be used as legal, financial or tax advice on any specific matter. This information is not a substitute for proper evaluation and advice by an attorney, financial consultant or certified public accountant regarding ACA regulations, compliance requirements, or facts and law applicable to any particular case.

Small employer tax credit

Q:   What is the small employer tax credit?

A:   Small employers have been eligible to receive tax credits since the passage of the ACA in 2010. For tax years beginning in 2010 through 2013, an eligible small employer may claim a 35 percent tax credit (25 percent in the case of a tax-exempt eligible small employer) for premiums it pays toward health coverage for its employees. An eligible small employer is an employer that has no more than 25 full-time equivalent employees and the average annual compensation of these employees is not greater than $50,000. The credit is reduced by 6.667 percent for each full-time employee in excess of 10 employees and by 4 percent for each $1,000 that average annual compensation paid to the employees exceeds $25,000. Since the exchange marketplaces were not yet functioning during this time, there was no requirement to purchase through an exchange to receive the tax credit. Employers who did not apply for this tax credit in previous years could do so as the federal government is permitting these tax credits to be applied retroactively.

In tax years that begin after 2013, an employer must purchase health care coverage through an Exchange in order to claim the credit. The credit, however, may only be claimed in two tax years that begin after 2013. The credit rate for these two tax years is increased to 50 percent (35 percent in the case of a tax-exempt eligible small employer). In order to claim the credit, the employer must pay at least 50 percent of the premium cost. Under Hawai‘i’s Prepaid Health Care Act, employers complying with this law will meet this threshold for employee contribution.

The IRS has issued proposed regulations that provide guidance on the tax credit available to small eligible employers that offer health care coverage to their employees. 

Q:   Which employers are eligible for the small employer health care tax credit?

A:   Small employers that provide health care coverage to their employees and that meet certain requirements, generally are eligible for a federal income tax credit for health insurance premiums they pay for their employees. In order to be eligible to receive tax credits the employer must have fewer than 25 full-time equivalent employees (FTEs) for the tax year, the average annual wages of its employees for the year must be less than $50,000 per FTE, and the employer must pay the premiums under a “qualifying arrangement.” A qualifying arrangement is an arrangement under which the employer pays premiums for each employee enrolled in health insurance coverage offered by the employer in an amount equal to a uniform percentage (not less than 50 percent) of the premium cost of the coverage.

Q:   If a small business under 25 FTEs qualifies for the tax credit due to average salaries under $50,000, does the credit apply to employer 2014 premium payments? 

A:   No, the tax credit will be applied to reduce taxes paid when the employer’s 2014 tax return is filed in 2015.

Q:   Can a tax-exempt organization qualify to receive tax credits?

A:   Yes a non-profit entity can qualify to receive tax credits. However, special rules apply in calculating the credit for a tax-exempt qualified employer. An employer that is an agency of the federal government, or of a state or local government, is not eligible to receive a tax credit unless it is an organization described in Code Section 501(c).

Q:   What expenses are counted in calculating the credit?

A:   Only premiums paid by the employer under a qualifying arrangement are counted in calculating the tax credit. Under a qualifying arrangement, the employer pays premiums for each employee enrolled in health care coverage offered by the employer in an amount equal to a uniform percentage (not less than 50 percent) of the premium cost of the coverage.

Only premiums paid to a health insurance company or HMO for health care coverage are counted for purposes of the tax credit. Premiums for health care coverage that covers a wide variety of conditions, such as a major medical plan, are counted and premiums for certain coverage that is more limited in scope, such as limited-scope dental or vision coverage, is also counted. However, if an employer offers more than one type of coverage, such as a major medical plan and a separate limited-scope dental or vision plan, the employer must separately satisfy the requirements for a qualifying arrangement with respect to each type of coverage the employer offers (meaning the employer cannot aggregate these different plans for purposes of meeting the qualifying arrangement requirement).

If an employer pays part of the premiums for the coverage provided to employees under the arrangement, with employees paying the rest, the amount of premiums counted in calculating the credit is only the part paid by the employer. For purposes of the credit, including the 50-percent requirement, any premium paid pursuant to a salary-reduction arrangement under a Section 125 cafeteria plan is not treated as paid by the employer.

The amount of an employer's premium payments that counts for purposes of the credit is capped by the average premium for the small group market in the state (or an area within the state). The average premium for the small group market does not apply separately to each type of coverage the employer offers, but rather provides an overall cap for all health insurance coverage provided by a qualified employer.

Example:

If an employer pays 50 percent of the $7,000 premium for family coverage for its employees ($3,500), but the average premium for family coverage in the small group market in the rating area in which the employees enroll is $6,000, for purposes of calculating the credit the employer’s premium payments are limited to 50 percent of $6,000 ($3,000).

Q:   What is the average premium for the small group market in a state (or an area within the state)?

A:   The average premium is determined by federal Department of Health and Human Services (HHS). The instructions for IRS Form 8941 give the average premiums for each state.

Q:   My small business will qualify for a tax credit.  Are there new requirements in 2014? 

A:   Yes.  In order to claim the employer tax credit for 2014, small businesses must purchase their health care coverage through the Hawai‘i Health Connector, and not directly from their current Issuer. Small employers may be able to select a plan from their current Issuer which is similar to the coverage they have now. To understand what might be right for you, contact your current Issuer.

Q:   Since Hawai‘i imposes requirements on employer contributions, how can an employer satisfy the uniform percentage requirement?

A:   In Hawai‘i due to the Prepaid Health Care Act, employers are required to contribute at least 50% to an employee’s premium cost and the employee’s contribution cannot exceed 1.5% of their monthly gross earnings. If you comply with the Prepaid Health Care Act employer contribution requirements, you are in compliance with this requirement of the ACA.

Q:   What is the maximum tax credit for a qualified employer (other than a tax-exempt employer)?

A:   For tax years beginning in 2010 through 2013, the maximum credit is 35 percent of the employer's premium expenses that count toward the credit. Starting in 2014, the maximum credit is 50 percent.

Q:   What is the maximum credit for a tax-exempt qualified employer?

A:   For tax years beginning in 2010 through 2013, the maximum credit for a tax-exempt qualified employer is 25 percent of the employer's premium expenses that count towards the credit. Starting in 2014, the maximum credit is 35 percent. However, the amount of the credit cannot exceed the total amount of income and Medicare (i.e., hospital insurance) tax the employer is required to withhold from employees' wages for the year and the employer share of Medicare tax on employees' wages for the year.

Q:   How is the credit reduced if the number of FTEs exceeds 10 or average annual wages exceed $25,000?

A:   There are mechanisms in place to reduce the amount of the tax credit if the employer becomes ineligible. If the number of FTEs exceeds 10 or if average annual wages exceed $25,000, the amount of the credit is reduced as follows:

         If the number of FTEs exceeds 10, the reduction is determined by multiplying the otherwise applicable credit amount by a fraction, the numerator of which is the number of FTEs in excess of 10 and the denominator of which is 15.

         If average annual wages exceed $25,000, the reduction is determined by multiplying the otherwise applicable credit amount by a fraction, the numerator of which is the amount by which average annual wages exceed $25,000 and the denominator of which is $25,000.

         In both cases, the result of the calculation is subtracted from the otherwise applicable credit to determine the credit to which the employer is entitled.

         For an employer with both more than 10 FTEs and average annual wages exceeding $25,000, the reduction is the sum of the amount of the two reductions.

         This sum may reduce the credit to zero for some employers with fewer than 25 FTEs and average annual wages of less than $50,000.

Example 1:

For the 2014 tax year, a qualified employer has nine FTEs with average annual wages of $23,000 per FTE. The employer pays $72,000 in health care premiums for those employees, which does not exceed the average premium for the small group market in the employer's state, and otherwise meets the requirements for the credit. The credit for 2014 equals $36,000 (50 percent × $72,000).

Example 2:

For the 2014 tax year, a qualified tax-exempt employer has 10 FTEs with average annual wages of $21,000 per FTE. The employer pays $80,000 in health care premiums for those employees, which does not exceed the average premium for the small group market in the employer's state, and otherwise meets the requirements for the credit. The total amount of the employer's income tax and Medicare tax withholding plus the employer's share of the Medicare tax equals $30,000 in 2014.

The credit is calculated as follows:

1.      Initial amount of credit determined before any reduction: (35 percent × $80,000) = $28,000

2.      Employer's withholding and Medicare taxes: $30,000

3.      Total 2014 tax credit is $28,000 (the lesser of $28,000 and $30,000).

Example 3:

For the 2014 tax year, a qualified employer has 12 FTEs and average annual wages of $30,000. The employer pays $96,000 in health care premiums for those employees, which does not exceed the average premium for the small group market in the employer's state, and otherwise meets the requirements for the credit.

The credit is calculated as follows:

1.      Initial amount of credit determined before any reduction: (50 percent × $96,000) = $48,000

2.      Credit reduction for FTEs in excess of 10: ($48,000×2/15) = $6,400

3.      Credit reduction for average annual wages in excess of $25,000: ($48,000 × $5,000/$25,000) = $9,600

4.      Total credit reduction: ($6,400 + $9,600) = $16,000

5.      Total 2014 tax credit: ($48,000 – $16,000) = $32,000.

Q:   Is there a transition rule for groups that decide to purchase coverage through the SHOP in 2014, but after January 1?

A:   Yes, if an eligible small employer’s plan year begins on a date other than the first day of its taxable year, it may not be practical or possible for the employer to offer insurance to its employees through a SHOP Exchange at the beginning of 2014.  These proposed regulations provide that if:

         As of August 26, 2013, a small employer offers coverage in a plan year that begins on a date other than the first day of its taxable year;

         The employer offers coverage during the period before the first day of the plan year beginning in 2014 that would have qualified the employer for the credit under the rules otherwise applicable to the period before January 1, 2014; and

         The employer begins offering coverage through a SHOP Exchange as of the first day of its plan year that begins in 2014, then it will be treated as offering coverage through a SHOP Exchange for its entire 2014 taxable year for purposes of eligibility for, and calculation of, a credit. 

Thus, for an employer that meets these requirements, the credit will be calculated at the 50 percent rate (35 percent rate for tax-exempt eligible small employers) for the entire 2014 taxable year and the 2014 taxable year will be the start of the two-consecutive-taxable year credit period.

Q:   How is the number of FTEs determined for purposes of the credit?

A:   The number of an employer's FTEs is determined by dividing the total hours of service for which the employer pays wages to employees during the year (but not more than 2,080 hours for any employee) by 2,080. The result, if not a whole number, is then rounded to the next lowest whole number.

An employee's hours of service for a year include each hour for which an employee is paid, or entitled to payment, for the performance of duties for the employer during the employer's tax year and each hour of paid leave (except that no more than 160 hours of service are required to be counted for an employee on account of any single continuous period of paid leave). To calculate the total number of hours of service which must be taken into account for an employee for the year, the employer may use any of the following methods:

1.      determine actual hours of service from records of hours worked and hours for which payment is made or due, including hours for paid leave;

2.      use a days-worked equivalency whereby the employee is credited with eight hours of service for each day for which the employee would be required to be credited with at least one hour of service under Method 1; or

3.      use a weeks-worked equivalency whereby the employee is credited with 40 hours of service for each week for which the employee would be required to be credited with at least one hour of service under Method 1.

Example 1:

For the 2013 tax year, an employer's payroll records indicate that an employee worked 2,000 hours and was paid for an additional 80 hours on account of vacation, holiday, and illness. The employer counts hours actually worked.

Under this method of counting hours, Employee A must be credited with 2,080 hours of service (2,000 hours worked and 80 hours for which payment was made or due).

Example 2:

For the 2013 tax year, an employee worked 49 weeks, took two weeks of vacation with pay, and took one week of leave without pay. The employer uses the weeks-worked equivalency.

Under this method of counting hours, Employee B must be credited with 2,040 hours of service (51 weeks multiplied by 40 hours per week).

Example 3:

For the 2013 tax year, an employer pays five employees wages for 2,080 hours each, three employees’ wages for 1,040 hours each, and one employee wages for 2,300 hours. The employer counts hours actually worked.

The employer's FTEs would be calculated as follows:

         Total hours not exceeding 2,080 per employee is the sum of:

~        10,400 hours for the five employees paid for 2,080 hours each (5 × 2,080)

~        3,120 hours for the three employees paid for 1,040 hours each (3 × 1,040)

~        2,080 hours for the one employee paid for 2,300 hours (lesser of 2,300 and 2,080)

These add up to 15,600 hours

         FTEs: 7 (15,600 divided by 2,080 = 7.5, rounded to the next lowest whole number-7).

Q:   How is the amount of average annual wages determined?

The amount of average annual wages is determined by dividing the total wages paid by the employer during the employer's tax year by the number of the employer's FTEs for the year. The result is then rounded down to the nearest $1,000 (if not otherwise a multiple of $1,000). Only wages that are paid for hours of service are taken into account. Wages for this purpose means wages as defined for FICA purposes (without regard to the wage base limitation).

Example:

For the 2013 tax year, an employer pays $224,000 in wages and has 10 FTEs.

The employer's average annual wages would be: $22,000 ($224,000 divided by 10 = $22,400, rounded down to the nearest $1,000).

Q:   Can an employer with 25 or more employees qualify for the credit if some of its employees are part-time?

A:   Yes. Because the limitation on the number of employees is based on FTEs, an employer with 25 or more employees could qualify for the credit if some of its employees work part-time. For example, an employer with 46 half-time employees (meaning they are paid wages for 1,040 hours) has 23 FTEs and therefore may qualify for the credit.

Q:   Are seasonal workers counted in determining the number of FTEs and the amount of average annual wages?

A:   Generally, no. Seasonal workers are disregarded in determining FTEs and average annual wages unless the seasonal worker works for the employer on more than 120 days during the tax year, although premiums paid on their behalf may be counted in determining the amount of credit.

Q:   If an owner of a business also provides services to it, does the owner count as an employee?

A:   Generally, no. A sole proprietor, a partner in a partnership, a shareholder owning more than 2 percent of an S corporation, and any owner of more than 5 percent of other businesses are not considered employees for purposes of the credit. Thus, the wages or hours of these business owners and partners are not counted in determining either the number of FTEs or the amount of average annual wages, and premiums paid on their behalf are not counted in determining the amount of the credit.

Q:   Do family members of a business owner who work for the business count as employees?

A:   Generally, no. A family member of any of the business owners or partners or a member of such a business owner's or partner's household, is not considered an employee for purposes of the credit. Thus, neither their wages nor their hours are counted in determining the number of FTEs or the amount of average annual wages, and premiums paid on their behalf are not counted in determining the amount of the credit. For this purpose, a family member is defined as a child (or descendant of a child); a sibling or step-sibling; a parent (or ancestor of a parent); a step-parent; a niece or nephew; an aunt or uncle; or a son-in-law, daughter- in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.

Q:   How is eligibility for the credit determined if the employer is a member of a controlled group or an affiliated service group?

A:   Members of a controlled group (e.g., businesses with the same owners) or an affiliated service group (e.g., related businesses of which one performs services for the other) are treated as a single employer for purposes of the credit. Thus, for example, all employees of the controlled group or affiliated service group, and all wages paid to employees by the controlled group or affiliated service group, are counted in determining whether any member of the controlled group or affiliated service group is a qualified employer.

Q:   Can a successor employer claim the tax credit if the predecessor did?

A:   Under the proposed regulations, an entity that would be treated as a successor employer for employment tax purposes will also be treated as a successor employer for purposes of the two-consecutive-taxable year credit period. Therefore, if the predecessor employer had previously claimed the credit, that period will count towards the successor employer’s two-consecutive-taxable year credit period.

Q:   How does an employer claim the credit?

A:   For an eligible small employer that is not a tax-exempt eligible small employer, the credit is calculated on Form 8941, Credit for Small Employer Health Insurance Premiums, and can be applied against both regular and alternative minimum tax.  A tax-exempt employer claims the refundable credit by filing a Form 990-T with an attached Form 8941 showing the calculation of the claimed credit. Filing Form 990-T with an attached Form 8941 is required for a tax-exempt eligible small employer to claim the credit, even if it is not otherwise required to file Form 990-T.

Q:   May an employer use the credit to offset its alternative minimum tax liability?

A:   Yes. The credit can be used to offset an employer's alternative minimum tax (AMT) liability for the year, subject to certain limitations based on the amount of an employer's regular tax liability, AMT liability, and other allowable credits.

Q:   Can an employer (other than a tax-exempt employer) claim the credit if it has no taxable income and no AMT liability for the year?

A:   Generally, no. Except in the case of a tax-exempt employer, the credit for a year offsets only an employer's actual income tax liability or AMT liability, subject to certain limitations, for the year. However, as a general business credit, an unused credit amount can generally be carried back one year and carried forward 20 years. Because an unused credit amount cannot be carried back to a year before the effective date of the credit, though, an unused credit amount for 2010 can only be carried forward.

Q:   Can a tax-exempt employer claim the credit if it has no taxable income for the year?

A:   Yes. For a tax-exempt employer, the credit is a refundable credit, so that even if the employer has no taxable income, the employer may receive a refund (so long as it does not exceed the income tax withholding and Medicare tax liability).

Q:   Can the credit be reflected in determining estimated tax payments for a year?

A:   Yes.

Q:   Does taking the credit affect an employer's deduction for health insurance premiums?

A:   Yes. In determining the employer's deduction for health insurance premiums, the amount of premiums that can be deducted is reduced by the amount of the credit.

Q:   May an employer reduce employment tax payments--withheld income tax, Social Security tax, and Medicare tax--during the year in anticipation of the credit?

A:   No. The credit applies against income tax, not employment taxes.

Q:   Do I need to hire a tax advisor to determine whether or not my small business qualifies for a tax credit? 

A:   The IRS web site has an explanation of the tax credit and tools that can help employers see if it applies to their business which employees 25 or fewer employees.

Excepted Benefits

Q:   What if my dental (or vision) benefits are structured as excepted benefits under the Health Insurance Portability and Accountability Act (HIPAA)?  Does that exemption except my dental (or vision) plan from the Affordable Care Act’s market reforms?

A:   Yes.  If benefits constitute excepted benefits under HIPAA, the requirements of the Affordable Care Act’s market reforms do not apply, such as the new age rating rules.  Under HIPAA, dental (and vision) benefits generally constitute excepted benefits if they:

§  Are offered under a separate policy, certificate, or contract of insurance; or

§  Are not integral parts of the plan.  For dental (or vision) benefits to be considered not an integral part of the plan, participants must have a right not to receive the coverage and, if they do elect to receive the coverage, must pay an additional premium.

Accordingly, if a plan provides its dental (or vision) benefits pursuant to a separate election by a participant and the plan charges even a nominal employee contribution towards the coverage, the dental (or vision) benefits would constitute excepted benefits, and the market reform provisions would not apply to that coverage.

Q:   What are the circumstances under which fixed indemnity coverage constitutes excepted benefits?

A:   The regulations provide that a hospital indemnity or other fixed indemnity insurance policy under a group health plan provides excepted benefits only if:

§  The benefits are provided under a separate policy, certificate, or contract of insurance;

§  There is no coordination between the provision of the benefits and an exclusion of benefits under any group health plan maintained by the same plan sponsor; and

§  The benefits are paid with respect to an event without regard to whether benefits are provided with respect to the event under any group health plan maintained by the same plan sponsor. 

The  regulations further provide that to be hospital indemnity or other fixed indemnity insurance, the insurance must pay a fixed dollar amount per day (or per other period) of hospitalization or illness (for example, $100/day) regardless of the amount of expenses incurred.

Some health insurance policies advertised as fixed indemnity coverage cover doctors’ visits at $50 per visit, hospitalization at $100 per day, various surgical procedures at different dollar rates per procedure, and/or prescription drugs at $15 per prescription.  In such circumstances, for doctors’ visits, surgery, and prescription drugs, payment is made not on a per-period basis, but instead is based on the type of procedure or item, such as the surgery or doctor visit actually performed or the prescribed drug, and the amount of payment varies widely based on the type of surgery or the cost of the drug.  Because office visits and surgery are not paid based on “a fixed dollar amount per day (or per other period),” a policy such as this is not hospital indemnity or other fixed indemnity insurance, and is therefore not excepted benefits.  When a policy pays on a per-service basis as opposed to on a per-period basis, it is in practice a form of health coverage instead of an income replacement policy.  Accordingly, it does not meet the conditions for excepted benefits. 

Coverage for Former Employees

Q:     Do the HIPAA statutory exemptions in effect since 1997 for group health plans with “less than two participants who are current employees” apply to the Affordable Care Act’s group market reforms?

A:   Yes.  Statutory provisions in effect since 1997 exempting group health plans with “less than two participants who are current employees” from HIPAA also exempt such plans from the group market reform requirements of the Affordable Care Act.  Accordingly, under the terms of these statutory provisions, group health plans that do not cover at least two employees who are current employees (such as plans in which only retirees participate) are exempt from the Affordable Care Act's market reform requirements.

Q:   I am an employer who sponsors a number of plans including one for both my retirees and individuals on long-term disability.  Before the Affordable Care Act, we treated our plan covering retirees and those on long-term disability as exempt under HIPAA.  Can we continue to treat that plan as exempt?  

A:   The federal government has not issued guidance on this specific issue. Until guidance is issued, the federal government will treat plans described above as satisfying the exemption from HIPAA and the Affordable Care Act’s group market reforms for plans with less than two participants who are current employees.  To the extent future guidance on this issue is more restrictive with respect to the availability of the exemption than this interim relief, the guidance will be prospective, applying to plan years that begin sometime after its issuance.

Pending such further guidance, a plan may adopt any or all of the HIPAA and Affordable Care Act market reform requirements without prejudice to its exemption.  

Rescissions

Q:     Is the exception to the statutory ban on rescission limited to fraudulent or intentional misrepresentations about prior medical history? What about retroactive terminations of coverage in the “normal course of business”?

A:   The statutory prohibition related to rescissions is not limited to rescissions based on fraudulent or intentional misrepresentations.  An example in the interim final regulations on rescissions clarifies that some plan errors (such as mistakenly covering a part-time employee and providing coverage upon which the employee relies for some time) may be cancelled prospectively once identified, but not retroactively rescinded unless there was some fraud or intentional misrepresentation by the employee.

On the other hand, some employers’ human resource departments may reconcile lists of eligible individuals with their insurer via data feed only once per month.  If a plan covers only active employees (subject to the COBRA continuation coverage provisions) and an employee pays no premiums for coverage after termination of employment, the federal government does not consider the retroactive elimination of coverage back to the date of termination of employment, due to delay in administrative record-keeping, to be a rescission.

Similarly, if a plan does not cover ex-spouses (subject to the COBRA continuation coverage provisions) and the plan is not notified of a divorce and the full COBRA premium is not paid by the employee or ex-spouse for coverage, the federal government does not consider a plan’s termination of coverage retroactive to the divorce to be a rescission of coverage.  (Of course, in such situations COBRA may require coverage to be offered for up to 36 months if the COBRA applicable premium is paid by the qualified beneficiary.)

Automatic Enrollment

Q:   When do employers have to comply with the new automatic enrollment requirements in the Fair Labor Standards Act (FLSA)?

A:   This section of the ACA provides that employer compliance with the automatic enrollment provisions of that section shall be carried out “[i]n accordance with regulations promulgated by the Secretary [of Labor].” Accordingly, it is the view of the Department of Labor that, until such regulations are issued, employers are not required to comply with this section. The Department of Labor concluded that its automatic enrollment guidance will not be ready to take effect by 2014. It is important to note that the automatic enrollment provision only applies to employers which have more than 200 FTEs.

Wellness Programs

Q:   Are all employment-based wellness programs required to check for compliance with the nondiscrimination provisions?

A:   No. Many employers offer a wide range of programs to promote health and prevent disease. For example, some employers may choose to provide or subsidize healthier food choices in the employee cafeteria, provide pedometers to encourage employee walking and exercise, pay for gym memberships, or ban smoking on employer facilities and campuses. A wellness program is subject to the nondiscrimination rules only if it is, or is part of, a group health plan. If an employer operates a wellness program as an employment policy separate from its group health plan(s), the program may be covered by other Federal or State nondiscrimination laws, but it is not subject to the nondiscrimination regulations.

Q:   My group health plan gives an annual premium discount of 50 percent of the cost of employee-only coverage to participants who adhere to a wellness program which consists of attending a monthly health seminar. Does this reward violate the nondiscrimination regulations?

A:   No. This wellness program is not based on an individual satisfying a standard that is related to a health factor, so it does not have to satisfy the five criteria in the nondiscrimination regulations. (The rule limiting the amount of the reward for health-contingent wellness programs to 20 percent of the cost of coverage--30 percent starting in 2014--applies only to programs that require satisfaction of a standard related to a health factor in order to qualify for the reward.)

Q:   My group health plan gives an annual premium discount of 20 percent of the cost of employee-only coverage to participants who adhere to a wellness program. The wellness program consists of giving an annual cholesterol exam to participants; participants who achieve a cholesterol count of 200 or lower receive the annual premium discount. The plan also provides that if it is unreasonably difficult or medically inadvisable to achieve the targeted cholesterol count within a 60-day period, the plan will make available a reasonable alternative standard that takes the relevant medical condition into account. Does this wellness program violate the nondiscrimination regulations?

A:   No. The wellness program is based on a health factor (achieving a cholesterol count of 200 or lower) and is subject to the nondiscrimination regulations. In general, among other things, a wellness program subject to the nondiscrimination regulations must be available to all similarly situated individuals, provide a reasonable alternative standard, and the reward must be limited to no more than 20 percent of the total cost of coverage (30 percent starting in 2014). The wellness program described above satisfies the requirement of being available to all similarly situated individuals because the plan provides a reasonable alternative standard and the premium discount is limited to 20 percent of the cost of employee-only coverage.

Q:   My group health plan offers two different wellness programs, both of which are offered to all full-time employees enrolled in the plan. The first program requires participants to take a cholesterol test and provides a 20 percent premium discount for every individual with cholesterol counts under 200. The second program reimburses participants for the cost of a monthly membership to a fitness center. If I participate in both wellness programs and receive both rewards (the 20 percent premium discount and the reimbursement for the cost of a fitness center membership), is my plan violating the nondiscrimination regulations?

A:   No. In this scenario, the first program is subject to the requirements of the nondiscrimination regulations because the premium discount reward is based on an individual satisfying a standard that is related to a health factor (having a cholesterol count under 200). Therefore, the first program must meet the five criteria in the regulations, including the 20 percent limit on the amount of the reward (30 percent starting in 2014). The second program is not based on an individual satisfying a standard that is related to a health factor, so it does not have to satisfy the five criteria in the regulations.

Furthermore, it is permissible to offer both programs at the same time because the rule limiting the amount of the reward for health-contingent wellness programs to 20 percent of the cost of coverage only applies to programs that require satisfaction of a standard related to a health factor.

Summary of Benefits and Coverage

Q:   Are plans and insurers required to provide a separate SBC for each coverage tier (e.g., self-only coverage, employee-plus-one coverage, family coverage) within a benefit package?

A:   No, plans and insurers may combine information for different coverage tiers in one SBC, provided the appearance is understandable. In such circumstances, the coverage examples should be completed using the cost sharing (e.g., deductible and out-of-pocket limits) for the self-only coverage tier (also sometimes referred to as the individual coverage tier). In addition, the coverage examples should note this assumption.

Q:   If the participant is able to select the levels of deductible, copayments, and co-insurance for a particular benefit package, are plans and insurers required to provide a separate SBC for every possible combination that a participant may select under that benefit package?

A:   No, plans and insurers may combine information for different cost-sharing selections (such as levels of deductibles, copayments, and co-insurance) in one SBC, provided the appearance is understandable. This information can be presented in the form of options, such as deductible options and out-of-pocket maximum options. In these circumstances, the coverage examples should note the assumptions used in creating them. An example of how to note assumptions used in creating coverage examples is provided in the sample completed SBC.

Q:   The final regulations require the SBC to be provided in certain circumstances within 7 business days. Does that mean the plan or insurer has 7 business days to send the SBC, or that the SBC must be received within 7 business days?

A:   In the context of the final regulations, the term “provided” means sent. Accordingly, the SBC is timely if sent out within 7 business days, even if it is not received until after that period.

Q:   Are plans and insurers required to provide SBCs to individuals who are COBRA qualified beneficiaries?

A:   Yes. While a qualifying event does not, itself, trigger an SBC, during an open enrollment period, any COBRA qualified beneficiary who is receiving COBRA coverage must be given the same rights to elect different coverage as are provided to similarly situated non-COBRA beneficiaries. In this situation, a COBRA qualified beneficiary who has elected coverage has the same rights to receive an SBC as a similarly situated non-COBRA beneficiary. There are also limited situations in which a COBRA qualified beneficiary may need to be offered different coverage at the time of the qualifying event than the coverage he or she was receiving before the qualifying event and this may trigger the right to an SBC.

Q:   What circumstances will trigger the requirement to provide an SBC to a participant or beneficiary in a group health plan?

A:   The final regulations require that the SBC be provided in several instances:

§  Upon application: If a plan distributes written application materials for enrollment, the SBC must be provided as part of those materials. For this purpose, written application materials include any forms or requests for information, in paper form or through a website or email that must be completed for enrollment. If the plan does not distribute written application materials for enrollment (in either paper or electronic form), the SBC must be provided no later than the first date on which the participant is eligible to enroll in coverage. A plan or insurer must provide the SBC as soon as practicable, but no later than seven business days after receiving a substantially complete application for a health insurance product.

§  By first day of coverage (if there are any changes): If there is any change in the information required to be in the SBC that was provided upon application and before the first day of coverage, the plan or insurer must update and provide a current SBC no later than the first day of coverage.

§  Special enrollees: The SBC must be provided to special enrollees no later than the date on which a summary plan description is required to be provided (90 days from enrollment).

§  Upon renewal: If a plan or insurer requires participants and beneficiaries to actively elect to maintain coverage during an open season, or provides them with the opportunity to change coverage options in an open season, the plan or insurer must provide the SBC at the same time it distributes open season materials. If there is no requirement to renew (sometimes referred to as an “evergreen” election), and no opportunity to change coverage options, renewal is considered to be automatic and the SBC must be provided no later than 30 days prior to the first day of the new plan year.

§  Upon request: The SBC must be provided upon request for an SBC or summary information about the health coverage as soon as practicable but in no event later than seven business days following receipt of the request.

Q:   What are the circumstances in which an SBC may be provided electronically?

A:   An SBC may be provided electronically: (1) by an insurer to a plan, and (2) by a plan or insurer to participants and beneficiaries who are eligible but not enrolled for coverage, if:

§  The format is readily accessible (such as in an html, MS Word, or pdf format);

§  The SBC is provided in paper form free of charge upon request; and

§  If the SBC is provided via an Internet posting, the insurer timely advises the plan (or the plan or insurer timely advises the participants and beneficiaries) that the SBC is available on the Internet and provides the Internet address. Plans and insurers may make this disclosure (sometimes referred to as the “e-card” or “postcard” requirement) by email.

§  SBCs may be provided electronically to participants and beneficiaries in connection with their online enrollment or online renewal of coverage under the plan.  

§  SBCs also may be provided electronically to participants and beneficiaries who request an SBC online.

An SBC may also be provided electronically by a plan or insurer to a participant or beneficiary who is covered under a plan in accordance with the Department of Labor’s disclosure regulations. Those regulations include a safe harbor for disclosure through electronic media to participants who have the ability to effectively access documents furnished in electronic form at any location where the participant is reasonably expected to perform duties as an employee and with respect to whom access to the employer’s or plan sponsor’s electronic information system is an integral part of those duties. Under the safe harbor, other individuals may also opt into electronic delivery.

In addition, unless the plan or insurer has knowledge of a separate address for a beneficiary, the SBC may be provided to the participant on behalf of the beneficiary (including by furnishing the SBC to the participant in electronic form).

Q:   Is there model language to meet the requirement to provide an e-card or postcard in connection with evergreen website postings?

A:   Yes. Plans and insurers have flexibility with respect to the postcard and may choose to tailor it in many ways. One example is:

Availability of Summary Health Information

As an employee, the health benefits available to you represent a significant component of your compensation package. They also provide important protection for you and your family in the case of illness or injury.

Your plan offers a series of health coverage options. Choosing a health coverage option is an important decision. To help you make an informed choice, your plan makes available a Summary of Benefits and Coverage (SBC), which summarizes important information about any health coverage option in a standard format, to help you compare across options.

The SBC is available on the web at: www.website.com/SBC. A paper copy is also available, free of charge, by calling 1-XXX-XXX-XXXX (a toll-free number).

Q:   The regulations state that in order to satisfy the requirement to provide the SBC in a culturally and linguistically appropriate manner, a plan or insurer follows the rules in the claims and appeals. Does this mean that the SBC must include a sentence on the availability of language assistance services?

A:   Yes, if the notice is sent to an address in a county in which ten percent or more of the population is literate only in a non-English language. The final SBC regulations provide that a plan or insurer is considered to provide the SBC in a culturally and linguistically appropriate manner if the thresholds and standards of the claims and appeals regulations are met. The claims and appeals regulations outline three requirements that must be satisfied for notices sent to an address in a county in which ten percent or more of the population is literate only in a non-English language. In such cases, the plan or insurer is generally required to provide oral language services in the non-English language, provide notices upon request in the non-English language, and include in all English versions of the notices a statement in the non-English language clearly indicating how to access the language services provided by the plan or insurer.

Accordingly, plans and insurers must include, in the English versions of SBCs sent to an address in a county in which ten percent or more of the population is literate only in a non-English language, a statement prominently displayed in the applicable non-English language clearly indicating how to access the language services provided by the plan or insurer. In this circumstance, the plan or insurer should include this statement on the page of the SBC with the “Your Rights to Continue Coverage” and “Your Grievance and Appeals Rights” sections.

Current county-by-county data can be accessed at 2012 Culturally and Linguistically Appropriate Services (CLAS) County Data. No counties in Hawai‘i require statements in other languages.

Even in counties where no non-English language meets the ten percent threshold, a plan or insurer can voluntarily include such a statement in the SBC in any non-English language. Moreover, nothing in the SBC regulations limits an individual’s rights to meaningful access protections under other applicable Federal or State law.

Q:   Is an SBC permitted to simply substitute a cross-reference to the summary plan description (SPD) or other documents for a content element of the SBC?

A:   No, an SBC is not permitted to substitute a reference to the SPD or other document for any content element of the SBC. However, an SBC may include a reference to the SPD in the SBC footer. (For example, “Questions: Call 1-800-[insert] or visit us at www.[insert].com for more information, including a copy of your plan’s summary plan description.”) In addition, wherever an SBC provides information that fully satisfies a particular content element of the SBC, it may add to that information a reference to specified pages or portions of the SPD in order to supplement or elaborate on that information. 

Q:   Can a plan or insurer add premium information to the SBC form voluntarily?

A:   Yes. If a plan or insurer chooses to add premium information to the SBC, the information should be added at the end of the SBC form.

Q:   Must the header and footer be repeated on every page of the SBC?

A:   No. If a plan or insurer chooses, it may include the header only on the first page of the SBC. In addition, a plan or insurer may include the footer only on the first and last page of the SBC, instead of on every page.

The OMB control numbers (which were displayed on the SBC template and the Departments’ sample completed SBC to inform plans and insurers that the Departments had complied with the Paperwork Reduction Act) should not be displayed on SBCs provided by plans or insurers.

Q:   For group health plan coverage, may the coverage period in the SBC header reflect the coverage period for the group plan as a whole, or must the coverage period be the period applicable to each particular individual enrolled in the plan?

A:   The SBC may reflect the coverage period for the group health plan as a whole. Therefore, if a plan is a calendar year plan and an individual enrolls on January 19, the coverage period is permitted to be the calendar year. Plans and insurers are not required to individualize the coverage period for each individual’s enrollment.

Q:   Can insurers and plans make minor adjustments to the SBC format, such as changing row and column sizes? What about changes such as rolling over information from one page to another, which was not permitted by the instructions?

A:   Minor adjustments are permitted to the row or column size in order to accommodate the plan’s information, as long as the information is understandable. The deletion of columns or rows is not permitted.

Additionally, it is permissible to display the SBC electronically on a single webpage, so the viewer can scroll through the information required to be in the SBC without having to advance through pages (as long as a printed version is available that meets the formatting requirements of the SBC).  

Q:   Can plan names be generic, such as “Standard Option” or “High Option”?

A:   Yes, generic terms may be used.

Q:   Can the insurer’s name and the plan name be interchangeable in order?

A:   Yes. 

Q:   Can barcodes or control numbers be added to the SBC for quality control purposes?

A:   Yes, they can be added.

Q:   Is the SBC required to include a statement about whether the plan is a grandfathered health plan?

A:   No, although plans may voluntarily choose to add a statement to the end of the SBC about whether the plan is a grandfathered health plan.

Q:   If a plan or its sponsor receives an SBC prior to application for coverage, must an insurer automatically provide another SBC upon application, if the information required to be in the SBC has not changed?

A:   No. A duplicate SBC is generally not required to be provided at the time of application unless requested by the applicant.  However, if by the time the application is filed, there is a change in the information required to be in the SBC, the insurer or plan must update and provide a current SBC to the individual (or plan or its sponsor) as soon as practicable following receipt of the application, but in no event later than seven business days following receipt of the application.  Similarly, if an SBC is provided upon application, there is no requirement to provide the SBC again on the first day of coverage, unless there is a change to the information that is required to be in SBC or an SBC is requested by the applicant.  

Q:   Are insurers required to provide SBCs to group health plans (or their sponsors) who are “shopping” for coverage, but have not yet submitted an application for coverage?

A:   Yes, but only in certain circumstances.  The regulations generally provide that an SBC must be provided upon request for an SBC or “summary information about a health insurance product.”  The latter phrase is intended to ensure that persons who do not ask exactly for a “summary of benefits and coverage” still receive one when they explicitly ask for a summary document with respect to a specific health product.  Other, general questions about coverage options or discussions about health products do not trigger the requirement to provide an SBC.  

Q:   Some plans or insurers provide web-based or print materials to illustrate the differences between benefit package options (including comparison charts and broker comparison websites). Is it permissible to “combine” SBCs or SBC elements to provide a side-by-side comparison?

A:   Yes.  Insurers and plans (and agents and brokers working with such plans) may display SBCs, or parts of SBCs, in a way that facilitates comparisons of different benefit package options by individuals and employers shopping for coverage.  For example, on a website, viewers could be allowed to select a comparison of only the deductibles, out-of-pocket limits, or other cost sharing of several benefit package options.  This could be achieved by providing the “deductible row” of the SBC for several benefit packages, but without having to repeat the first one or two columns, as appropriate, of the SBC for each of the benefit packages.

However, such a chart, website, or other comparison does not, itself, satisfy the final regulations to provide the SBC.  The full SBC for all the benefit packages included in the comparison view/tool must be made available in accordance with the regulations and other guidance.

Q:   Under what circumstances can penalties be imposed for failure to provide the SBC or the uniform glossary?

A:   The Act states that an entity is subject to a fine if the entity “willfully fails to provide the information required under this section.”

Q:  What templates should plans and insurers use for the SBCs and the uniform glossary required to be provided after the first year of applicability?

A:   An updated SBC template (and sample completed SBC) are now available at http://cms.gov/cciio and http://www.dol.gov/ebsa/healthreform.  These documents are authorized for use with respect to group health plans for SBCs provided with respect to coverage beginning on or after January 1, 2014, and before January 1, 2015 (referred to in this guidance document as “the second year of applicability”). 

The only change to the SBC template and sample completed SBC is the addition of statements of whether the plan or coverage provides minimum essential coverage (MEC) and whether the plan or coverage meets the minimum value (MV) requirements (that is, the plan’s or coverage’s share of the total allowed costs of benefits provided under the plan or coverage is not less than 60 percent of such costs).  On page 4 of the SBC template (and illustrated on page 6 of the sample completed SBC), a plan or insurer should indicate in the designated entry on the SBC template that the plan or coverage “does” or “does not” provide MEC and whether the plan or coverage “does” or “does not” meet applicable MV requirements.

There are no changes to the uniform glossary.  There are also no changes to the Instructions for Completing the SBC (for either group or individual health coverage), “Why This Matters” language for the SBC, or to the coverage examples.  

Q:  Safe harbors and other enforcement relief were provided by the Departments related to the requirement to provide an SBC and a uniform glossary for the first year of applicability. Will this relief be extended?

A: Yes. The following enforcement relief will apply through the end the second year of applicability:

§  The basic approach to implementation of the SBC requirements during the first year of applicability;

§  The circumstances in which an SBC may be provided electronically;

§  Penalties for failure to provide the SBC or uniform glossary;

§  Coverage examples calculator; and

§  Expatriate coverage.

Q:   I am an employer sponsoring a group health plan.  One of the benefit packages is a Medicare Advantage plan. Am I required to provide an SBC for the Medicare Advantage package?

A:   No.  Medicare Advantage benefits are Medicare benefits (financed by the Medicare Trust fund and equivalent to Medicare A and B benefits, which are set by Congress and regulated by the Centers for Medicare & Medicaid Services (CMS)).  They are, therefore, not health insurance coverage and Medicare Advantage organizations are not required to provide an SBC with respect to such benefits.

Waiting Periods

Q:   When the 90-day limitation on waiting periods in the ACA becomes effective in 2014, will it require an employer to offer coverage to part-time employees or to any other particular category of employees?

A:   No. The PHCA is more favorable on this subject than the ACA, so Hawai‘i employers are required meet eligibility requirements in the PHCA.

PCORI Fee

Q:   Does ERISA prohibit a multiemployer plan’s joint board of trustees from paying the PCORI fee from assets of the plan?

A: In the case of a multiemployer plan, the plan sponsor liable for the fee would generally be the independent joint board of trustees appointed by the participating employers and employee organization, and directed pursuant to a collective bargaining agreement to establish the employee benefit plan.  Normally, such a joint board of trustees has no function other than to sponsor and administer the multiemployer plan, and it has no source of funding independent of plan assets to satisfy the statutory obligation.  The fee involved is not an excise tax or similar penalty imposed on the trustees in connection with a violation of federal law or a breach of their fiduciary obligations in connection with the plan.  Nor would the joint board be acting in a capacity other than as a fiduciary of the plan in paying the fee.  In such circumstances, it would be unreasonable to construe the fiduciary provisions of ERISA as prohibiting the use of plan assets to pay such a fee to the Federal government.  Thus, unless the plan document specifies a source other than plan assets for payment of the fee, such a payment from plan assets would be permissible under ERISA.

There may be rare circumstances where sponsors of employee benefit plans that are not multiemployer plans would also be able to use plan assets to pay the fee, such as a VEBA that provides retiree-only health benefits where the sponsor is a trustee or board of trustees that exists solely for the purpose of sponsoring and administering the plan and that has no source of funding independent of plan assets.

The same conclusion would not necessarily apply, however, to other plan sponsors required to pay the fee.  For example, a group or association of employers that act as a plan sponsor but that also exist for reasons other than solely to sponsor and administer a plan may not use plan assets to pay the fee even if the plan uses a VEBA trust to pay benefits under the plan.  Such an entity or association, like employers that sponsor single employer plans, would have to identify and use some other source of funding to pay the fee.

Preventive Services

Q:   Some of the recommendations and guidelines of the United States Preventive Services Task Force (USPTF), the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention (Advisory Committee) and the Health Resources and Services Administration (HRSA) do not definitively state the scope, setting, or frequency of the items or services to be covered.  How will my plan provide these new services such as daily counseling for diet?

A:   The interim final regulations regarding preventive health services provide that if a recommendation or guideline for a recommended preventive health service does not specify the frequency, method, treatment, or setting for the provision of that service, the plan or insurer can use reasonable medical management techniques (which generally limit or exclude benefits based on medical necessity or medical appropriateness using prior authorization requirements, concurrent review, or similar practices) to determine any coverage limitations under the plan.  Thus, to the extent not specified in a recommendation or guideline, a plan or insurer may rely on the relevant evidence base and these established techniques to determine the frequency, method, treatment, or setting for the provision of a recommended preventive health service.

Q:   My group health plan does not impose a copayment for colorectal cancer preventive services when performed in an in-network ambulatory surgery center. In contrast, the same preventive service provided at an in-network outpatient hospital setting would generally require a $250 copayment. Is this permissible?

A:   Yes, this plan design is permissible. The implementing regulations allow plans to use reasonable medical management techniques to control costs. The regulations issued to implement the preventive health benefits in the Affordable Care Act recognized the important role that Value-Based Insurance Design (VBID) can play in promoting the use of appropriate, high value preventive services and providers. Plans may use reasonable medical management techniques to steer patients towards a particular high-value setting such as an ambulatory care setting for providing preventive care services, provided the plan accommodates any individuals for whom it would be medically inappropriate to have the preventive service provided in the ambulatory setting (as determined by the attending provider) by having a mechanism for waiving the otherwise applicable copayment for the preventive services provided in a hospital.

Q:   My plan does not have any in-network providers to provide a particular preventive service required under the ACA. If I obtain this service out-of-network, can the plan impose cost-sharing?

A:   No. While nothing in the interim final regulations generally requires a plan or insurer that has a network of providers to provide benefits for preventive services provided out-of-network, this provision is premised on enrollees being able to access the required preventive services from in-network providers. Thus, if a plan or insurer does not have in its network a provider who can provide the particular service, then the plan or insurer must cover the item or service when performed by an out-of-network provider and not impose cost-sharing with respect to the item or service.

Q:   The United States Preventive Services Task Force (USPSTF) recommends the use of aspirin for certain men and women when the potential benefit due to a reduction in myocardial infarctions outweighs the potential harm. Aspirin is generally available over-the-counter (OTC) to patients. Are group health plans and health insurers now required to pay for OTC methods such as aspirin?

A:   Aspirin and other OTC recommended items and services must be covered without cost-sharing only when prescribed by a health care provider. If a member purchased aspirin themselves without a prescription, this purchase will not be covered.

Q:   If a colonoscopy is scheduled and performed as a screening procedure pursuant to the USPSTF recommendation, is it permissible for a plan or insurer to impose cost-sharing for the cost of a polyp removal during the colonoscopy?

A:   No. Based on clinical practice and comments received from the American College of Gastroenterology, American Gastroenterological Association, American Society of Gastrointestinal Endoscopy, and the Society for Gastroenterology Nurses and Associates, polyp removal is an integral part of a colonoscopy. Accordingly, the plan or insurer may not impose cost-sharing with respect to a polyp removal during a colonoscopy performed as a screening procedure. On the other hand, a plan or insurer may impose cost-sharing for a treatment that is not a recommended preventive service, even if the treatment results from a recommended preventive service.

Q:   Does the recommendation for genetic counseling and evaluation for routine breast cancer susceptibility gene (BRCA) testing include the BRCA test itself?

A: Yes. The scope of the recommendation includes both genetic counseling and BRCA testing, if appropriate, for a woman as determined by her health care provider.

The ACA addresses coverage for evidence-based items or services with a rating of “A” or “B” in the current recommendations of the USPSTF, as well as coverage for preventive care and screenings as provided for in comprehensive guidelines released by HRSA. The USPSTF recommends with a “B” rating that “women whose family history is associated with an increased risk for deleterious mutations in the BRCA1 or BRCA2 genes be referred for genetic counseling and evaluation for BRCA testing.”

In some instances, the Institute of Medicine (IOM) Committee Report provides additional interpretation of USPSTF recommendations. For the USPSTF BRCA recommendation, the IOM Committee interpreted the recommendation to include “referral for genetic counseling and BRCA testing, if appropriate.” Thus, genetic counseling and BRCA testing, if appropriate, must be made available as a preventive service without cost-sharing.

Q:   Some USPSTF recommendations apply to certain populations identified as high-risk. Some individuals, for example, are at increased risk for certain diseases because they have a family or personal history of the disease. It is not clear, however, how a plan or insurer would identify individuals who belong to a high-risk population. How can a plan or insurer determine when a service should or should not be covered without cost-sharing?

A:   Identification of “high-risk” individuals is determined by clinical expertise. Decisions regarding whether an individual is part of a high-risk population, and should therefore receive a specific preventive item or service identified for those at high-risk, should be made by the attending provider. Therefore, if the attending provider determines that a patient belongs to a high-risk population and a USPSTF recommendation applies to that high-risk population, that service is required to be covered in accordance with the requirements of the interim final regulations (that is, without cost-sharing, subject to reasonable medical management).

Q:   Which Advisory Committee on Immunization Practices (ACIP) recommendations are required to be covered without cost-sharing by non-grandfathered group health plans and health insurance coverage?

A: The interim final regulations require coverage for immunizations for routine use in children, adolescents, and adults that have in effect a recommendation by the ACIP for routine use. The vaccines must be covered without cost-sharing requirements when the service is delivered by an in-network provider. The ACIP makes routine immunization recommendations for children, adolescents, and adults that are population-based (e.g., age-based), risk-based (e.g., underlying medical conditions, work-related, or other special circumstances that increase risk of illness), or are catch-up recommendations.

In some circumstances, the ACIP makes a recommendation that applies for certain individuals rather than an entire population. In these circumstances, health care providers should determine whether the vaccine should be administered, and if the vaccine is prescribed by a health care provider consistent with the ACIP recommendations, a plan or insurer is required to provide coverage for the vaccine without cost-sharing.

New ACIP recommendations will be required to be covered without cost-sharing starting with the plan year that begins on or after the date that is one year after the date the recommendation is issued. An ACIP recommendation is considered to be issued on the date on which it is adopted by the Director of the Centers for Disease Control and Prevention (CDC), which is the earlier of: the date the recommendation is published in the Mortality and Morbidity Weekly Report, or the date the recommendation is reflected in the Immunization Schedules of the CDC.

Q:   Do the recommendations for women’s preventive services in the HRSA Guidelines promote multiple visits for separate services?

A:   No. The regulations allow plans and insurers to use reasonable medical management techniques to determine the frequency, method, treatment, or setting for a recommended preventive item or service, to the extent this information is not specified in a recommendation or guideline. Although the HRSA Guidelines list services individually, nothing in the regulations requires that each service be provided in a separate visit. Efficient care delivery and the delivery of multiple prevention and screening services at a single visit is a reasonable medical management technique, permissible under the regulations. For example, HIV screening and counseling and Sexually Transmitted Infections counseling could occur as part of a single well-woman visit.

Q:   What is included in a “well-woman” visit?

A:   The HRSA Guidelines recommend at least one annual well-woman preventive care visit for adult women to obtain the recommended preventive services that are age- and developmentally-appropriate, including preconception and prenatal care. The HRSA Guidelines recommend that well-woman visits include preventive services listed in the HRSA Guidelines, as well as others. HHS understands that additional well-woman visits, provided without cost-sharing, may be needed to obtain all necessary recommended preventive services, depending on a woman’s health status, health needs, and other risk factors. If the clinician determines that a patient requires additional well-woman visits for this purpose, then the additional visits must be provided in accordance with the requirements of the regulations (that is, without cost-sharing and subject to reasonable medical management).

Q:   When should the HPV DNA test be administered?

A:   The HRSA Guidelines recommend high-risk HPV DNA testing for women with normal cytology results who are 30 years of age or older to occur no more frequently than every 3 years.

Q:   The HRSA Guidelines include a recommendation for annual HIV counseling and screening for all sexually active women. Is the term “screening” in this context defined as actual testing for HIV?

A:   Yes. In this context, “screening” means testing.

Q:   The HRSA Guidelines include a recommendation for all Food and Drug Administration (FDA) approved contraceptive methods, sterilization procedures, and patient education and counseling for all women with reproductive capacity, as prescribed by a health care provider. May a plan or insurer cover only oral contraceptives?

A:   No. The HRSA Guidelines ensure women’s access to the full range of FDA-approved contraceptive methods including, but not limited to, barrier methods, hormonal methods, and implanted devices, as well as patient education and counseling, as prescribed by a health care provider. Plans and insurers may use reasonable medical management techniques to control costs and promote efficient delivery of care. For example, plans may cover a generic drug without cost-sharing and impose cost-sharing for equivalent branded drugs. However, in these instances, a plan or insurer must accommodate any individual for whom the generic drug (or a brand name drug) would be medically inappropriate, as determined by the individual’s health care provider, by having a mechanism for waiving the otherwise applicable cost-sharing for the branded or non-preferred brand version. This generic substitution approach is permissible for other pharmacy products, as long as the accommodation described above exists. If, however, a generic version is not available, or would not be medically appropriate for the patient as a prescribed brand name contraceptive method (as determined by the attending provider, in consultation with the patient), then a plan or insurer must provide coverage for the brand name drug in accordance with the requirements of the interim final regulations (that is, without cost-sharing, subject to reasonable medical management).

Q:   Do the HRSA Guidelines include contraceptive methods that are generally available over-the-counter (OTC), such as contraceptive sponges and spermicides?

A:   Contraceptive methods that are generally available OTC are only included if the method is both FDA-approved and prescribed for a woman by her health care provider. The HRSA Guidelines do not include contraception for men.

Q:   Do the HRSA Guidelines include services related to follow-up and management of side effects, counseling for continued adherence, and for device removal?

A:   Yes. Services related to follow-up and management of side effects, counseling for continued adherence, and device removal are included under the HRSA Guidelines and required to be covered in accordance with the requirements of the interim final regulations (that is, without cost-sharing, subject to reasonable medical management).

Q:   Are intrauterine devices and implants contraceptive methods under the HRSA Guidelines and therefore required to be covered without cost-sharing?

A:   Yes, if approved by the FDA and prescribed for a woman by her health care provider, subject to reasonable medical management.

Q:   The USPSTF already recommends breastfeeding counseling. Why is this part of the HRSA Guidelines?

A:   Under the topic of “Breastfeeding Counseling” the USPSTF recommends interventions during pregnancy and after birth to promote and support breastfeeding. The HRSA Guidelines specifically incorporate comprehensive prenatal and postnatal lactation support, counseling, and equipment rental. Accordingly, the items and services described in the HRSA Guidelines are required to be covered in accordance with the requirements of the regulations (that is, without cost-sharing, subject to reasonable medical management, which may include purchase instead of rental of equipment).

Q:   Under the HRSA Guidelines, how long after childbirth is a woman eligible for lactation counseling? Are breastfeeding equipment and supplies unlimited?

A:   Coverage of comprehensive lactation support and counseling and costs of renting or purchasing breastfeeding equipment extends for the duration of breastfeeding. Plans and insurers may use reasonable medical management techniques to determine the frequency, method, treatment, or setting for a recommended preventive item or service, to the extent not specified in the recommendation or guideline.

Transparency Reporting

Q:  When do plans and insurers have to comply with the transparency in coverage reporting requirements?

A: The ACA requires Qualified Health Plan (QHP) insurers to submit specified information to the Marketplace and other entities in a timely and accurate manner.  However, because QHP insurers will not have some of the data necessary for reporting under this requirement until during or after the first year of operation of their QHPs (e.g., QHP enrollment and disenrollment), QHP insurers will begin submitting information only after QHPs have been certified as QHPs for one benefit year.

Similarly, because the ACA extends the transparency provisions to group health plans and health insurers, the reporting requirements will become applicable to group health plans and health insurers no sooner than when the reporting requirements for QHPs become applicable.  

Q:   Can we ask the Hawai‘i Association of Health Plans more questions? 

A:   Not at this time.   Please direct your questions to the Assisters, to the Hawai‘i Health Connector or to your existing insurance carrier(s).  HAHP will try to update our Web site as the day’s events require and permit.

This material is intended for general information purposes only and is not intended to be used as legal, financial or tax advice on any specific matter. This information is not a substitute for proper evaluation and advice by an attorney, financial consultant or certified public accountant regarding ACA regulations, compliance requirements, or facts and law applicable to any particular case.

 

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