Employer-sponsored health plans and insurers got a double dose of compliance advice on May 16 from the Centers of Medicare and Medicaid Services in the form of a set of Frequently Asked Questions.
The first FAQ clarifies that insurers in the individual and small group market may not impose waiting periods on specific essential health benefits. For example, insurers cannot impose waiting periods for transplants, as they would discriminate against people with kidney, heart and liver diseases. “Any issuer that currently has a waiting period in its plan policy for an EHB needs to amend the policies to remove the waiting period within a reasonable timeframe of the release of this document,” CMS states.
CMS added that this policy interpretation is not meant to disallow waiting periods that are part of reasonable medical management.
Answers Relating to Delays in Employer Mandate
Several FAQs address issues under the recent policy delay allowing insurers in the individual and small-group markets to continue to sell policies that would be noncompliant, because of cost-sharing or a failure to provide EHB, for example. (Note: States have the power to permit or not allow this policy delay, and they have flexibility to limit the duration of the extended transition policy.)
One FAQ clarifies that employers with 51-100 employees do not have to stay with the same insurer they had in 2013 in order to be allowed to offer a small group policy that does not offer EHB, or would have been cancelled for another reason if it weren’t for the transitional policy.
Employers of this size will be redefined as small employers because of the policy directive that extended the year-long waiver of the employer mandate yet another year (through to the end of October 2016) for employers with 51-100 employees. These companies will not face consequences for having noncompliant small-group policies, the FAQ states. But they cannot switch down to lesser requirements that apply to large-group plans (such as those relating to preventive care benefits and 90-day waiting periods), another FAQ states.
Another answer says employers with 51-100 employees that were not insured when the transitional relief guidance came out may still qualify for transitional relief if they are insured before Jan. 1, 2016.
An FAQ clarifies that transitional policies are minimum essential coverage for purposes of the individual responsibility requirement.
Answers About the AV Calculator
Three of the FAQs address use of the actuarial value calculator for specific types of plans.
One instance of this is when a plan uses wellness incentives to set cost-sharing rates, and the result is varying deductible and copayment amounts. Another example involves using different cost sharing amounts to steer workers to the lesser resource-intensive method of imaging. Assigning different copayment amounts to MRIs versus CT scans, the FAQ says, would not be compatible with the AV Calculator because it cannot account for varying deductible or copayment amounts under the calculator’s single cost sharing input, “advanced imaging.”
Another example covers how drug plans that have four or more tiers may use the AV calculator, even though the calculator does not have room for that many tiers. Users are advised to consult CMS’s AV Calculator user guide.
On the same day, the IRS released other sets of FAQs on employer responsibility requirements and another on the small employer tax credit.
The former says basically if an employer wants to put pre-tax dollars toward employee premiums outside of a company-sponsored health plan, that will not satisfy the employer pay-or-play mandate.
Employers that continue to think such programs will satisfy health care reform’s requirement to offer a group health plan that provides minimum essential coverage, could be subject to extremely expensive penalties, the FAQ says.
Programs that reimburse employees pre-tax amounts for premiums paid to a qualified health plan or directly paid to insurers are called employer payment plans in IRS Notice 2013-54. To pay premiums only and avoid excise taxes, the employer will have to offer post-tax programs, the FAQ says. (They also may have to pay a no-coverage or inadequate-coverage penalty.)
The latter states that the small business tax credit for purchasing group health insurance is based on the number of full-time equivalents employed by the company. But excluded from the calculation is owners, their family members, and shareholders above a certain percent, depending on the type of corporation. Therefore hours worked by family members — but also seasonal workers — have to be excluded from calculations of FTEs. Other answers discuss how to calculate average annual wages for purposes of claiming this credit. For more information on the small business tax credit, see Section 780 of The New Health Care Reform Law: What Employers Need to Know.