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Health Care Reform Updates

October 1, 2013 Marketplace Notification Requirements:

May 23, 2013

Please read the notice below relative to obligations of employers and Health Care Reform.  VAST will be communicating with our clients prior to this obligation to assist in facilitation of communication strategies and education of your employee population.

As of January 1, 2014, Americans will have the ability to purchase health insurance from the Health Insurance Marketplace. The Affordable Care Act (ACA) requires employers to notify their employees of the existence of the Marketplace, no later than October 1, 2013. All employers are required to comply, regardless of offering an employee benefits plan. The Department of Labor has provided additional guidance on this requirement.

In order for employers to comply with notification requirements, the following must be met:

  • Deliver Marketplace notification to employees no later than October 1, 2013
  • Deliver Marketplace notification to newly hired employees upon employment on and after October 1, 2013
  • Beginning January 1, 2014, new employers must be notified within 14 days of the employee's start date
  • Deliver Marketplace notification to employees at no cost

The Health Insurance Marketplace will open for enrollment on October 1, 2013 for coverage effective January 1, 2014.

Sample notification forms released on DOL Website:
The Department of Labor released sample notices that employers can use to satisfy the delivery requirements. The notice includes general information about the Marketplaces, information specific to the employer and, for employers offering employee benefits, information about the benefit plan. Employers are responsible for completing the template and providing it to their employees.

Employers subject to Fair Labor Standards Act must comply with ACA:
All employers subject to the Fair Labor Standards Act (FLSA) must comply with this notification delivery requirement. In general, FLSA applies to employers that employ one or more employees. For additional information on FLSA testing requirements and guidance, see the Department of Labor website.

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What do the SHOP headlines mean?


You may have seen the recent headlines regarding the “SHOP” marketplace being delayed. The truth in the matter is only the employee choice requirement within the SHOP has been delayed.

What does this mean? Starting in 2014, the Federally Facilitated SHOP marketplace will be operating, however they will not offer employee choice benefits. The employer will choose the plan and offer only one company to their employees. Starting in 2015, the Federally Facilitated SHOP marketplace will offer employee choice plans.

Please note, this applies to the Federally Facilitate Marketplace only. Any state based marketplaces may have the potential to offer employee choice options. This will vary state to state.


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Feds Release Minimum Value Calculator

March 12, 2013

New regulations were issued by the Department of Health & Human Services (HHS) on February 20, 2013 outlining rules for employers with for 50+ full time employees (FTE). This included the minimum value calculator, which will be used to decide if a plan covers 60% of services, meeting the minimum value requirement of ACA. This ruling also set an annual cost-sharing limit for employees of large group plans.

Minimum Value Calculator - The minimum value calculator is designed to help large employers determine if their health plan meets the minimum essential coverage requirements under ACA. If a plan does not meet minimum value, and is not deemed affordable, the employer may face penalties. A plan meets the minimum value test if its share of the total allowed cost of benefits provided is at least 60%.  The calculator and information about its use can be found at http://cciio.cms.gov/resources/regulations/index.html#pm.

Annual Cost Sharing Limits – New annual cost-sharing limits will be imposed on all large employer group plan years starting on and after January 1, 2014, including self-funded plans. These limits are as follows:

1) Limits what an enrollee pays for deductibles, coinsurance, and copays for the year.

2) The annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $6,350 for self-only coverage or $12,700 for family coverage.

3)  Requirement that all in-network covered services must count toward the new annual out of pocket maximum.

Transitional Rule - This makes allowances for the application of the out of pocket maximum rule for group health plans with separate out of pocket maximums for different benefits when those benefits are administered by different service providers. An example of this would be major medical & pharmacy. This rule provides that for 2014, as long as the major medical coverage, including mental health and substance abuse, out of pocket maximum does not exceed the ACA limit, and no other coverage independently exceeds that limit, the group will be in compliance of the law.

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February 14, 2013

Last week more regulations were released on the Affordable Care Act regarding the affordability of family coverage and access to the health insurance premium tax credit.  There has been plenty dialogue around the IRS’s definition of affordability and how this would impact an individual’s family members from receiving a premium tax credit. 

The IRS has stated that the affordability test of the law will be based on the cost of self-only coverage, and will not include the cost of family coverage.  Large employers will face a tax penalty if the employee’s premium share for the employer’s lowest cost plan exceeds 9.5% of household income and that plan meets the minimum value standards.  Employers will be expected to determine income using W-2 information or other safe harbor methods that have been posted by the IRS.  If these two tests are met, the employee’s family will not be eligible to recieve subsidized coverage in the exchange regardless of what the premium share would be for family coverage.  However the family can still purchase coverage through the exchange.

There is a potential for a family to get some individual mandate relief if they have very high family coverage costs.  The IRS issued proposed language on January 30th that says that an employee offered affordable, self-only coverage will not incur individual mandate tax penalties when the employee's premium share for family coverage exceeds 8% of household income and the family members are not enrolled in the coverage.  There is also a hardship exemption being proposed.  These circumstances will be applicable when one or more family members are eligible for self-only coverage in separate employer-sponsored plans that meet the 9.5% affordability test, but together are unaffordable for the couple.  The hardship exemption also extends to people living in states that are not expanding Medicaid under ACA who would be eligible otherwise

The last piece of this discusses minimum essential coverage for the individual mandate.  The question being asked here is, “What level of coverage must an individual maintain to avoid the mandate’s tax penalty?”  This is a focal point that has not received a lot of press, but it is being proposed that this standard will be LOWER than QHP coverage that will be required to be offered for sale in the individual and small group markets in 2014. The minimum essential coverage will include:

  • Coverage under a grandfathered health plan

  • Governmental sponsored programs such as Medicare, Medicaid, CHIP, and TRICARE

  • Other health benefits coverage designated by the Secretary of HHS

  • Coverage available in the state’s individual market

  • Coverage under an eligible employer sponsored plan, which includes a governmental plan or any plan available in the small or large group market within a state

HHS comments are due on March 18th, comments to the IRS are due May 2nd, and the IRS plans on holding a hearing on May 29th regarding these topics.  Stay tuned!

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Learn how employers can prepare for 2014 compliance with the Affordable Care Act (ACA)! Topics will include, among others:
  • Is my organization required to provide health insurance coverage to its employees in 2014?
  • If required, what is the best "pay or play" decision for my organization?
  • Is there a benefit to purchasing health insurance coverage through a health insurance exchange?
  • If I choose not to be insured as an individual in 2014, will I have to pay a penalty?
  • How could tax credits help small businesses purchase health insurance coverage for employees?
  • Fact or Fiction: Is everything we are hearing about the Affordable Care Act true?
  • And more!
  • Johanna Novak, Foster Swift Law Firm
  • Pam Stewart, VAST
  • George Kinnane, Blue Cross Blue Shield of Michigan



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Notice of Exchange Requirement Delayed

January 25, 2013 

Notice of Exchange Requirement Delayed Until Regulations are Issued on the Topic

A new set of FAQs was just issued by the Department of Labor that delays the "Notice of Exchange" requirement that would have required employers to provide the Notice to employees by 3.1.2013, and to new hires on the date of hire.

The requirement will not take effect on March 1, 2013 for two reasons:

  1. Notice should be coordinated with HHS's educational efforts and Internal Revenue Service (IRS) guidance on minimum value.

  2. Employers should be provided with sufficient time to comply and selecting an applicability date that ensures that employees receive the information at a meaningful time.

The Department of Labor expects that the timing for distribution of notices will be late summer or fall of 2013, which will coordinate with the open enrollment period for Exchanges.

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Proposed Regulations to the Play or Pay Mandate


On Friday, December 28, 2012, the IRS released Proposed Regulations addressing a variety of issues relating to the "Play or Pay" mandates of the Affordable Care Act. This guidance broke new ground and was accompanied by an FAQ.  We will have more information for you once we have the final interpretation of the complex rules.  For now, you should be aware that important new or clarifying information has been provided for many facets of the Play or Pay Mandate, including: 

  • A requirement that coverage be offered to 95% of full time employees (and their dependents) to be considered meeting the coverage requirements of ACA.  For purposes of the Play or Pay Mandates, the term "dependents" refers only to the employee's children under age 26 and not to spouses.

  • ACA requires that coverage be offered to full time employees and their dependents.  The Proposed Regulations establish a transition period during 2013 for those employers who currently only cover employees, but they must be on track to offer coverage to both employees and dependents and must take steps to do so during the 2014-2015 plan year.  

  • The Proposed Regulations also offer some relief to non-calendar year plans that are currently in place (on December 27, 2012), indicating the Play or Pay Mandates will be effective for the first day of the plan year commencing after January 1, 2014.

  • Providing a one-time election change in Cafeteria Plans for employees opting Exchange coverage during 2014.

  • Clarifying that the Controlled Group rules apply for purposes of determining whether an employer is a large employer (over 50 full time equivalent employees) and that the "reduction of the first 30 employees" for purposes of the Play or Pay Mandate penalties will be done on a Controlled Group basis, but that--IMPORTANTLY--the determination and assessment of the penalty will be done on a member-by-member basis. 

There is significant guidance in these Proposed Regulations. Please be watching for more guidance in the near future.

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MANDATED EMPLOYERS: How do we know if we are and what guidelines should we use to count?


Beginning in 2014, employers with 50 or more full-time / full-time-equivalent (FTE) employees must offer employees and their dependents the option to enroll in minimum essential coverage. The plan must meet minimum value and affordability standards (see below). If such a plan is not offered, employers will be penalized, also referred to as the "pay-or-play" provision. All employees working 30 or more hours per week are considered full time and must be offered coverage.  The law does not require coverage be offered to part time employees.

Minimum Value Coverage:  A plan that that offers at least 60% coverage

Affordable Coverage:  The employee’s cost for single coverage does not exceed 9.5% of that employee’s wages.

There are two conditions in which an employer must count employees:  1) To see if they qualify as a mandated employer (large employer), and 2) To then determine if they qualify for coverage as full time employees.

Determining Your Company Size: Here are some guidelines as it stands right now:

  • Full Time – any employee working 30 or more hours per week, on average.
  • Full Time Equivalent (FTE) – calculated by adding the hours worked by all employees that are not full time, and dividing by 120. This calculation must be done for every month in the previous calendar year, and must be calculated on an annual basis, to ensure an employer’s requirements have not changed.  (Seasonal Employee Exception – Employers are not large if they exceed the 50 employee count for 120 days or less
  • Variable Hours
    • IRS Notice 2012-58 – Created a stability look-back measurement period of 3-12 months, which is chosen by the employer (number of months). If an employee with variable hours  worked an average of 30 or more hours per week during these months, the employee is considered full time and must be offered coverage for the same months as the look back (but at least six months). If the employer has a 12 month look back period, coverage must be offered for 12 months.
    • New employees with variable hours must be measured in the same consistent fashion using the same stability period. The exception would be the ability to use different look-back periods for varying populations of employees such as collective bargaining (BA) vs. non-CBA employees, Hourly vs. Salary, Employees of different entities, Employees in different states.

Counting Example:

“ABC Employer” has 20 full time employees that work more than 30 hours per week for the last month. They also have 100 part-time employees working 15 hours per week. Adding the part time hours for the last month comes to 6,000 total hours worked. To determine how many FTE’s are in the 100 part-time employees, 6,000 total hours is divided by 120, equals 50 FTE’s. Since “ABC Employer” has a total of 70 full time/FTE employees, they are deemed a large employer.  However, to remain compliant, they must only offer coverage to the 20 full time employees and their dependents.

Please note that large companies with small subsidiaries need to be aware the federal government has indicated that employees of multiple corporations must be combined at the ownership level to determine employer size. Official regulations are still being written regarding these guidelines, but this guidance shows the intent of the law’s implementation.

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December 17, 2012

Federal regulations under the Affordable Care Act require that you inform your employees about six important things:

  1. How much the employer pays for employees’ health coverage - Employers that issue 250 or more W-2s must report the total cost of employer-sponsored health coverage on those W-2 forms. The requirements generally apply to W-2 forms for 2012 that employers must give to employees in January 2013.

  2. That there are private exchanges and subsidies available - This provision requires all employers to provide each employee with written notification of the existence of health insurance exchanges and subsidies effective March 1, 2013. The notifications must include:

    • Information about the existence of the exchange

    • A description of services provided by the exchange

    • Information on how the employee may contact the exchange for assistance

    • A statement that the employee may be eligible for a premium tax credit for a qualified health plan purchased through an exchange if the actuarial value of the employer's health-benefit plan is less than 60 percent.

    • Notification that the employee then loses the employer contribution toward health coverage and that some or all of the contribution may be excludable from federal income taxes, if the employee purchases a qualified health plan through an exchange.

    • Currently the government hasn't issued any "model language"

  3. Increased withholding of Medicare tax on employees making more than $200,000 - Effective Jan. 1, 2013, this provision requires employers to withhold additional Medicare tax on wages or compensation it pays to an employee in excess of $200,000 in a calendar year.

  4. Grandfathered status - If you offer a plan that's considered grandfathered, you must notify participants.

  5. Primary Care Physician - If your plan requires that participants select a primary care physician (PCP), you must notify participants that women can select a gynecologist and parents may select a pediatrician for their children.

  6. If you're exempted as a religious organization - Religious organizations claiming exemption from certain ACA requirements (i.e. contraception benefits) need to notify employees.

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The upholding of PPACA has employers wondering what it will mean to them and what is the best course of action they should take in 2014.  It is difficult to know that today and the only correct answer can be, “It depends.”

It is possible that some employers can expect an increase in plan enrollment for 2014 as a result of the individual mandate, but much of that will depend on state exchanges being fully operational and probably more importantly, how well they operate and what will be available through those exchanges.  In addition, the Medicaid portion of the decision could have an impact on employers with lower income employees depending on whether or not their state chooses to participate in the expansion or not.

While we do have to wait a little longer for more information from our State governments as employers to be able to make sound decisions on the plan we will put in place for 2014, there are some things that can and should be taken care of now.

Provisions that employers should be concerned with prior to 2014 include whether or not they are required to report the value of employer coverage on IRS Form W-2, making sure they are capping dollar limits on health care FSA, increase Medicare withholding for employees earning more than $200,000 per year and complying with reforms that have already gone into effect prior to yesterday’s decision.


  • Summaries of benefits and coverage (SBC), or mini-SPDs:   This part of the law requires U.S. health insurers and group health plans to provide concise and comprehensible information about health plan benefits and coverage to current and potential health plan participants, for plan years beginning on the first day of the first open enrollment period on or after September 23, 2012.   Some of the key requirements include:

    • The SBCs can be no more than four (4) double-sided pages in at least 12 point font (no small print allowed);

    • Must include the required elements of the plan and a uniform glossary of terms;

    • Must provide notice of modification 60 days in advance if content of SBC changes mid-plan year;

    •  Can be a standalone document or combined with the SPD.

    • The insurer (carrier) must prepare and provide the SBCs to the plan sponsor of insured plans.  We recommend that employers check the plan language contained in the SBCs to ensure that it accurately reflects the plan provisions.

    • The responsibility for SBC preparation for self-insured plans remains with the plan sponsor.  Although most employers expect that their third party administrators will provide the SBC, employers should review the SBC carefully and note any disclaimers the TPA might insert.

    • SBCs must be distributed as follows:

      • To plan participants (employees and former employees)

      • To plan beneficiaries (spouses and dependents, including COBRA beneficiaries)

      • Distribution can be in either paper or electronic format, and a single copy is allowed for everyone at the same address but for plan beneficiaries at other addresses, they must get their own copy.

  • Form W-2 health plan reporting for the 2012 tax year:  

    • Generally all employers need to comply, with one exception:  Employers who filed less than 250 W-2s in the previous year are exempt from this requirement.  Please note that this is not the count of employees but the number of W-2s filed, so small employers with high turnover may need to meet this requirement.

    • Employers will be required to report the aggregate value of group health benefits, including the total cost of all applicable coverage, including the employer and employee portion and the cost for the employee and spouse/dependents in Box DD on the Form W-2.  Note that this is a report of the value of the benefits, not for tax reporting.

    • This information must be furnished beginning with 2012 W-2 forms, which generally must be provided to employees by the end of January 2013. The aggregate cost of an employee’s health care coverage is to be determined under rules similar to the rules for determining the applicable premium for COBRA continuation coverage.

    • The IRS has issued W-2 reporting FAQs and additional information about the elements to be reported that can be found at http://www.irs.gov/newsroom/article/0,,id=254321,00.html.

  • Patient-centered outcomes trust fund fee: Two new sections in the Internal Revenue Code require insurers and self-insured plans to pay the comparative effectiveness research fees.

    • IRC section 4375 applies to health insurance policies with the fees paid by the issuers of the policies, while IRC section 4376 applies to self-insured health plans with the fees paid by the plan sponsor.

    • The fees are $1 per covered life for 2012 and $2 per covered life for 2013.

  • Health care flexible spending account limits: The U.S. Internal Revenue Service issued Notice 2012-40 on May 30, 2012, with guidance on the $2,500 limit on pretax employee contributions to health care flexible spending accounts (FSAs) under the PPACA. The reform law limit on the amount that employees can set aside in FSAs is scheduled to take effect in 2013. For plans not on a calendar year basis, the clarifying IRS rules note that the $2500 limit begins with the first day of the plan year after December 31, 2012.

    • Employers with fiscal year health FSAs may keep higher reimbursement limits in effect through the end of their 2012-2013 plan year.

    • Employers may adopt retroactive amendments to impose the $2,500 limit before December 31, 2014.

    • The $2,500 limit applies only to salary reduction contributions under a health FSA and not to employer non-elective contributions (sometimes called flex credits).

    • In the case of a plan providing a grace period (which may be up to two months and 15 days), unused salary reduction contributions to the health FSA for plan years beginning in 2012 or later that are carried over into the grace period for that plan year will not count against the $2,500 limit for the subsequent plan year.

  • Medical loss ratio (MLR):  This provision requires insurance companies to spend a certain proportion of income on health care for their insured population, and if the insurer does not meet the MLR standards, it is required to issue a rebate to policyholders.

    • MLR rebates do not apply to self-insured plans.

    • PPACA requires insurance companies in the large-group market (100+ employees) to spend at least 85% of premium dollars on medical care and quality improvement activities.

    • Small group and individual market insurers must spend at least 80% on such care.

    • Rebates and notices for the 2011 plan year must be provided by August 1, 2012.

    • The rebate can be in the form of a premium credit, lump sum check or lump sum reimbursement to the same account that the participant used to pay the premium.

    • Additional guidance can be found in the Department of Labor’s Technical Release 2011-04 at:  http://www.dol.gov/ebsa/newsroom/tr11-04.html.

Because there is much that is changing and evolving that will certainly impact all of us, this will be a very fluid site and what is posted here one day very well could be completely null and void the next depending on many factors.  We will continue to update this site as information becomes available and encourage you to visit often to stay abreast of changing information and how it impacts you and your organization.

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VAST is proud to provide information on Health Care Reform provided by Foster Swift.  This update is brought Foster Swift health care law attorney, Johanna Novak, who was recently interviewed on Michigan Business Network radio concerning the United States Supreme Court's long-anticipated decision on the Patient Protection and Affordable Care Act (the "Act").  The interview aired on July 6, 2012, and was separated into two parts.  Podcasts for both parts of Johanna's interview can be accessed at the link below.