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Featured Question:

What is in the House-passed Replacement to ACA?

Taxpayers justifiably think of state legislation as hard to understand and confusing. When you read articles or see something on TV about liquor store privatization, property tax reform, the looming budget deficit, unfunded liability in the pension programs, consolidation of government agencies, expansion of the Insurance Premium Tax, etc., it gets mind-boggling pretty quickly. No doubt it is very confusing. Butit is worse trying to grasp what is going on with the Federal Government. Pennsylvania brokers should thank their lucky stars that the National Association of Health Underwriters is a force on the national landscape just as PA Association of Health Underwriters seeks to be here in the Commonwealth.
As I write this article, Washington, DC is reeling from the abrupt firing of the FBI Director by President Trump and Congress is trying to figure out if and how it will affect the various congressional investigations about the Russians.
Most Confusing is Health Legislation
Like everyone else, PAHU members are wondering what will happen. For better or worse, Obamacare has had seven years to get established and there is some public understanding of basically how health insurance works with some of the changes. Enter the 2016 election and almost immediately after being sworn in, Donald Trump reduced the penalty for an individual not having health insurance to zero. He said that for every new regulation, there must be two repealed or made inoperative. Republicans in the U.S. House under pressure from President Trump passed legislation May 4 designed to repeal and replace Obamacare.
It is now in the U.S. Senate where it will be amended. So, what is in the American Health Care Act (HR 1628) and what will the Senate do to it? The 217-213 House vote showed division in GOP ranks with 20 Republicans voting no along with all Democrats. All members of Pennsylvania's House delegation voted. In addition to all of the Democrats, four Republicans voted no: Representatives Ryan Costello, Tom Meehan, and Brian Fitzpatrick from the Philadelphia area and Representative Charlie Dent from the Lehigh Valley.
Groom Law Group prepared a summary.
A link to the actual text.
Some provisions and bite-size explanations
- Continued are ACA provisions dependant coverage up to age 26, first-dollar preventive care services, essential benefits (although states may ask for a waiver to change these)
NOTE: For now, this leaves these Obamacare provisions in place although the Trump Administration may be looking at redefining what a preventive care service is. The term "first-dollar" means that the patient pays zero. Examples would be a physical exam, a colonoscopy, a breast exam, etc.
- Rate band changes from 3:1 to 5:1. This means that insurers will have more options when pricing coverage per age. States would have the option of having ratios greater than 5:1.
NOTE: "Banding" is a way insurance companies can decide what to charge based on age. Under Obamacare, a 64-year old would only pay three times as much as a 20-something.
- Coverage reporting requirements remain. Instead of an individual mandate, a person would have to document 12-months of coverage or risk paying a 30% surcharge to the insurance company and not to the Federal Government.
NOTE: Under Obamacare, individuals and employees have to be able to verify that they had insurance in the previous year. They get a form certifying that. A person without health insurance would be fined. The Republican approach is to eliminate the individual mandate requiring health insurance and have a system where someone without coverage for part of the year could pay a 30% surcharge on their insurance premium when they do get health insurance.
- Tax subsidies (called tax credits) range between $2,000-4,000 per year depending on age (from $2,000 if person is under 30 to $4,000 for those 60 and older). Subsidies phase out so that a modified adjusted gross income above $75,000 or $150,000 for joint filers means a 10% reduction in the subsidy for the portion of income above the threshold. Non-exchange plan policyholders would also be eligible for the subsidy.
NOTE: Nothing like a formula to make it confusing. What this means is that the exchanges go away and the tax subsidy connected with exchanges goes away. Instead, a person meeting income requirements could get a $2,000 to $4,000 reduction in their annual insurance premium.
- Individuals with pre-existing conditions with no access to employer-offered coverage would be eligible to receive individual coverage due to insurers' premiums being subsidized thanks to a new $100 billion Patient and State Stability Fund (supplemented by $15 billion in 2020 for maternity and newborn care or substance abuse care). NOTE: This plan is also called a risk pool run by the state. The Rendell Administration had one in the early days of Obamacare and many agricultural states had risk pools in the 1990s. A risk pool is where a person with a pre-existing condition goes. The idea is to put those with lots of claims due to some serious ailment they had before getting insurance into one pool. This makes insurance cheaper for everyone else. The sticking point to a risk pool is how much does the person pay. The State Stability Fund is supposed to subsidize that higher cost.
- Repealed taxes would be: ACA's 10% tax on tanning; Federal Health Insurance Tax on premiums (both in 2017); SHOP tax credits (finally ending in 2020); annual prescription drug tax (2017); and repeal on limitation to insurance executive compensation now limited to $500,000 by the Affordable Care Act (2017). Also repealed in 2017 would be the Medical Device Excise Tax (now 2.3% on gross sales). Repeal of ACA Medicare taxes in higher income individuals would be effective in 2022. Cadillac Tax would take effect in 2025.
NOTE: Obamacare gave us lots of new taxes including those listed above. One in particular that got both Republicans and Democrats upset was what amounted to a federal sales tax on medical equipment manufacturers making it ironic that something called Affordable Care Act would make health care (medical devices) more expensive. The Cadillac Tax is a tax that would impose a 40% federal tax on the value of a health plan above a certain threshold paid for by the individual or worker. Can you see why everyone from conservatives to labor unions did not like the Cadillac Tax? Make note that tax is not repealed in this legislation, only delayed.
- ACA's Expanded Medicaid eligibility to 133% of the Federal Poverty Level would end.
NOTE: Getting more people into Medicaid was a big goal of Obamacare since it was assumed that they previously had no insurance. States had the choice to expand Medicare or not and Governor Wolf decided to. The Federal Government subsidized the costs of the increased numbers receiving Medicaid 100% at first, then increasing the state's share over several years to 10%. Given Pennsylvania's budget problems, will Republicans in our General Assembly want to pay the extra bucks to continue that expansion of Medicaid? Fact to note is that almost 20% of PA adults are on Medicaid due to the expansion - it was about 13% before.
Hopefully, this explanation did not confuse you any worse. The Senate has to look at what the U.S. House sent them and come up with their own version. Expect changes but hopefully, this gives readers an idea as to some things in the House repeal and replace bill. Please feel free to contact me with questions and concerns. , 717-232-0022
Vince Phillips has lobbied for PAHU since 1998. Since Obamacare was signed into law in 2010, Vince has given over 300 presentations to insurance, business, and consumers' groups as to how the Affordable Care Act functions.

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Employer Mandate

Q:Are Health Reimbursement Arrangements considered separate plans under PCORI and so must pay the PCORI tax in addition to PCORI taxes paid because of the employer-offered health plan?

A: In most cases, yes. Here are links to several resources:
IRS Fact Sheet
IRS FAQs Fee Amount
This question dealt with self-insured plans and HRAs.
Q5. Which individuals are taken into account for determining the lives covered under a specified health insurance policy or applicable self-insured health plan?
A5. Generally, all individuals who are covered during the policy year or plan year must be counted in computing the average number of lives covered for that year. Thus, for example, an applicable self-insured health plan must count an employee and his dependent child as two separate covered lives unless the plan is a health reimbursement arrangement (HRA) or flexible spending arrangement (FSA).
Gallagher Benefit Services, Inc.
PCORI Fee Worksheet For HRAs
Effective for plan years ending on or after 10/1/12 and before 10/1/19 (e.g., beginning with 2012 plan year for calendar year plans), health insurance issuers and plan sponsors of self-funded health plans are required to pay an excise tax to fund the Patient Centered Outcomes Research Institute - often referred to as the “PCORI fee.” The fee is calculated based on the average number of lives covered under the plan (including employees, dependents, COBRA participants, and covered retirees) and is due by July 31 following the end of each applicable year. Health reimbursement arrangements (HRAs) are considered self-funded health plans and are subject to the PCORI fee. However, special rules apply to HRAs for purposes of calculating the PCORI fee:
If the plan sponsor also maintains a self-funded medical plan with the same plan year, the medical plan and HRA may be treated as one plan for purposes of the PCORI fee. However, if the medical plan is fullyinsured, the medical plan and HRA must be treated as separate plans for purposes of the PCORI fee, with the insurer paying the fee for the medical plan and the employer/plan sponsor paying the fee for the HRA.
For purposes of counting covered lives for HRAs, only employees need to be counted; spouses/dependents are not included.
Methods for determining the fee for HRAs that must be treated as separate plans from a fully-insured medical plan* Below is a worksheet outlining the calculation methods available under the PCORI fee final regulations,** modified as applicable for HRAs that must be treated as separate plans from a fully-insured medical plan. HRA plan sponsors must choose one method to be used for the entire plan year; however, a different method may be chosen for subsequent plan years.
For plan years beginning before 7/11/12 and ending on or after 10/1/12, the average number of covered employees for purposes of the PCORI fee may be determined using “any reasonable method.” Otherwise, one of the following methods must be used:
* Use the PCORI Fee for Self-Funded Plans worksheet to calculate the PCORI fee for self-funded plans and HRAs that may be treated as a single plan.
* Starting in 2014, health insurance issuers and plan sponsors of self-funded plans must also make contributions to a temporary reinsurance program, which will also based on the number of covered lives. Proposed regulations indicate that the methods to calculate the temporary reinsurance program fee will be similar to those required for the PCORI fee. Different methods may be used to determine the PCORI fee and the temporary reinsurance program fee. HRAs that are integrated with self-funded or fully-insured medical coverage are not subject to the temporary reinsurance program fee.
Benefit Administration Company had this summary of PCORI and HRAs

Q:I received a call from a former client. They had nine enrolled employees on their group plan. Last December they termed the group and everyone moved to individual policies. The company pays for each employe's policy.
Today the group notified me that their tax advisor had seen new information regarding small groups under 50 employees who pay for individual insurance policies will have to setup a group policy or be penalized $100 per person.I haven't heard about this - can you offer any insight?

A: The problem with what the employer is doing is that the IRS issued a ruling that such subsidies where the employer pays the premium is illegal. The tax advisor gave one of two choices -- offer a plan or pay a fine. I believe there is a third option: Increasing taxable compensation to the employee. So, it's not the subsidy by the employer per se, it's that it must be treated as earned (taxable) income by the employee. Of course, it would be advisable for the employer to run it by an employment law attorney to make sure that the income increase would not be potentially considered as discriminatory per EEOC (particularly age discrimination).

Q:Hi Vince. Please try and stay as warm as possible for the next few days. It's brutally cold in Pittsburgh today.
A question came up this afternoon concerning fines/penalties groups would need to pay if they did not meet the requirements set by the ACA. For this question we are dealing with 100 plus size groups.
Do you know how the penalties will be assessed? Meaning, if a group has 150 ees and doesn't offer coverage, choosing to opt to pay the fine, will the group need to pay the fine all at once on April 15th of 2016? Will they be paying quarterly throughout 2015? I have not heard anything on how this will be laid out to the groups/brokers/business owners.

A: Here is what the IRS issued December 15, 2014 regarding payment of the fine...uh, employer shared responsibility. As you see, it's not terribly clear
27. How will an employer know that it owes an Employer Shared Responsibility payment? The IRS will adopt procedures that ensure employers receive certification that one or more employees have received a premium tax credit. The IRS will contact employers to inform them of their potential liability and provide them an opportunity to respond before any liability is assessed or notice and demand for payment is made. The contact for a given calendar year will not occur until after the due date for employees to file individual tax returns for that year claiming premium tax credits and after the due date for applicable large employers to file the information returns identifying their full-time employees and describing the coverage that was offered (if any). 28. How will an employer make an Employer Shared Responsibility payment?
If it is determined that an employer is liable for an Employer Shared Responsibility payment after the employer has responded to the initial IRS contact, the IRS will send a notice and demand for payment. That notice will instruct the employer on how to make the payment. Employers will not be required to include the Employer Shared Responsibility payment on any tax return that they file.
I went back further and I think this will be slightly more helpful. Nothing happens until there is a trigger, the approval of an employee for tax credits when he/she enrolls in an exchange. When the IRS flags this and determines that either coverage is not offered or that the plan offered is "unaffordable" or is not benefit-rich enough (comparing with the employer's submission of coverage to the IRS), it notifies the employer of a potential violation of ACA. After the threshold, the employer pays monthly ($2,000 divided by twelve for all employees. There is due process where the employer can fight the IRS determination that a violation of the ACA shared employer responsibility (penalty) has occurred.
I hope this is helpful.
Best wishes, Vince February 2014
§ 54.4980H-5 Assessable payments under section 4980H(b).
(a) In general. If an applicable large employer member offers to its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan for any calendar month (including an offer of coverage to all but five percent or less (or, if greater, five or less) of its full-time employees (provided that an employee is treated as having been offered coverage only if the employer also offers coverage to that employee's dependents)) and the applicable large employer member has received a Section 1411 Certification with respect to one or more full-time employees of the applicable large employer member, then there is imposed on the applicable large employer member an assessable payment equal to the product of the number of full-time employees of the applicable large employer member for which it has received a Section 1411 Certification (minus the number of those employees in a limited non-assessment period for certain employees and the number of other employees who were offered the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan that satisfied minimum value and met one or more of the affordability safe harbors described in paragraph (e) of this section) and the section 4980H(b) applicable payment amount. Notwithstanding the foregoing, the aggregate amount of assessable payment determined under this paragraph (a) with respect to all employees of an applicable large employer member for any calendar month may not exceed the product of the section 4980H(a) applicable payment amount and the number of full-time employees of the applicable large employer member during that calendar month (reduced by the applicable large employer member's ratable allocation of the 30 employee reduction under § 54.4980H-4(e)).
(b) Offer of coverage. For purposes of this section, the same rules with respect to an offer of coverage for purposes of section 4980H(a) apply. See § 54.4980H-4.
(c) Partial calendar month. If an applicable large employer member fails to offer coverage to a full-time employee for any day of a calendar month, that employee is treated as not offered coverage during that entire month, regardless of whether the employer uses the payroll period rule set forth in § 54.4980H-3(d)(1)(ii) or the weekly rule set forth in § 54.4980H-3(c)(3) to determine full-time employee status for the calendar month. However, in a calendar month in which a full-time employee's employment terminates, if the employee would have been offered coverage if the employee had been employed for the entire month, the employee is treated as having been offered coverage during that month. Also, an applicable large employer member is not subject to an assessable payment under section 4980H with respect to an employee for the calendar month in which the employee's start date occurs if the start date is on a date other than the first day of the calendar month.
(d) Applicability to applicable large employer member. The liability for an assessable payment under section 4980H(b) for a calendar month with respect to a full-time employee applies solely to the applicable large employer member that was the employer of that employee for that calendar month. For an employee who was a full-time employee of more than one applicable large employer member during that calendar month, the liability for the assessable payment under section 4980H(b) for a calendar month applies to the applicable large employer member for whom the employee has the greatest number of hours of service for that calendar month (if the employee has an equal number of hours of service for two or more applicable large employer members for the calendar month, those applicable large employer members can treat one of those members as the employer of that employee for that calendar month for purposes of this paragraph (d), and if the members do not select one member, or select in an inconsistent manner, the IRS will select a member to be treated as the employer of that employee for purposes of the assessable payment determination). For a calendar month, an applicable large employer member may be liable for an assessable payment under section 4980H(a) or under section 4980H(b), but will not be liable for an assessable payment under both section 4980H(a) and section 4980H(b).

Q:Here is the situation. It is a nonprofit group with 3 FT employees. Two have insurance elsewhere (spouse), leaving one participating person. Going as a group with only one appears to be out of the question per carriers. The question is how can the employer subsidize the premium?
One answer is an individual policy. The employer knows that it could increase salary in order to absorb the premium and the tax consequence of W2 income. Problem is that the other employee may demand additional compensation causing possible backlash or even Board concerns.
Can this employer go into the SHOP exchange with 3 employees and only one choosing to participate? The employer knows that a decision must be made by December 15.

A:The open enrollment period does allow for an employer not to meet minimum participation requirements at that time but it must be compliant at renewal in order to stay in the SHOP plan. Following are FAQs from the HHS website regarding SHOP-related questions:

FAQ #29
Publish Date 08/28/2013
During the annual November 15th - December 15th special enrollment period (when no minimum participation rate will be calculated), will the FF-SHOP send issuers a single enrollment file or will enrollment files be sent piecemeal as employees enroll?
The Group Enrollment XML file transaction and associated ASC X12 834 enrollment transaction will not be sent until after the group's enrollment period has expired or all employees have responded to the offer of coverage. Thus, issuers will not be receiving ASC X12 834 enrollment transactions in a piecemeal manner.
FAQ #50
Publish Date 07/30/2013
Will minimum participation rates take into account employees who have coverage elsewhere?
Yes, minimum participation rate calculations will take into account employees that have coverage elsewhere. Generally, employees with other group coverage (e.g., from a spouse, and those with public coverage, such as Medicare or Medicaid) will be excluded from minimum participation rate calculations. Employees with individual coverage, including Individual Marketplace coverage, will be included in minimum participation rate calculations. See 45 C.F.R. 155.705(b)(10) of the HHS Notice of Benefit and Payment Parameters for 2014 for additional information on how minimum participation rates will be calculated in the FF-SHOPs. (
FAQ #51
Publish Date 07/30/2013
Does the FF-SHOP minimum participation requirement apply to stand-alone dental coverage?
No, the minimum participation rate provision in 45 C.F.R. 155.705(b)(10) applies only to comprehensive medical QHPs offered through the FF-SHOPs. CMS does not intend for the FF-SHOP minimum participation requirements to apply to stand-alone dental coverage. Many of the adverse risk segmentation concerns that exist for medical plans do not apply to stand-alone dental plans. Unlike medical QHPs in the FF-SHOP, dental plan issuers may continue to adjust premiums to reflect risk when pricing plans in the FF-SHOP by redirecting employers to dental plan issuer sites for quoting and enrollment purposes.

FAQ #52a
Publish Date 07/30/2013
Previously, it was mentioned that state minimum participation rates would be adhered to if a state's rate was higher than the FF-SHOP's default 70% rate. Is that still accurate or will all states participating in the FF-SHOP be required to adhere to the 70% participation rate?
Pursuant to 45 C.F.R. 155.705(b)(10), states participating in the FF-SHOP must follow the 70% minimum participation rate rule. However, if a State can provide evidence to CMS that either State law or wide-spread issuer practice dictates a rate higher or lower than the FF-SHOP's default rate, that State rate may be used in place of the 70% participation rate requirement.
Based on information received to date from States, FF-SHOPs will use different minimum participation rates in the following States for 2014 and 2015:
State FF-SHOP Minimum Participation Rate
  • Arkansas 75%
  • Iowa 75%
  • Nevada 75%
  • New Hampshire 75%
  • New Jersey 75%
  • South Dakota 75%
  • Tennessee 50%
  • Texas 75%

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Q: On May 20, 2014, Federal Judge John Jones III issued a landmark ruling in Whitewood et al vs. Michael Wolf (Commonwealth of PA) that struck down Pennsylvania's 1996 Marriage Law specifying that a marriage is defined as being between a man and a woman. The ruling also forced PA to recognize same-sex marriages conducted in other states. On May 21, Governor Corbett said that although as a Catholic, he disagreed with the ruling, he would not appeal it. The ruling is effective immediately but an unanswered question is effective date for employer-offered health plans. Is it now? Is it a month from now? Is it at plan renewal? PAHU is awaiting guidance from the carriers.
What impact will that have on insurance plans and employers?

A: DISCLAIMER: The following analysis should not be construed as legal advice but presents guideposts for evaluating the ruling's implication to health benefits. Employers are advised to seek legal counsel for guidance.
The ruling did NOT specify which PA changes in benefits are affected BUT it brings the June 2013 US Supreme Court ruling against the Defense of Marriage Act (DOMA) to Pennsylvania since SCOTUS said that its decision affects states which do recognize same-sex marriages. Consider these potential impacts:

  • PA's Administration and General Assembly must review state statutes and rules that are non-compliant with Judge Jones' ruling.
  • The IRS issued Notice 2013-61 on August 29, 2013 which provided some guidance. For example, Employer-funded portion of value of coverage for same-sex spouses will no longer be counted as income on the employee's W-2. Treasury and IRS Announce That All Legal Same-Sex Marriages Will Be Recognized For Federal Tax Purposes;
  • Other items from the Notice:
    • Same-sex couples will be treated as married for all federal tax purposes, including estate and income taxes, earned income tax credit, child tax credit, etc.
    • Legally-married same-sex couples would file federal returrns as married filing jointly or married filing separately.
  • The IRS earlier issued Revenue Ruling 2013-17 and FAQs and Publication 555, Community Property. (www.irs.gove)
  • There is nothing in the ruling that addresses the IRS determination that spouses are not considered dependents under the mandated offering of coverage in firms which are classified as "large" under the Patient Protection Affordable Care Act (PPACA). This may have an impact on firms that decide after the ruling to discontinue spouse coverage if a same-sex couple alleges that the decision is discriminatory against them... a pretext not to cover gay couples. It sounds like a reason to review employment practices liability coverage (EPLI) with a P/C broker to make sure that EPLI coverage is in place.

ERISA-governed plans should be aware of US Department of Labor Technical release 2013-04 posted September 18, 2013 regarding treatment of same-sex couples.

Q: Can you possibly find out an answer to this? One of my group's hires summer interns from the beginning of June until the end of August. They could stay on until early September. They work between 32 and 40 hours. The benefit eligibility is date of hire and 30 hours for FT eeys.
They historically classified these interns as seasonal interns not eligible for benefits.
Questions -
Under 4980 H - can these interns be claassified as seasonal as they work the same time of the year? If so, can they be placed into a 3 or 6 months look back period and not offered medical?
If not, and they do not offer coverage to them, how would this work with the 95% offer of coverage calculation. Is this based on a per month calculation? Meaning that if 5 interns are 8% of the monthly workforce for 3 or 4 months, they might owe the portion of the $2000 per eey penalty for those months, but then only if the interns are there for more than 3 calendar months?
Would the employer remain penalty free if they ensure the interns start after June 1 and leave by 8-31?
Or, do they have to be treated as any other eey and since they will work over 30 hours, have to be offered coverage date of hire? If so, could they set up a second eligibility of 90-days for Interns while all other eeys are date of hire?
Are there any other employment laws that might be a concern?

A: IRS Notice 2012-58 states:
If an employer maintains a group health plan that would offer coverage to the employee only if the employee were determined to be a full-time employee, the employer may use both a measurement period of between three and 12 months (the same as allowed for ongoing employees) and an administrative period of up to 90 days for variable hour and seasonal employees. However, the measurement period and the administrative period combined may not extend beyond the last day of the first calendar month beginning on or after the one-year anniversary of the employee's start date(totaling, at most, 13 months and a fraction of a month). These periods are described in greater detail below.
1. Initial Measurement Period and Associated Stability Period For variable hour and seasonal employees, employers are permitted to determine whether the new employee is a full-time employee using an “initial measurement period” of between three and 12 months (as selected by the employer).The employer measures the hours of service completed by the new employee during the initial measurement period and determines whether the employee completed an average of 30 hours of service per week or more during this period. See Page 16 and 17 of this Bulletin.
The IRS also released a February 10, 2014 FAQ. Question 54 appears below:
54. What is the impact under the Employer Shared Responsibility provisions if some of my employees are seasonal “employees” and some are seasonal “workers”? Is a seasonal employee the same as a seasonal worker under these rules?
The terms "seasonal worker" and "seasonal employe" are both used in the Employer Shared Responsibility provisions but in two different contexts. The term "seasonal worker" is relevant for determining whether an employer is an applicable large employer subject to the Employer Shared Responsibility provisions. To be an applicable large employer, an employer must have employed, during the previous calendar year, at least 50 full-time employees (including full-time equivalent employees). However, if an employer's workforce exceeds 50 full-time employees (including full-time equivalent employees) for 120 days or fewer during a calendar year, and the employees in excess of 50 who were employed during that period of no more than 120 days were seasonal workers, the employer is not considered an applicable large employer. Seasonal workers are workers who perform labor or services on a seasonal basis, as defined by the Secretary of Labor, and include retail workers employed exclusively during holiday seasons. For this purpose, employers may apply a reasonable, good faith interpretation of the term “seasonal worker.” The term "seasonal employee" is relevant for determining an employee's status as a full-time employee under the look-back measurement method. For purposes of the Employer Shared Responsibility provisions, an employee is a full-time employee for a calendar month if he or she averages at least 30 hours of service per week (or 130 hours of service per month). The final regulations under the Employer Shared Responsibility provisions provide two methods for determining full-time employee status, one of which is the look-back measurement method. Under the look-back measurement method an employer may determine an employee's status as a full-time employee during a period (referred to as the stability period), based upon the hours of service of the employee in a prior period (referred to as the measurement period). The look-back measurement method includes special rules that apply to new employees who are seasonal employees. For this purpose, a seasonal employee means an employee who is hired into a position for which the customary annual employment is six months or less and for which the period of employment begins each calendar year in approximately the same part of the year, such as summer or winter. Note that the look-back measurement method is not available for purposes of determining whether the employer is an applicable large employer.

Q: Do you have any information on what is deemed seasonal employees on the federal side? How much they must work and how many months out of the year to be eligible for group coverage?

A: A seasonal EE is defined by the IRS as someone working fewer than 120 days per calendar year. The work may be split and does not have to flow for example, peak times in October-December and again maybe in the late spring. As far as I know, this definition applies to all whether public or private sector. It may well be though that some federal procurement contracts have a different definition. And there is the question of migrant agricultural labor but I do not know what federal rules apply to that group.
In terms of being offered health coverage through the employer mandate, it depends on the look-back measurement period. For example, if the employer used a full year to look back, seasonal employees' hours could be diluted to show fewer than 30 hours in the overall average. Likewise, an employer choosing a period with more seasonal hours, say the summertime, there would be more full-time average hour workers who then must be offered health insurance during plan year beginning in 2014.

Q: Regarding ACA discrimination rules regarding different levels of health benefits being offered to different classes of employees. Does this rule apply to all business sizes or just the +50?

A: The 105 (h) applies to all businesses regardless of size. I have not seen anything to the contrary. Keep in mind that implementation was to have taken place in 2011 but the IRS had difficulty figuring out how to implement and so postponed actual enforcement until when they finalize regulations.
CAVEAT TO EMPLOYERS: Even though 105(h) is not in effect yet, an employer would do well to anticipate it in executive hiring or severance packages of highly compensated individuals.
PPACA itself (Section 2716) says "A group health plan other than a self-insured plan shall satisfy the requirements of section 105(h)(2) if the IRS Code of 1986 relating to discrimination in favor of highly compensated individuals." In this section there is no definition of employer suggesting a size threshold.
Following are two IRS Bulletins relating to this subject. background and call for comments on the proposed 105 (h) rule after comments received; call for more comments; no enforcement until IRS figures it out and then only beginning with the next plan year.

Q: What to do re aggregation per the IRS for businesses with locations in more than one state?

A: This is where an accountant would come in since this shared ownership idea is not new to business but it is new in the context of the Patient Protection Affordable Care Act.

It would appear per the following that the aggregation rule would apply. As I have no accountancy training, I do not know the context of section 414 but I’ve bolded the reference from the IRS proposed rule issued December 28, 2012. Link

2.Application of Aggregation Rules For purposes of counting the number of full-time and full-time equivalent employees for determining whether an employer is an applicable large employer, section 4980H(c)(2)(C)(i) provides that all entities treated as a single employer under section 414(b), (c), (m), or (o) are treated as a single employer for purposes of section 16 4980H.

Thus, all employees of a controlled group under section 414(b) or (c), or an affiliated service group under section 414(m), are taken into account in determining whether the members of the controlled group or affiliated service group together constitute an applicable large employer. Section 4980H applies to all common law employers, including an employer that is a government entity (such as Federal, State, local or Indian tribal government entities) and an employer that is an organization described in section 501(c) that is exempt from Federal income tax under section 501(a).

The proposed regulations reserve on the application of the section 414(b), (c), (m), and (o) aggregation rules in section 4980H(c)(2)(C)(i) to government entities and churches, or a convention or association of churches (as defined in §1.170A-9(b)). Until further guidance is issued, government entities, churches, and a convention or association of churches may rely on a reasonable, good faith interpretation of section 414(b), (c), (m), and (o) in determining whether a person or group of persons is an applicable large employer. Several commenters asked for clarification of whether the aggregation rules used in determining applicable large employer status also applied for purposes of determining liability for, and the amount of, an assessable payment. The proposed regulations clarify that for a calendar year during which an employer is an applicable large employer, the section 4980H standards generally are applied separately to each person that is a member of the controlled group comprising the employer (with each such person referred to as an applicable large employer member) in determining liability for, and the amount of, any assessable payment. For example, if an applicable large employer is comprised of a parent corporation and 10 wholly owned subsidiary corporations, each of the 11 corporations, regardless of the number of employees, is an applicable large employer member. For a discussion of the related information reporting requirements for applicable large employer members under section 6056, see section VII of this preamble.


Q: My employer client is going early renewal December 1st. Can he on January 1, 2014 exclude spouses as dependents? He does not want to exclude them in December because the exchanges won't be operational until 1/1/2014.

A:No. Once should do it. The important thing that employers should remember is that documenting that employees received the exchange notice is all-important. Not having the documentation means that the employee is open to employees asserting that a notice was not provided to demonstrate the evils of the workplace as part of an EEOC complaint. Or, worse yet, the US Department of Labor gets the employee complaint and seeks to punish the employer for a perceived violation of the Fair Labor Standards Act

Q: Some carriers are sending out text of exchange notices that look different than what the US Department of Labor in May. It's the same message but appears to be different text. If my employer groups have already distributed the earlier notice to their employees, do they have to send out a second one?

A:No. The plan year is the plan year. Assuming that the transitional rule applies to him, the opportunity to remove spouses would come on the December 1, 2014 renewal but would not occur January 1.

Federal PPACA Taxes

Q:I have something I would like to run past you that is affecting some of our clients. Please bill us for any consulting time on this matter.
We service some small clients, less that 50 full time equivalents, that are reimbursing their employees for their health insurance. They do not have health insurance plans for their employees, however they are giving their employees a flat amount to be used for the purchase of their health insurance. They are currently not reflecting this on their W-2 as income since the employees are providing proof of the purchase of Health Insurance.
Under the new regulations, are they now required to include this as income on the employee's W-2? Thank you for any guidance you can give me on this matter.

A:Some in the insurance industry have suggested this as a way to have an employer defined contribution with no tax consequence to the employer. IRS Bulletin 2014-22 issued May 27, 2014 appears to say that this would be non-compliant with IRS rules and that the extra money given to employees would be taxable income to them as a salary increase or bonus would be. "Section 105(a) provides that except as otherwise provided, amounts received by an employee through accident or health insurance for personal injuries or sickness are included as gross income to the extent the amounts are (1) are attributable to contributions by the employer that were not includable in the gross income of the employee or (2) are paid by the employer." Even though the effective date of this rule applies to taxable years beginning on or after January 1, 2015, "No inference should be drawn that the payment of accident or health premiums from a qualified plan does not constitute a taxable distribution if made in a previous year."
IFA Media posted a good article describing the IRS ruling. Earlier, IRS Bulletin 2013-54 (September 13, 2013) stated it much more clearly but zeroed in on employers of over 50 full-time employees. It also dictated a $100 per employee per day penalty.

Q:Businesses have a new burden where firms have to file a form 720 with the IRS for the new comparative effectiveness tax also known as PCORI. ($1 for 2013 and $2 in 2014. It's frustrating and I cannot locate the form. Shouldn't there be an exemption for small businesses from this nuisance tax?

A:I was able to find the updated form 720 which shows both the medical device tax and PCORI. I hope your clients find it to be helpful. I like your idea of no payment if a small business. Unfortunately, I saw no exemption in the IRS sets of instructions for the PCORI.
Instructions (pages 8 and 9) have the same link as the 720 form itself but are listed separately at .

Q: What plans are exempted from paying the PCORI tax?

A:Following are excerpts from the IRS Rule governing who must pay the PCORI tax (fee). Altho a separate free-standing Rx plan is not cited here, the text suggests a liberal interpretation as to plans that must pay PCORI. The first part is the list of exceptions. The second is the descriptive narrative. Both were in the Federal Register December 6, 2012 (link follows). I hope this is helpful.

Here is part of an IRS July 25, 2013 FAQ describing exemptions in which Rx is not mentioned.

Q: What exceptions to the PCORI fee apply?

A: The PCORI fee does not apply to exempt governmental programs, including Medicare, Medicaid, Children's Health Insurance Program (CHIP) and any program established by federal law for providing medical care (other than through insurance policies) to members of the Armed Forces, veterans and members of Indian tribes (as defined in section 4(d) of the Indian Health Care Improvement Act).

Also, health insurance policies and self-insured plans that provide only excepted benefits, such as plans that offer benefits limited to vision or dental benefits and most flexible spending arrangements (FSAs), are not subject to the PCORI fee. Further, health insurance policies or self-insured plans that are limited to employee assistance programs, disease management programs or wellness programs are not subject to the PCORI fee if these programs do not provide significant benefits in the nature of medical care or treatment.

The PCORI fee applies only to policies and plans that cover individuals residing in the United States. Thus, the PCORI fee does not apply to policies and plans that are designed specifically to cover employees who are working and residing outside the United States.

Q: Are health insurance policies or self-insured health plans for tax-exempt organizations or governmental entities subject to the PCORI fee?

A: Yes. Unless the health insurance policy or self-insured health plan is an exempt governmental program described above, the policy or plan is a specified health insurance policy or applicable self-insured health plan subject to the PCORI fee and, accordingly, the health insurance issuer or plan sponsor is responsible for the PCORI fee.


Individual Mandate

Q: Does President Obama's latest delay in the implementation of ACA include individuals and small group?

A: The President's plan would allow individuals and small businesses (under 50) to keep existing plans until 2015 providing that carriers spell out the increased benefits in coverage if consumers would give up existing coverage for the 2014 "richer" and more expensive plans. He also put the onus on the carriers and state regulators to allow his desired changes to occur. (Think DC's firing of their insurance commissioner when he said 'the law is the law') Following is a link to original White House release describing the President's move.


Q: Given certain carriers' decisions to cut broker compensation to zero for individual policies, consumers are in a worse bind than they were before since it is unrealistic to ask agents and brokers to work for free. Consumers will be at the mercies of or have to wade through a confusing landscape of co-pays, in and out of network, out of pocket, minimum essential benefits and the like. Some may just opt to pay the PPACA fine because it's simpler.
Agents and brokers are loyal to their clients. How, then, can a broker be compensated if there is no commission? 

A: Ordinarily, a broker would think of moving to a fee basis (makes sense, right?) but in PA, filling out the app or helping the client fill out the application might be considered a violation by the Insurance Department.
Act 147 says explicitly that charging a fee for filling out an applications in prohibited. When the law was crafted, it did not occur to anyone in those pre-PPACA times that their would be no commissions.
The cautionary note is that fees are OK if the fee is known in advance, that the service for which the fee is charged is known by the client and that the client agrees to the fee (signature on a written document) AND that the fee is not for application assistance.

Q:We have spoken in the past. I have a question re: referral fees . Perhaps you could provide me some direction and input. XXX Group Inc has licensed agents, some with P & C license only, that refer us potential business. They refer to us individuals and groups for health insurance. We do the field underwriting, place the business with a carrier, perform service work and conduct the annual renewal. In essence we own the business. When business is written we pay the agents/individuals a fee/commission based upon an agreed percentage of the commission earned on an ongoing basis monthly. Is this arrangement permissible in PA?
Should I have some type letter of agreement or something else addressing this arrangement?

A: Here is my take on the question. Act 147 OF 2002 is the law governing insurance producers.
Section 647-A prohibits inducements but opens the door to referral fees "This section shall not prohibit payment or receipt of referral fees in accordance with this act." (page 35)
Section 673-A. Receipt of Commissions (page 43) "(B) A person may accept: ....
(2) A fee for referring persons to a licensee that are interested in purchasing insurance provided that they do not discuss specific terms and conditions of a contract of insurance, and, in the case of referrals for insurance that is primarily for personal, family or household use, they receive no more than a one-time nominal fee of a fixed dollar amount for each referral that does not depend on whether the referral results in a sale."
From these citations, I draw several conclusions. The referral fee for commercial business (group health) should be reasonable and must not be contingent on a sale. This referral fee must not be commission-splitting if the person referring has a P/C license and is referring health business with you. That person cannot receive commission from a product for which he/she is not licensed. If the referral is for an individual policy, the referral fee would be nominal, one-time and fixed dollar. (The drafters of this bill were thinking about referral fees to unlicensed bank tellers sending a customer to the annuity salesperson in the corner office when they wrote it but it does apply to all.
I hope this is helpful to you. I am not an attorney, but my view is to always have a written agreement in order to prevent any misunderstandings as to how the referral compensation works, perhaps incorporating language from Act 147.

Q:From an agent: A client is a free clinic which is also a certified application counselor. I have professional liability for them but they are saying that they no longer need it because of the Patient Protection Affordable Care Act. Is this true?

A: Yes and No. There is a provision within PPACA amending the Federal Tort Claims Act (FTCA) which grants volunteer free clinic professionals malpractice coverage to also include medical malpractice coverage for their boards, officers, employees and individual contractors. The purpose is to help the free clinics secure volunteers who otherwise would be reluctant to help out because of liability concerns (for example, retired doctors). The No part of the answer is what part of liability can come from non-medical activities being undertaken by the free clinic. For example, if a certified application counselor were to incorrectly advise someone that he/she was eligible to receive a tax subsidy in the exchange and the person successfully enrolled and received the subsidy, AND THEN it turned out that the person was not eligible and so the IRS goes after him/her to repay the subsidy, the person could sue the free clinic and the representative of the free clinic, the certified application counselor. Since that activity is not medical per se, there would probably be a need for professional liability and possibly a non-medical E&O policy. Another example would be an accusation that the nonprofit was misusing its donated funds or a wrongful discharge suit against the nonprofit, the Federal Tort Claims Act coverage would not respond; hence, the need to look at D&O, EPLI, and perhaps a general liability policy.

Q: Regarding PPACA and the first-dollar preventive care services...
If someone goes for a routine colonoscopy for a wellness check and polyps are found and removed, can the facility now bill this visit as an outpatient surgery which is subject to the deductible, or is it still treated as wellness and covered in full free of charge?

A: Yes. The US Department of Labor, HHS and the IRS issued a FAQ to that effect on February 20, 2013.
If a colonoscopy is scheduled and performed as a screening procedure pursuant to the USPSTF recommendation, is it permissible for a plan or issuer to impose cost-sharing for the cost of a polyp removal during the colonoscopy?
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 issuer 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 issuer 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: Who are the Navigators in PA?

A: There are five showing their respective grant amounts: Resources for Human Development ($953,176); PA Association of Community Health Centers ($694,380); PA Mental Health Consumers Association ($380,000); Mental Health America ($503,129); Cardon Healthcare Network, LLC DBA Cardon Outreach ($178,500)

May an employer under 50 FTE consider 40 hours as full time for purpose of providing health benefits versus the 30 hour threshold?


Businesses governed by the Fair Labor Standards Act (two or more employees, $500,000 in business) are required to provide notices to employees by October 1 about the exchanges. What is the penalty for noncompliance?

The May rule was silent on penalty but September 10, the Department of Labor issued a FAQ saying that there is no penalty.

Q: When will PA know who its Navigators are.

A: They were released August 15, 2013

Centers for Medicare & Medicaid Services
Room 352-G
200 Independence Avenue, SW Washington, DC 20201
FOR IMMEDIATE RELEASE Contact: CMS Media Relations
Thursday, August 15, 2013 (202) 690-6145 |
New resources available to help consumers navigate the Health Insurance Marketplace

HHS awards $67 million to Navigators and recognizes more than 100 organizations as Champions for Coverage Health and Human Services (HHS) Secretary Kathleen Sebelius today announced $67 million in grant awards to 105 Navigator grant applicants in Federally-facilitated and State Partnership Marketplaces. These Navigator grantees and their staff will serve as an in-person resource for Americans who want additional assistance in shopping for and enrolling in plans in the Health Insurance Marketplace beginning this fall. Also today, HHS recognized more than 100 national organizations and businesses who have volunteered to help Americans learn about the health care coverage available in the Marketplace. “Navigators will be among the many resources available to help consumers understand their coverage options in the Marketplace,” said Secretary Sebelius. “A network of volunteers on the ground in every state - health care providers, business leaders, faith leaders, commmunity groups, advocates, and local elected officials - can help sppread the word and encourage their neighbors to get enrolled.” Today’s announcement builds upon the significant progress in outreach and education made this summer. Consumers can learn about and enroll in coverage later this fall through HHS launched 24-hours-a-day consumer call center ready to answer questions in 150 languages. More than 1,200 community health centers across the country are preparing to help enroll uninsured Americans in coverage, and a partnership with the Institute of Museum and Library Services will help trusted local libraries be a resource for consumers who want information on their options. In addition, HHS has begun training other individuals who will be providing in-person assistance, such as agents and brokers and certified application counselors. Navigators are trained to provide unbiased information in a culturally competent manner to consumers about health insurance, the new Health Insurance Marketplaces, qualified health plans, and public programs including Medicaid and the Children’s Health Insurance Program. The Navigator funding opportunity announcement was open to eligible private and public groups and people who are self-employed who met certain standards to promote effectiveness, diversity, and program integrity.

Navigators will be required to adhere to strict security and privacy standards - including how to safeguard a consumer’s personal information. They’ll be required to complete 20-30 hours of training to be certified, will take additional training throughout the year, and will renew their certification yearly. All types of enrollment assisters - includingg in-person assistors, Certified Application Counselors, and agents and brokers - are required to coomplete specific training and are subject to federal criminal penalties for violations of privacy or fraud statutes, on top of any relevant state law penalties.

The growing list of Champions for Coverage is one more example of businesses and organizations across the nation pitching in to help consumers understand the coming options for quality, affordable coverage. Champions for Coverage, among others, include:

  • American Medical Association
  • League of United Latin American Citizens (LULAC)
  • National Baptist Convention
  • National Partnership for Women and Families

For a list of Navigator awardees or more information about Navigators and other in-person assisters, please visit: Site.

To learn more about organizations participating in Champions for Coverage: Click here.

To become a Champion of Coverage, visit: Site

Smoking and Rating Issues

Q: Does a company’s intent to continue grandfathered plan status affect how they treat smoker/non-smoker rates?


Q: If employers are required in 2014 under ACA to tell employees about smoking cessation plans, does that mean that they do not need to actually offer classes or pay for them, but simply let employees know what’s available?


Q: If an employee who smokes signs up for and completes a smoker’s cessation program, receives the non-smoking rate but continues to smoke, does he or she continue to receive the non-smoking rate?


Q: In doing the ‘affordability’ calculations (i.e. 9.5% limit of the cost of employee only coverage), can the employer use the lowest cost (i.e. non-tobacco user) rate, or do they have to use the higher cost (i.e. tobacco user) rate?


Q:It’s my understanding that the rules around the application of the smoker surcharge on the premium share will also be impacted by ACA. Can you further explain that as well?



Q:“Check on a regulation that says that if an employer group has 30% or less of their EEs, are they not afforded transition relief?

A:Yes per an IRS FAQs of December 28, 2012, a companion to the proposed IRS rules on Employer Shared Responsibility issued on the same date.

Transition Relief

18. I understand that the Employer Shared Responsibility provisions do not go into effect until 2014. However, the health plan that I offer to my employees runs on a fiscal plan year that starts in 2013 and will run into 2014. Do I need to make sure my plan complies with these new requirements in 2013 when the next fiscal plan year starts? For an employer that as of December 27, 2012, already offers health coverage through a plan that operates on a fiscal year (a fiscal year plan), transition relief is available. First, for any employees who are eligible to participate in the plan under its terms as of December 27, 2012 (whether or not they take the coverage), the employer will not be subject to a potential payment until the first day of the fiscal plan year starting in 2014. Second, if (a) the fiscal year plan (including any other fiscal year plans that have the same plan year) was offered to at least one third of the employer’s employees (full-time and part-time) at the most recent open season or (b) the fiscal year plan covered at least one quarter of the employer’s employees, then the employer also will not be subject to the Employer Shared Responsibility payment with respect to any of its full-time employees until the first day of the fiscal plan year starting in 2014, provided that those full-time employees are offered affordable coverage that provides minimum value no later than that first day. So, for example, if during the most recent open season preceding December 27, 2012, an employer offered coverage under a fiscal year plan with a plan year starting on July 1, 2013 to at least one third of its employees (meeting the threshold for the additional relief), the employer could avoid liability for a payment if, by July 1, 2014, it expanded the plan to offer coverage satisfying the Employer Shared Responsibility provisions to the full-time employees who had not been offered coverage. For purposes of determining whether the plan covers at least one quarter of the employer’s employees, an employer may look at any day between October 31, 2012 and December 27, 2012.

19. Is transition relief available to help employers that are close to the 50 full-time employee threshold determine their options for 2014? Yes. Rather than being required to use the full twelve months of 2013 to measure whether it has 50 full-time employees (or an equivalent number of part-time and full-time employees), an employer may measure using any six-consecutive-month period in 2013. So, for example, an employer could use the period from January 1, 2013, through June 30, 2013, and then have six months to analyze the results, determine whether it needs to offer a plan, and, if so, choose and establish a plan.

Women's Reproductive Issues

Q:Does PPACA allow for payment for abortion services?

A:No because other federal legislation as well as President Obama's March 24, 2010 Executive Order preclude it. There may however be a politically-charged loophole given Congress' action to allow staff to continue to receive Federal premium support if they enter the exchanges. Some say that is a possible subsidy of abortion services.