Archive for September, 2011

Update on MSP Reporting Requirements for HRAs

September 29, 2011

Yesterday CMS published an alert notifying group health plans that it is changing the Medicare Secondary Payer  reporting requirements for HRAs by increasing the threshhold at which an HRA is required to participate in MSP reporting from $1,000 to $5,000.  HRA coverage that reflects a benefit of less than $5,000 per year (including any roll-over contributions from the previous year) will not be required to report MSP data effective with the start of the HRA’s first plan year on or after October 3, 2011.   While this is good news for HRA sponsors with lower threshholds, HRA sponsors should note that the reporting exemption does not mean that HRAs with annual benefits of less than $5,000 are exempt from the general MSP payment policies and it will not change the primary payer status of the HRA coverage. 

The alert also notifies HRAs required to participate in MSP reporting of a new reporting requirement.  A notice of termination must be submitted when an insured has exhausted his/her HRA balance and no additional funds will be added for the remainder of the coverage year.

A copy of the alert can be accessed at http://www.cms.gov/MandatoryInsRep/Downloads/HRACoverage.pdf

CCIIO Releases Risk Adjustment White Paper

September 27, 2011

The Center for Consumer Information and Insurance Oversight has released a white paper discussing various issues surrounding the Affordable Care Act’s risk adjustment program, one of the mechanisms created by the Act to help stabilize premiums in the  non-grandfathered individual and small group market (inside and outside the Exchanges) in 2014.  The white paper can be accessed at http://cciio.cms.gov/resources/files/riskadjustment_whitepaper_web.pdf  The program assesses charges on plans with lower than average health risk and transfers those funds to plans with higher than average health risk.   HHS is charged with developing a Federally-certified risk adjustment methodology that States may adopt.  States also have the ability to propose alternative methods to HHS for approval.  The CCIIO’s white paper outlines various choices available in developing a risk adjustment model, methods for calculating payments and charges, and permissible rating variations.  The white paper is a follow-up to proposed regulations issued by HHS in July.  Comments to the proposed rules can continue to be submitted until Wednesday, September 28, 2011 at http://www.regulations.gov/

CLASS Act Scrapped?

September 23, 2011

Not yet, but its future looks dim.  The Affordable Care Act created the CLASS Act, a national voluntary insurance program designed to help those who participate pay for community-based and long-term care services in the event they become functionally disabled.  It was intended to expand community-based services to allow individuals to remain in their  homes and provide working adults with an opportunity to plan for future long-term care needs.  There is wide-spread speculation that the program will not be implemented by the Obama Administration due to concerns over the program’s solvency.  This speculation increased yesterday when the actuary hired to run the CLASS program notified colleagues via email that HHS had decided to close the CLASS office.   While HHS denies that it is closing the CLASS office, it admits that whether the CLASS Act will be implemented is an “open question.” 

IRS Releases Safe Harbor Proposal for Employers

September 14, 2011

Yesterday the IRS released Notice 2011-73 outlining its proposed safe harbor for employers subject to the shared responsibility provisions of the Affordable Care Act and who will be penalized for not providing affordable, minimum essential coverage in 2014.  Because the determination of whether employer coverage is affordable is based on household income, a figure not known by employers, an employer may encounter practical difficulties in assessing whether the coverage they offer to employees is affordable.  To address this concern, the IRS  proposes creating a safe harbor providing that an employer who offers full-time employees the opportunity to enroll in minimum essential coverage will not be penalized if the required employee premium contribution for single coverage in the employer’s lowest cost plan does not exceed 9.5% of the employee’s W-2 wages, regardless of whether the employee receives a subsidy from the federal government based on the employee’s household income.  W-2 wages is defined by the safe harbor as the amount reported in Box 1 of Form W-2 which does not include amounts excluded from taxable income, such as medical premiums or 401(k) contributions.   The IRS will determine whether an employer actually meets the safe harbor at the end of each calendar year; however, the IRS expects that employers will use the safe harbor prospectively to set employee contribution levels.

The proposed safe harbor is unlikely to have a significant impact on whether an employer is actually penalized since in a majority of cases an employee’s household income will be greater than his/her reported W-2 wages.  The safe harbor will, however, protect an employer in circumstances where an employee’s household income is less than W-2 wages.  This can be the case if the employee has alimony deductions or deductions based on losses due to self-employment.   In addition, the impact of the proposed safe harbor on predicting prospectively whether employer coverage is affordable is diminished by the IRS’ definition of wages, which excludes pre-tax contributions to various employee benefit programs.  Because these contributions are typically determined after an employer has established its contribution rates and because employee contributions may change mid-year (for example 401(k) deferrals), it will still be  difficult for an employer to predict with certainty at the beginning of a plan year whether its coverage is affordable. 

The IRS intends to propose regulations incorporating the safe harbor but is seeking comments on its proposal until December 13, 2011.  A copy of the Notice can be accessed at http://www.irs.gov/pub/irs-drop/n-11-73.pdf


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