HIM NOTICES + HIGH DEDUCTIBLE PLAN UPDATE
I. Healthcare Exchange Notices Due to all new hires.
If you thought you were exempt from sending out the ACA-required Employee Health Insurance Marketplace Notification, think again.
Most employers, regardless of how many employees they have, ARE in fact required to provide this notice to their current full-time and part-time employees by October 1, 2013 and to all new hires effective October 1, 2013. Even if your company does not offer health insurance coverage, you are still required to provide the notice if your company is subject to the Fair Labor Standards Act (FLSA).
The test for whether your company is governed by the FLSA is if:
1. You have at least one (1) employee;
2. Your company is a “$500,000 Enterprise” as that term is defined under the FLSA.
A company is considered a “$500,000 Enterprise” under the FLSA if:
1. Your company’s annual revenues are $500,000 or more;
2. You have two (2) or more business entities that involve:
a) “Related Activities” performed either through
(i) “Unified Operation”; or
(ii) “Common Control” by any person or persons;
b) For a “Common Business Purpose”.
RELATED ACTIVITIES are the same or similar activities, such as those of the individual retail or service stores in a chain. Activities are also related when they are auxiliary and service activities generally necessary to the operation of a particular business, such as warehousing, bookkeeping, auditing, purchasing, and advertising. Likewise, activities are related when they are part of a vertical structure such as the manufacturing, warehousing, and retailing of a particular product or products.
UNIFIED OPERATION means combining, uniting or organizing the performance of related activities so as to be in effect a single business unit or organized business system, which is directed to the accomplishment of a common business purpose.
COMMON CONTROL exists where a number of persons, corporations or other organizational units have the power or authority to direct, regulate, govern or administer the performance of related activities. Common ownership is not a prerequisite for common control or sufficient ownership to exercise control, however, it will constitute common control.
COMMON BUSINESS PURPOSE will encompass activities directed to the same or similar business objectives, whether performed by one or more persons, corporations, or other business organizations.
We have attached three (3) forms you can use in providing the required notice to your employees and new hires:
2. For companies that DO NOT OFFER Medical Insurance - A Department of Labor (DOL)-issued form Notice that you can complete and distribute to each of your employees (DOL Form: OMB 1210-0149without plans effective until 11/30/13)[Fillable form located athttp://www.dol.gov/ebsa/pdf/FLSAwithoutplans.pdf; and
1. For companies that DO OFFER Medical Insurance - A Department of Labor (DOL)-issued form Notice that you can complete and distribute to each of your employees (DOL Form: OMB 1210-0149 with plans effective until 11/30/13)[Fillable form located athttp://www.dol.gov/ebsa/pdf/FLSAwithplans.pdf ;
3. An Acknowledgement of Receipt form to be completed by your employees and kept on file by you to document that the notice has been provided and when.
II. WILL HIGH DEDUCTIBLE HEALTH PLANS SURVIVE OBAMA CARE?
High Deductible Health Insurance Plans (HDHPs) are an increasingly common kind of health insurance. These plans have cheaper premiums than traditional plans, but they put the employee on the hook for thousands of dollars in out-of-pocket costs before the insurance kicks in. This high deductible amount is offset, to a certain extent, by the employee’s ability to put away pre-tax income in a Health Savings Account (HSA) and to use those funds to pay for healthcare that counts toward their high deductible. Once an employee puts money in an HSA, he/she can use it to pay for qualified medical expenses now, or save and grow their balance to use later in life or in retirement—all tax-free.
In order to qualify for an HSA, the employee must be enrolled in an HSA-qualified high deductible health plan, and must not be covered by other non-HDHP health insurance or Medicare, and cannot be claimed as a dependent on someone else’s tax return.
How does the Affordable Care Act (ACA) make these plans less desirable? According to Public Health Service Act Sec. 2718, as added by the ACA, insurers offering group or individual health insurance must report annually to the Department of Health and Human Services on the percentage of health premiums used for claims reimbursement and must maintain certain minimum MLRs. If minimums are not maintained, rebates must be provided to health plan participants. The MLR formula does not take into account contributions to HSAs.
In addition, HDHPs have fewer premium dollars to cover their fixed expenses. Every plan has fixed expenses that it covers with premiums. Since HDHPs have lower premiums than other plans, a greater percentage of the premium must be used to pay these fixed expenses. For example, $400 of fixed expenses represents 40 percent of a $1,000 premium, but only 20 percent of a $2,000 premium and just 8 percent of a $5,000 premium. Therefore, it is harder for a lower premium plan to keep its non-claim expenses below 20 percent of its adjusted premiums as the MLR rule requires, thus providing incentive for insurers to eliminate such plans.
One piece of recent news that tips the scales in favor of the HDHPs survival under the ACA is the IRS’ recent clarification of the relationship between the ACA’s preventive care requirements and a HDHP’s ability to qualify as such under the IRS rules.
IRS Notice 2013-57 (issued September 9, 2013) clarifies that a high deductible health plan (HDHP) will not fail to qualify as a HDHP under IRC section 223(c)(2) merely because it provides –without a deductible—the preventive care services required under section 2713 of the Public Health Service Act (PHS Act). These are the preventive care services that the Affordable Care Act (ACA) requires to be offered by all group health plans and health insurance issuers offering group or individual health insurance coverage. This is important because a HDHP MUST qualify as such under the IRS regulations in order for an HSA to be established.
IRC section 223 permits “eligible individuals” to establish Health Savings Accounts (HSAs). Among the requirements for an individual to qualify as an eligible individual under section 223(c) (1) (and thus to be eligible to make, or for the individual’s employer to make on their behalf, tax-favored contributions to a HSA) is that the individual be covered under a HDHP and have no disqualifying health coverage.
Generally, under section 223(c) (2) (A), a HDHP may not provide benefits for any year until the minimum deductible for that year is satisfied. However, IRC section 223(c) (2) (C) provides a safe harbor for the absence of a deductible for preventive care. Section 223(c)(2)(C) predates the ACA, so the safe harbor it offers does not specifically refer to preventive services under PHS Act 2713, which was added by the ACA. Instead, it states that a HDHP may provide “preventive care (within the meaning of section 1871 of the Social Security Act, except as otherwise provided by the Secretary).” Notice 2013-57 clarifies that the Secretary allows HDHPs to provide “preventive care” within the meaning of PHS Act 2713, as well as within the meaning of section 1871 of the Social Security Act.