Choosing A Benefits Broker

Choosing MedCon Benefit Systems Group, Inc. as your benefits broker – we aim to improve your bottom line and save you money – all at the same time.

We understand you need to save money on employee benefits.

With the rising cost of employee benefits, balancing employee needs with your capabilities and bottom line has never been more difficult. Let us help you meet your benefits goals, your employees’ expectations and your bottom line.

MedCon provides not only insurance, but also employee benefits consulting services. We save you money by delivering benefits solutions that meet your needs through strategic planning, professional services and technology-based solutions.

What You Should Expect from Your Insurance Broker

Your broker shouldn’t stop at obtaining competitive quotes for coverage and handling claims issues—you should expect more from your insurance broker.

MedCon goes above and beyond, providing quality service throughout the year. From custom employee communication materials to human resources tools and claims data analysis, we have the tools to make your benefits goals a reality.

The bare minimum doesn’t cut it anymore—get what you really need from your insurance broker.

Officially Obtaining Our Firm’s Services

There is no standard contract to sign to obtain services from an insurance broker. MedCon is an independent agency that works with a wide variety of carriers in order to provide you with the best possible benefits options.

Once you have chosen us as your insurance broker, you need only provide your current carriers with a letter establishing us as your broker of record. We even provide this letter for you—if you would like to see a sample, please let us know.

When we are established as your broker of record, we are able to do a detailed market analysis, getting quotes from more markets, better leveraging our relationships with carriers and taking advantage of a better negotiating position with carriers.

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Increase Value, Not Cost

Providing the best possible value and service to your employees is important—especially because they are paying a portion of the benefits costs and our commission.

While some brokers only provide quotes, we also provide clear and professional enrollment materials, wellness communication materials and other resources to help keep employees healthy and safe.

Saving You Money

The value-added services we offer can save your employees money and protect your bottom line. The educational materials we provide can do everything, from helping employees understand their health care needs to enabling them to make healthy lifestyle changes. Helping employees understand the benefits that are available and make educated decisions about which benefits are right for them allows them more say in their health care, and also saves you money.

Employees educated on the importance of preventive care may be less likely to rack up hospital bills resulting from leaving conditions untreated. Employees with large families and frequent doctor visits may choose a health plan with broader coverage than employees who live alone and visit the doctor infrequently.

Allowing employees to choose the level of coverage that is right for them saves you money in the short and long term.

Contact MedCon Benefit Systems Group, Inc. today to learn more about the value we can bring to your organization – we look forward to partnering with you!

The Affordable Care Act – How the Individual Mandate Impacts Your Employees

As the Patient Protection and Affordable Care Act (PPACA) continues to be implemented, employers and their employees have questions about how the health care law affects them.

In an effort to keep our clients up to date about PPACA, we commit to answering the many questions that arise. Here is a basic sampling of the top questions:

Q: What is the individual mandate?

A: The individual mandate is the provision in the PPACA that says most US citizens and legal residents must have health insurance. For a listing of exemptions refer to www.Healthcare.gov. Some examples include: those who are incarcerated, members of a federally recognized tribe, those with religious exemptions, etc.

Your employees who do NOT comply with the individual mandate will be responsible for penalties when preparing individual tax returns. For 2014, the penalty equates to the greater of $95 or 1% of your annual income. If you earn under $10,150, there is no penalty. For 2015, the penalty equates to $325 or 2% of annual income. For 2016, the penalty equates to $695 or 2.5% of annual income.

As you can see, the Affordable Care Act has a direct impact on your employees regardless of whether or not you offer coverage. Dollars spent paying penalty fees could be used to contribute to group health insurance premiums, which in turn can lead to numerous benefits for your business – including employee retention, higher morale and peace of mind for our employees.

Q: What is the exchange or marketplace?

A: The public marketplace, or exchange, is the website where individuals can comparison shop for health plans and sign up for coverage. You have probably heard this referred to as: www.Healthcare.gov.

Federal tax subsidies to help pay for medical coverage may be available to eligible individuals if they enroll for coverage through the public marketplace.

The types of plans offered through the marketplace must be qualified health plans and must meet certain “metallic” levels of coverage – bronze, silver, gold or platinum. These metallic designations refer to the actuarial value of the plan, or how much, on average, the plan pays for the cost of covered benefits.

Q: What are essential health benefits?

A: Effective for plan years beginning on or after January 1st, 2014, all plans offered through the exchange are also required to cover certain, essential benefits. The PPACA requires plans to cover at least 10 general categories of items and services:

  • Ambulatory patient services (outpatient care)
  • Emergency services
  • Hospitalization
  • Maternity and newborn care
  • Mental health and substance use disorder benefits, including behavioral health treatment
  • Prescription drugs
  • Rehabilitative and habilitative services and devices
  • Laboratory services
  • Preventive and wellness services and chronic disease management
  • Pediatric services, including oral and vision care

Q: Who is eligible for a subsidy through the individual marketplace?

A: Some individuals are eligible for tax credits to assist with premium payments and cost-sharing. Individuals with incomes between 100% and 400% of the federal poverty level are eligible, a family of four with income between $23,850 and $95,400.

Q: As an employer, should I offer health insurance to my employees?

A: Should you decide not to provide health insurance to your employees, you may be subject to penalties of up to $3,000 per employee. If you do provide coverage, it must be affordable and meet minimum value requirements. To maintain affordability, premiums may not exceed 9.55% of an employee’s annual income.

Most employees will find coverage offered through an employer to be more affordable than coverage offered on the marketplace based on your contributions. You have to weigh the cost of providing the benefit against the penalties as well as the intangible impact of not offering any coverage to your employees.

For help in making this important decision, we can work with you through our many resources and tools to estimate potential penalties against the cost of providing health care coverage to your employees.

This content is provided without any warranty of any kind. MedCon has taken reasonable steps to ensure this information is accurate and timely. If you have specific questions that pertain to your unique business environment or industry, we recommend that you consult legal council.

Small Group and Individual Markets: New Rating Restrictions for Health Insurance Premiums

Effective for 2014, the Affordable Care Act (ACA) reforms the rating practices of health insurance issuers in the individual and small group markets by limiting the factors that can vary premium rates. These rating restrictions do not apply to grandfathered plans, large group plans or self-funded plans.

Under the ACA’s reforms, issuers may vary the premium rate charged to a non-grandfathered plan in the individual or small group market from the rate established for that particular plan only based on the following factors:

  • Age (within a ratio of 3:1 for adults)
  • Family Size (individual or family)
  • Tobacco Use (within a ratio of 1.5:1)
  • Geography (rating area)

All other rating factors are prohibited. This means that several factors commonly used by issuers to set higher premiums prior to 2014, such as health status, claims history, duration of coverage, gender, occupation, small employer size and industry, can no longer be used.

Rating Methodology

In the final rule, HHS directs issuers to use the per-member rating methodology in the small group market. According to HHS, per-member rating ensures compliance with the requirement that age and tobacco rating only be apportioned to an individual family member’s premium, enhances employee choice inside the Exchanges’ Small Business Health Options Program (SHOP) and promotes the accuracy of the ACA’s risk adjustment methodology.

States may require issuers to offer premiums based on average employee amounts where every employee in the group is charged the same premium. Also, according to HHS, the age bands, as implemented by the per-member-rating methodology, are consistent with the Age Discrimination in Employment Act of 1967 (or the ADEA).

PERMISSIBLE RATING FACTORS

Age

The premium rate charged by an issuer for non-grandfathered health insurance coverage in the individual or small group market may vary by age, except that the rate may not vary by more than 3:1 for adults. The final rule defines “adults” as individuals age 21 and older.

The final rule specifies the following standard age bands for use in all states and markets subject to the ACA’s premium rating restrictions:

  • Children: A single age band for children ages 0 through 20.
  • Adults: One-year age bands for adults ages 21 through 63.
  • Older adults: A single age band for adults ages 64 and older.

Age for rating purposes is based on the date of policy issuance and renewal. However, for individuals who are added to the plan or coverage other than on the date of policy issuance or renewal, age may be determined as of the date they are added or enrolled in the coverage.

Geography

States may establish rating areas based on certain geographic divisions—counties, three-digit zip codes or metropolitan statistical areas (MSAs) and non-MSAs. The final rule provides flexibility for states regarding the rating area configurations that will be presumed adequate by HHS. If a state does not establish rating areas, the default will be one rating area for each MSA in the state and one rating area for all other non-MSA portions of the state.

The final rule provides that states may establish different rating areas for the individual or small group markets, but rating areas must apply uniformly within each market and may not vary by product. If a state merges its individual and small group markets, rating areas will apply uniformly in both the individual and small group markets in the state.

Also, the final rule clarifies that the ACA does not limit the amount by which rates may vary based on geography. Thus, states and issuers may determine the appropriate variation for the geographic rating area factor. However, HHS cautions that rating area factors should be actuarially justified to ensure that individuals and employers are not charged excessively high premiums that would make the ACA’s guaranteed availability protections meaningless.

Family Size

Under the ACA’s rating restrictions, issuers may vary premiums based on the number of individuals covered under a policy, or family size. The final rule instructs issuers to develop premiums for family coverage by adding up the rates of covered family members. However, no more than the three oldest covered children under age 21 may be included in the family rate. According to HHS, this cap on covered children will mitigate premium increases for larger families. The final rule does not contain a cap on the number of family members age 21 and older whose per-member rates are added into the family premium.

The final rule does not specify the minimum categories of family members that must be rated together on a family policy. Since state laws differ with respect to marriage, adoption and custody, HHS believes that states are in the best position to make decisions regarding family coverage practices. Thus, states have the flexibility to require issuers to include specific types of individuals on a family policy.

Tobacco Use

The premium rate charged by an issuer for non-grandfathered health insurance coverage offered in the individual or small group market may vary for tobacco use, except that the rate may not vary by more than 1.5:1. The final rule clarifies that issuers may vary rates for tobacco only based on individuals who may legally use tobacco under federal and state law.

The final rule defines “tobacco use” as use of tobacco an average of four or more times per week within no longer than the past six months, including all tobacco products but excluding religious and ceremonial uses of tobacco. Tobacco use will be based on when a tobacco product was last used.

Issuers in the small group market may apply the tobacco rating factor only in connection with a wellness program that allows a tobacco user to avoid paying the full amount of the tobacco factor by participating in a tobacco cessation program.

Also, if an enrollee provides false or incorrect information about their tobacco use, the final rule allows an issuer to retroactively apply the appropriate tobacco use rating factor to the enrollee’s premium. However, the issuer may not rescind the coverage.

 

This MedCon Benefit Systems Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.

HHS to Delay Part of Small Employer Exchanges

Beginning in 2014, individuals and small employers will be able to purchase health insurance through online competitive marketplaces, or Exchanges. The Affordable Care Act (ACA) requires each state that chooses to operate an Exchange to also establish a Small Business Health Options Program (SHOP) Exchange. The SHOP Exchange is intended to assist eligible small employers in providing health insurance for their employees.

HHS will establish and operate a federally-facilitated Exchange (FFE) in each state that does not establish its own Exchange. The FFE will include both individual market and SHOP components.

Small employers with up to 100 employees will be eligible to participate in the Exchanges. However, until 2016, states may limit participation in the SHOP Exchanges to businesses with up to 50 employees. Beginning in 2017, states may allow businesses with more than 100 employees to participate in the Exchanges.

On March 11, 2013, HHS issued a proposed rule that would amend some of the standards for SHOP Exchanges. Most notably, the proposed rule creates a transition policy regarding an employee’s choice of qualified health plans (QHPs) in the SHOP. The transition policy would delay implementation of the employee choice model as a requirement for all SHOPs for one year, until 2015.

FUNCTIONS OF THE SHOP EXCHANGE

On March 27, 2012, HHS issued a final rule on establishment of the Exchanges. This final rule describes the minimum functions of a SHOP. The final rule provides that a SHOP must allow employers the option to offer employees all QHPs at a level of coverage chosen by the employer—bronze, silver, gold or platinum. In addition, the final rule permits SHOPs to allow a qualified employer to choose one QHP for its employees.

In a separate final rule issued in March 2013, HHS provided that the federally-facilitated SHOP (FF-SHOP) would give employers the choice of offering only a single QHP, as employers customarily do today, in addition to the choice of offering all QHPs at a single level of coverage.

TRANSITION POLICY

In the proposed rule, HHS provides a transition policy for 2014 plan years that is intended to provide all SHOPs (both state SHOPs and the FF-SHOP) with additional time to prepare for the employee choice model.

Under the transition policy, for plan years beginning on or after Jan. 1, 2014, and before Jan. 1, 2015, state SHOPs would not have to allow employers to offer their employees a choice of QHPs at a single level of coverage. However, a SHOP may decide to provide this option to employers for 2014 plan years.

In addition, for plan years beginning on or after Jan. 1, 2014, and before Jan. 1, 2015, FF-SHOPs would not allow qualified employers to offer their employees a choice of QHPs at a single level of coverage. For 2014 plan years, the FF-SHOP would assist employers in choosing a single QHP to offer their qualified employees.

According to HHS, the transition policy would increase the stability of the small group market while providing small groups with the benefits of SHOP in 2014 (for example, choice among competing QHPs and access for qualifying small employers to the small business health insurance tax credit).

The 2012 final rule also included a premium aggregation function for the SHOP that was designed to assist employers whose employees were enrolled in multiple QHPs. Because this function will not be necessary in 2014 for SHOPs that delay implementation of the employee choice model, the proposed rule would make the premium aggregation function optional for plan years beginning before Jan. 1, 2015.

MedCon Benefit Systems, Inc. will continue to monitor health care reform developments and will provide updated information as it becomes available.

*This Legislative Brief is not intended to be exhaustive nor should any discussion or opinion be construed as legal advice. Readers should contact legal counsel for legal advice.

MedCon Legislative Brief: Cost-sharing Limitations and Preventive Care Coverage Clarified

The Affordable Care Act (ACA) includes many changes related to health care coverage and raises a number of questions for employers. The Departments of Labor (DOL), Health and Human Services (HHS) and Treasury (Departments) jointly provide guidance in the form of Frequently Asked Questions (FAQs) to assist in implementing ACA’s changes.

On February 20, 2013, the Departments issued FAQs on the ACA’s limitations on cost-sharing and coverage of preventive care services.

Limitations on Cost-sharing Under the ACA

The ACA added Public Health Service (PHS) Act section 2707(b). This section requires a group health plan to ensure that any annual cost-sharing imposed under the plan does not exceed the ACA’s limitations on out-of-pocket maximums and deductibles for employer-sponsored plans.

Those limits are foudn in Section 1302(c)(1) and (2). Section 1302(c)(1) limits out-of-pocket maximums and section 1302(c)(2) limits deductibles for employer-sponsored plans. The out-of-pocket maximums are tied to the limits under high-deductible health plans and the deductible limts are slated to start at $2,000 for single coverage and $4,000 for other than single coverage.

Due to unclear language in the statute, there has been confusion over which plans are subject to these limits, although grandfathered plans are clearly not subject to these requirements. The FAQs, along with the final rule on essential health benefits issued by HHS, provide clarification on this issue. This information is illustrated below, with additional detail provided in the following sections.

Deductible Limits

The Departments stated that they continue to believe that only non-grandfathered plans and issuers in the small group market (that is, small insured plans) are required to comply with the deductible limit described in section 1302(c)(2).

Under this guidance, the annual deductible limit does not apply to self-insured plans or large group market plans. The Departments intend to issue additional rules related to self-insured and large group health plans. Until final guidance is issued and becomes effective, self-insured or large group health plans can rely on the Departments’ stated intention to apply the deductible limits only to plans and issuers in the small group market.

Small insured plans are provided some relief in the final rule. A health plan’s annual deductible may exceed the ACA limit if a plan could not reasonably reach the actuarial value of a given level of coverage (that is, a metal tier—bronze, silver, gold or platinum) without exceeding the limit.

Out-of-Pocket Maximum Limits

The text of ACA’s out-of-pocket maximum limit broadly refers to “health plans.” HHS’ final rule provides that all non-grandfathered group health plans will be required to comply with the limitation on out-of-pocket maximums. This would include, for example, self-insured health plans and insured health plans of any size. These plans cannot exceed the 2014 limits under teh Internal Revenue Code for HSA (health savings account) out-of-pocket limits. For example, the 2013 limits are $6,250 for self-only coverage and $12,500 for family coverage – these amounts will be indexed annually.

The Departments recognize that plans may use more than one service provider to help administer benefits (for example, a third-party administrator for major medical coverage, a separate pharmacy benefit manager and a separate managed behavioral health organization). Separate plan service providers may impose different levels of out-of-pocket limitations and may utilize different methods for crediting participants’ expenses against any out-of-pocket maximums. These processes will need to be coordinated to comply with the annual out-of-pocket maximum limit, which may require new regular communications between service providers.

The Departments have determined that, only for the first plan year beginning on or after Jan. 1, 2014, where a group health plan or group health insurance issuer utilizes more than one service provider to administer benefits that are subject to the annual out-of-pocket maximum limit, the annual limit will be satisfied if both of the following conditions are met:

  • The plan complies with the out-of-pocket maximum limit with respect to its major medical coverage (excluding, for example, prescription drug coverage and pediatric dental coverage); and
  • To the extent there is an out-of-pocket maximum on coverage that does not consist solely of major medical coverage, this out-of-pocket maximum does not exceed the maximum dollar amount under ACA.

The Departments note, however, that existing regulations implementing Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) prohibit a group health plan (or health insurance coverage offered in connection with a group health plan) from applying a cumulative financial requirement or treatment limitation, such as an out-of-pocket maximum, to mental health or substance use disorder benefits that accumulates separately from any cumulative financial requirement or treatment limitation established for medical/surgical benefits. Accordingly, under MHPAEA, plans and issuers are prohibited from imposing an annual out-of-pocket maximum on all medical/surgical benefits and a separate annual out-of-pocket maximum on all mental health and substance use disorder benefits.

Coverage of Preventive Services

ACA requires non-grandfathered health plans to cover certain preventive health services without imposing cost-sharing requirements for the services. This requirement generally became effective for plan years beginning on or after Sept. 23, 2010. It does not apply to grandfathered health plans.

The FAQs address which specific services non-grandfathered health plans must cover in order to comply with this requirement. Most notably, non-grandfathered health plans must cover:

  • Contraceptives The FAQs confirm that the preventive care coverage requirements 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. Thus, a plan or issuer is not permitted to cover only oral contraceptives. However, plans and issuers 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 (although certain limitations apply).
  • Lactation Counseling and Breastfeeding Equipment and Supplies – Coverage of comprehensive lactation support and counseling and costs of renting or purchasing breastfeeding equipment extends for the duration of breastfeeding. Nonetheless, plans and issuers 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.

Additionally, the FAQs address issues relating to out-of-network services, if a plan does not have any in-network providers to provide a particular preventive service required under the ACA. While nothing in the interim final regulations generally requires a plan or issuer 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 issuer does not have in its network a provider who can provide the particular service, then the plan or issuer 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.

 

Source: U.S. Department of Labor

*This Legislative Brief is not intended to be exhaustive nor should any discussion or opinion be construed as legal advice. Readers should contact legal counsel for legal advice.

Form W-2 Reporting Requirements

The Affordable Care Act (ACA) requires employers to report the aggregate cost of employer-sponsored group health plan coverage on their employees’ Forms W-2. The purpose of the reporting requirement is to provide information to employees regarding how much their health coverage costs. The reporting does not mean that the cost of the coverage is taxable to employees.

This reporting requirement was originally effective for the 2011 tax year (for the W-2 Forms due by the end of January 2012). However, the IRS later made reporting optional for 2011 for all employers. The IRS further delayed the reporting requirement for small employers (those that file fewer than 250 Forms W-2) by making it optional for these employers until further guidance is issued. For the larger employers, the reporting requirement is mandatory for the 2012 Forms W-2 (that must be issued by the end of January 2013).

The IRS has provided interim guidance on how employers should comply with the Form W-2 reporting requirement. This guidance was first issued in April 2011 in Notice 2011-28. The IRS then revised and clarified its interim guidance by releasing Notice 2012-9 on Jan. 3, 2012. Notice 2012-9 provides technical reporting information for employers that include health coverage cost information on Forms W-2 for 2012 and later years. Employers that voluntarily comply with the reporting requirement for 2011 may also rely on the IRS’s interim guidance in Notice 2012-9.

This MedCon Benefit Systems, Inc. Legislative Brief describes the Form W-2 reporting requirement, including guidance provided by the IRS in Notice 2012-9.

Form W-2 Reporting Requirement

Section 9002(a) of ACA provides that employers must disclose the aggregate cost of applicable employer-sponsored coverage provided to employees on the Form W-2. Section 9002(a) specifically adds this information to the list of other items that must be included on the Form W-2. These items include information such as the individual’s name, social security number, wages, tax deducted, the total amount incurred for dependent care assistance under a dependent care assistance program and the amount contributed to any health savings account (HSA) by the employee or his or her spouse.

The inclusion of this information on the Form W-2 does not change the requirements with respect to taxable income, or the tax exclusion for amounts paid for medical care or coverage. Those items are addressed in another portion of the tax law that is not affected by this change. However, this information may be used to determine whether a plan is a “Cadillac plan” for purposes of the excise tax on high-cost health plans that will take effect in 2018.

The IRS has clarified that the reporting rule does not require an employer to issue a Form W-2 including the aggregate cost of coverage to an individual if the employer does not otherwise have to issue a W-2 for that person. For example, an employer would not have to issue a Form W-2 to a retiree or other former employee receiving no reportable compensation.

Employers Subject to the Reporting Requirement

In general, all employers that provide applicable employer-sponsored coverage must comply with the Form W-2 reporting requirement. This includes government entities, churches and religious organizations, but does not include Indian tribal governments or tribally chartered corporations wholly owned by an Indian tribal government.

For 2012, small employers are not subject to the reporting requirement. Small employers will continue to be exempt from the reporting requirement for later years, unless and until the IRS issues further guidance.

An employer is considered a small employer if it had to file fewer than 250 Forms W-2 for the prior calendar year. Thus, if an employer is required to file fewer than 250 Forms W-2 for 2011, the employer would not be subject to the reporting requirement for 2012. The IRS has indicated that the Internal Revenue Code’s aggregation rules do not apply for purposes of determining whether an employer filed fewer than 250 Forms W-2 for the prior year. However, if an employer files fewer than 250 Forms W-2 only because it uses an agent to file them, the employer does not qualify for the small employer exemption.

Coverage That Must Be Reported

Under the Form W-2 reporting requirement, the information that must be reported relates to “applicable employer-sponsored coverage.” Applicable employer-sponsored coverage is, with respect to any employee, coverage under any group health plan made available to the employee by the employer which is excludable from the employee’s gross income under Code section 106.

For purposes of this reporting requirement, it does not matter whether the employer or the employee pays for the coverage – it is the aggregate cost of the coverage that must be reported. The aggregate cost of the coverage is determined using rules similar to those used for determining the applicable premiums for purposes of COBRA continuation coverage. It must be determined on a calendar year basis.

Some types of coverage do not need to be reported on the Form W-2 under this requirement. These are:

  • Coverage under a dental or vision plan that is not integrated into a group health plan providing other types of health coverage;
  • Coverage under a health reimbursement arrangement (HRA);
  • Coverage under a multiemployer plan;
  • Coverage for long-term care;
  • Coverage under a self-insured group health plan that is not subject to COBRA (such as a church plan);
  • Coverage provided by the government primarily for members of the military and their families;
  • Excepted benefits, such as accident or disability income insurance, liability insurance, or workers’ compensation insurance;
  • Coverage for a specific disease or illness or hospital indemnity or other fixed indemnity insurance, provided the coverage is offered as independent, noncoordinated benefits and payment for the benefits is taxable to the employee; and
  • Coverage under an employee assistance program (EAP), wellness program or on-site medical clinic if the employer does not charge COBRA beneficiaries a premium for the benefits.

The reporting requirement does not apply to amounts contributed to an Archer medical savings account (Archer MSA) or amounts contributed to an HSA. Those amounts are already required to be separately accounted for on the Form W-2.

Also, salary reduction contributions to a health flexible spending arrangement (FSA) under a cafeteria plan are not required to be reported. However, if the amount of the health FSA for the plan year (including optional employer flex credits) exceeds the salary reduction elected by the employee for the plan year, the amount of the health FSA minus the salary reduction election for the health FSA must be reported.

Example: ABC Company maintains a cafeteria plan that offers permitted taxable benefits (including cash) and qualified nontaxable benefits (including a health FSA). The plan offers a flex credit in the form of a match of each employee’s salary reduction contribution. Sandy makes a $700 salary reduction election for a health FSA. ABC Company provides an additional $700 to the health FSA to match Sandy’s salary reduction election. The amount of the health FSA for Sandy for the plan year is $1,400. The amount of Sandy’s health FSA ($1,400) for the plan year exceeds the salary reduction election ($700) for the plan year. ABC Company must include $700 ($1,400 health FSA amount minus $700 salary reduction) in determining the aggregate reportable cost.

In addition, employers may include in the Form W-2 reportable amount the cost of coverage that is not required to be included in the aggregate reportable cost, such as HRA coverage, provided the coverage is applicable employer-sponsored coverage and is calculated under a permissible method.

Methods of Reporting

Coverage Provided after Termination of Employment

If an employer provides coverage (such as continuation coverage) to an employee who terminates employment during the year, the employer may apply any reasonable method of reporting the cost of coverage for that year, as long as that method is used consistently for all employees. Regardless of the method used, an employer does not have to report any amount for an employee who requests a Form W-2 before the end of the calendar year in which the employee terminated employment.

Example: Bob is an employee of XYZ Company on January 1, and continues employment through April 25. Bob had individual coverage under XYZ Company’s group health plan through April 30, with a cost of coverage of $350 per month. Bob elected continuation coverage for the six months following termination of employment, covering the period May 1 through October 31, for which he paid $350 per month. XYZ Company will have applied a reasonable method of reporting Bob’s cost of coverage if it uses either of the following methods consistently for all employees who terminate coverage during the year:

  • Reports $1,400 as the reportable cost under the plan for the year, covering the four months during which Bob performed services and had coverage as an active employee; or
  • Reports $3,500 as the reportable cost under the plan for the year, covering both the monthly periods during which Bob performed services and had coverage as an active employee, and the monthly periods during which Bob had continuation coverage under the plan.

Programs with Non-reportable Benefits

Also, if a program offers benefits that must be reported, and other benefits that are not subject to reporting, an employer may use any reasonable allocation method to determine the cost of the portion of the program providing a reportable benefit. If the portion of the program that provides a reportable benefit is only incidental in comparison to the portion of the program providing other benefits, the employer is not required to include either portion of the cost on the Form W-2.

Coverage Periods Spanning Calendar Years

If a coverage period, such as the final payroll period of a calendar year, includes December 31 and continues into the next calendar year, the employer has the following options:

  • Treat the coverage as provided during the calendar year that includes December 31;
  • Treat the coverage as provided during the following calendar year; or
  • Allocate the cost of coverage between each of the two calendar years using a reasonable allocation method that is consistently applied to all employees. The allocation method should generally relate to the number of days in the period of coverage that fall within each of the two calendar years.

Compliance Steps for Employers

Employers that file 250 or more Forms W-2 for 2011 will have to comply with the reporting requirement for 2012 (W-2 Forms provided in January 2013). These employers should ensure that they (or their payroll providers) are prepared to gather the health coverage information in advance of having to complete the Forms W-2 for 2012. In doing so, they should make sure they can identify the applicable employer-sponsored coverage that was provided to each employee and be prepared to calculate the aggregate cost of that coverage.

Employers may also have to address questions from employees regarding whether their health benefits are taxable under this new requirement. They can assure employees that this reporting is for informational purposes only, to show employees the value of their health care benefits so they can be more informed consumers. The amount reported does not affect tax liability, as the value of the employer contribution to health coverage continues to be excludible from an employee’s income, and it is not taxable.

 

MedCon Benefit Systems, Inc. will continue to update you if additional information becomes available with respect to this reporting requirement.

2013 Compliance Checklist

In light of the Supreme Court’s June 28, 2012, decision to uphold the health care reform law, or Affordable Care Act (ACA), employers must continue to comply with ACA mandates that are currently in effect. Employers must also prepare to comply with ACA changes that will go into effect in the future. To prepare for upcoming changes, employers need to be aware of the ACA mandates that will go into effect in 2013.

This MedCon Benefit Systems, Inc. Legislative Brief provides a compliance checklist for employers for 2013. Please contact your MedCon Benefit Systems, Inc. representative for assistance or if you have questions about changes that were required in previous years.

GRANDFATHERED PLAN STATUS

A grandfathered plan is one that was in existence when health care reform was enacted on March 23, 2010. If you make certain changes to your plan that go beyond permitted guidelines, your plan is no longer grandfathered. Contact your MedCon Benefit Systems, Inc. representative if you have questions about changes you have made, or are considering making, to your plan.

□    If you have a grandfathered plan, determine whether it will maintain its grandfathered status for the 2013 plan year. Grandfathered plans are exempt from some of the health care reform requirements. A grandfathered plan’s status will affect its compliance obligations from year-to-year.

□    If you move to a non-grandfathered plan, confirm that the plan has all of the additional patient rights and benefits required by ACA. This includes, for example, coverage of preventive care without cost-sharing requirements.

ANNUAL LIMITS

Effective for plan years beginning on or after Jan. 1, 2014, health plans will be prohibited from placing annual limits on essential health benefits. Until then, however, restricted annual limits are permitted.

□    Unless a health plan received an annual limit waiver, its annual limit on essential health benefits for the 2013 plan year cannot be less than $2 million. (This limit applies to plan years beginning on or after Sept. 23, 2012, but before Jan. 1, 2014.)

SUMMARY OF BENEFITS AND COVERAGE

Health plans and health insurance issuers must provide a Summary of Benefits and Coverage (SBC) to participants and beneficiaries. The SBC is a relatively short document that provides simple and consistent information about health plan benefits and coverage in plain language. A template for the SBC is available, along with instructions and examples, and a uniform glossary of terms.

Plans and issuers must provide the SBC to participants and beneficiaries who enroll or re-enroll during an open enrollment period beginning with the first open enrollment period that begins on or after Sept. 23, 2012. The SBC also must be provided to participants and beneficiaries who enroll other than through an open enrollment period (including individuals who are newly eligible for coverage and special enrollees) effective for plan years beginning on or after Sept. 23, 2012.

□    If your plan has an open enrollment period beginning on or after Sept. 23, 2012, confirm that the SBC is included with the open enrollment package. For participants and beneficiaries who enroll outside of the open enrollment period, confirm that the SBC will be provided to these individuals beginning with the plan year starting on or after Sept. 23, 2012.

  • If you have a self-funded plan, the plan administrator is responsible for providing the SBC.
  • If you have an insured plan, both the plan and the issuer are obligated to provide the SBC, although this obligation is satisfied for both parties if either one provides the SBC. Thus, if you have an insured plan, you should work with your health insurance issuer to determine which entity will assume responsibility for providing the SBC. Please contact your MedCon Benefit Systems, Inc. representative for assistance.

60-DAY NOTICE OF PLAN CHANGES

□    A health plan or issuer must provide 60 days’ advance notice of any material modifications to the plan that are not related to renewals of coverage. Notice can be provided in an updated SBC or a separate summary of material modifications. This 60-day notice requirement becomes effective when the SBC requirement goes into effect for a health plan.

PREVENTIVE CARE SERVICES FOR WOMEN

□    Effective for plan years beginning on or after Aug. 1, 2012, non-grandfathered health plans must cover specific preventive care services for women without cost-sharing requirements.

The covered preventive care services for women include: well-woman visits; gestational diabetes screening; human papillomavirus (HPV) testing; sexually transmitted infection (STI) counseling; human immunodeficiency virus (HIV) screening and counseling; FDA-approved contraception methods and contraceptive counseling; breastfeeding support, supplies and counseling;  and domestic violence screening and counseling. Exceptions to the contraception coverage requirement apply to certain religious employers. The preventive care guidelines for women are available at: www.hrsa.gov/womensguidelines/.

$2,500 CONTRIBUTION LIMIT FOR HEALTH FSAs

□    Effective for plan years beginning on or after Jan. 1, 2013, an employee’s annual pre-tax salary reduction contributions to a health flexible spending account (FSA) must be limited to $2,500. (The $2,500 limit will be indexed for cost-of-living adjustments for 2014 and later years.)

Health FSA plan sponsors are free to impose an annual limit that is lower than the ACA limit for employees’ health FSA contributions. Also, the $2,500 limit does not apply to employer contributions to the health FSA and it does not impact contributions under other employer-provided coverage. For example, employee salary reduction contributions to an FSA for dependent care assistance or adoption care assistance are not affected by the $2,500 health FSA limit.

W-2 REPORTING

□    Beginning with the 2012 tax year, employers that are required to issue 250 or more W-2 Forms must report the aggregate cost of employer-sponsored group health coverage on employees’ W-2 Forms. The cost must be reported beginning with the 2012 W-2 Forms, which are issued in January 2013.

ACA’s W-2 reporting requirement is optional for smaller employers until further guidance is issued. Also, the reporting is for informational purposes only; it does not affect the taxability of benefits.

RETIREE DRUG SUBSIDY

The Medicare Part D program includes a Retiree Drug Subsidy (RDS) to encourage employers to continue providing prescription drug coverage to Medicare-eligible retirees. The RDS is available to certain employers that sponsor group health plans covering retirees who are entitled to enroll in Medicare Part D but elect not to do so. Employers receive RDS payments tax-free. In addition, before 2013, employers receiving the RDS could take a tax deduction for their retiree prescription drug costs, unreduced for the subsidy amount.

□    Beginning in 2013, employers receiving the RDS will no longer be permitted to take a tax deduction for the subsidy amount.

MEDICARE TAX INCREASES

□    Effective Jan. 1, 2013, the Medicare Part A (hospital insurance) tax rate increases by 0.9 percent (from 1.45 percent to 2.35 percent) on wages over $200,000 for an individual taxpayers and $250,000 for married couples filing jointly. (The tax is also expanded to include a 3.8 percent tax on unearned income in the case of individual taxpayers earning over $200,000 and $250,000 for married couples filing jointly).

An employer must withhold the additional Medicare tax on wages or compensation it pays to an employee in excess of $200,000 in a calendar year. An employer has this withholding obligation even though an employee may not be liable for the additional Medicare tax because, for example, the employee’s wages or other compensation together with that of his or her spouse (when filing a joint return) does not exceed the $250,000 liability threshold. Any withheld additional Medicare tax will be credited against the total tax liability shown on the individual’s income tax return (Form 1040).

EMPLOYEE NOTICE OF EXCHANGES

□    Effective March 1, 2013, employers must provide all new hires and current employees with a written notice about ACA’s health insurance exchanges (Exchanges). In general, the notice must:

  • Inform employees about the existence of the Exchange and give a description of the services provided by the Exchange;
  • Explain how employees may be eligible for a premium tax credit or a cost-sharing reduction if the employer’s plan does not meet certain requirements;
  • Inform employees that if they purchase coverage through the Exchange, they may lose any employer contribution toward the cost of employer-provided coverage, and that all or a portion of the employer contribution to employer-provided coverage may be excludable for federal income tax purposes; and
  • Include contact information for the Exchange and an explanation of appeal rights.

Federal agencies are expected to issue more specific guidance on this notice requirement and provide a model notice for employers to use.

CER FEES

ACA created the Patient-Centered Outcomes Research Institute (Institute) to help patients, clinicians, payers and the public make informed health decisions by advancing comparative effectiveness research. The Institute’s research is to be funded, in part, by fees paid by health insurance issuers and sponsors of self-insured health plans. These fees are called comparative effectiveness research fees or CER fees.

□    Self-funded plans and health insurance issuers must pay a $1 per covered life fee for comparative effectiveness research. Fees are effective for plan years ending on or after Oct. 1, 2012. Fees increase to $2 the next year and will be indexed for inflation after that. Full payment of the research fees will be due by July 31 of each year. It will generally cover plan years that end during the preceding calendar year. Thus, the first possible deadline for paying the CER fees is July 31, 2013.

HIPAA CERTIFICATION

□    Health plans must file a statement with the Department of Health and Human Services (HHS), certifying their compliance with HIPAA’s electronic transaction standards and operating rules. Under ACA, the first deadline for certifying compliance with certain HIPAA standards and rules is Dec. 31, 2013. HHS has indicated that it intends on issuing more guidance on this requirement in the future.

This MedCon Benefit Systems, Inc. Legislative Brief is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.
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