News and Events
5 Holiday Party Best Practices - December 2017
Workplace-sponsored holiday parties present a host of liabilities for organizations each year. Factors like choice of venue and employees’ religious affiliations can create friction even before alcohol is thrown into the mix. Below are some best practices for hosting a successful holiday party.
1. Update Your Employee Handbook
Prior to the event, make sure your employee handbook is up to date regarding applicable holiday party topics, including the following:
- Outlining anti-harassment policies
- Enforcing a dress code
- Forbidding alcohol consumption while conducting business
- Expressing consequences for inappropriate behavior, like overt drunkenness
2. Make it Optional
Generally, if a workplace function is mandatory, employees must be compensated for their time. Depending on the number of employees, enforcing and tracking attendance may be difficult. With this in mind, it can simply be easier to make the party optional.
3. Keep it Festive
There are many arguments concerning the appropriateness of observing one holiday over another. For instance, some workplaces may favor a “Christmas party” over a more inclusive celebration. However, focusing on the holiday spirit—and avoiding religious celebrations—can help avoid unwanted employee divisions or discrimination suits.
4. Control or Limit Alcohol
Many organizations offer alcohol at holiday parties, but that comes with additional risks.
Consider some of the following methods to help control employee consumption:
- Offer drink tickets (with a maximum limit)
- Charge for drinks
- Only offer lower-alcohol drinks, like beer, wine or hard cider
5. Designate a Monitor
If you decide to offer alcohol, make sure there is a company-designated person to flag inappropriate behavior and ensure everyone leaves the party safely.
IRS Issues New Guidance on Qualified Small Employer HRAs - November 2017
On Oct. 31, 2017, the Internal Revenue Service (IRS) issued Notice 2017-67 to provide comprehensive guidance on a variety of topics regarding qualified small employer health reimbursement arrangements (QSEHRAs). Small employers that do not maintain group health plans may establish QSEHRAs for their employees, effective for plan years beginning on or after Jan. 1, 2017. Unlike other health accounts, QSEHRAs can be used to reimburse employees for their health insurance premiums.
Notice 2017-67 clarifies the technical rules for QSEHRAs, including the requirements that employees provide proof of minimum essential coverage (MEC) and that employers provide a written notice to eligible employees each year.
Small employers with QSEHRAs should confirm that their QSEHRAs comply with this new guidance. Notice 2017-62 applies to plan years beginning on or after Nov. 20, 2017. In addition, employers may need to provide their initial written notice by Feb. 19, 2018.
Beginning Jan. 1, 2017, employers that are not applicable large employers under the Affordable Care Act and do not maintain group health plans may sponsor QSEHRAs to pay for employees’ individual health insurance policies and other out-of-pocket medical expenses on a tax-favored basis. To qualify as a QSEHRA, the reimbursement arrangement must meet the following criteria:
- The QSEHRA must be funded solely by the employer. Employees cannot make their own salary reduction contributions.
- QSEHRA payments or reimbursements must be limited to medical care expenses incurred by the employee or the employee’s family members, after the employee provides proof of coverage.
- The maximum amount of payments and reimbursements from the QSEHRA for any year cannot exceed $4,950 (or $10,000 for QSEHRAs that also reimburse medical expenses of the employee’s family members). These amounts are adjusted annually for inflation. For 2018, the total amount of payments and reimbursements from a QSEHRA cannot exceed $5,050 ($10,250 for family coverage).
- The QSEHRA must be provided on the same terms to all eligible employees.
IRS Guidance on QSEHRAs – Notice 2017-67
Notice 2017-67 provides detailed guidance on a wide range of topics for QSEHRAs, including the criteria for QSEHRAs, the tax consequences of the arrangement, the impact on eligibility for health savings account (HSA) contributions and the written notice requirement.
The guidance applies for plan years beginning on or after Nov. 20, 2017, although QSEHRAs established before that date may rely on this guidance. Also, employers that established QSEHRAs for 2017 in accordance with a reasonable good faith interpretation of the law may continue to operate their QSEHRAs based on those terms until the last day of the plan year that began in 2017.
An employer funding a QSEHRA for any year must provide a written notice to each eligible employee at least 90 days before the beginning of each year. For employees who become eligible to participate in the QSEHRA during the year, the notice must be provided by the date on which the employee becomes eligible to participate. If an employer fails to provide this notice for a reason other than reasonable cause, the employer may be subject to a penalty of $50 per employee for each failure, up to a maximum annual penalty of $2,500 for all notice failures during the year. On Feb. 27, 2017, the IRS delayed the initial notice deadline pending its issuance of further guidance.
Notice 2017-67 provides a new deadline for the initial QSEHRA notice, as well as sample language that employers may use.
Initial Notice Deadline – An eligible employer that provides a QSEHRA during 2017 or 2018 must provide the initial written notice to eligible employees by the later of (1) Feb. 19, 2018, or (2) 90 days before the first day of the QSEHRA’s plan year. According to the IRS, penalties may apply to any employer that does not timely provide the written notice.
Same Terms Requirement
Notice 2017-67 explains what it means for a QSEHRA to be provided on the same terms to all eligible employees. For example, to satisfy this requirement:
- The QSEHRA must be operated on a uniform and consistent basis for all eligible employees;
- Eligible employees cannot be allowed to waive coverage; and
- If an employer is part of a controlled group or affiliated service group (as determined under Internal Revenue Code Section 414), each employer in the group must provide a QSEHRA to all eligible employees on the same terms.
In addition, Notice 2017-67 confirms that a QSEHRA may be designed to limit reimbursements to certain medical expenses (for example, health insurance premiums or cost-sharing expenses that are medical expenses). However, a QSEHRA will fail to satisfy the same terms requirement if, under the facts and circumstances, the plan’s reimbursement limit causes the QSEHRA not to be effectively available to all eligible employees. This may occur, for example, if a QSEHRA limits reimbursements to Medicare or Medicare supplement policies.
Maximum Benefit and Reimbursements
QSEHRAs may use the statutory dollar limits in effect for the preceding year to determine permitted benefits, rather than the dollar limits in effect for the current year. IRS Notice 2017-67 also confirms that any carryovers of unused amounts from a prior plan year are taken into account when determining an employee’s maximum annual benefit. An employee’s total permitted benefit, taking into account both carry-over amounts and newly available amounts, may not exceed the applicable statutory dollar limit.
In addition, a QSEHRA may reimburse premiums for coverage under the group health plan of a spouse’s employer. However, the reimbursement is taxable to the extent that the spouse’s share of premiums was paid on a pre-tax basis.
Proof of Coverage
Before a QSEHRA can reimburse an expense for any plan year, the eligible employee must first provide proof that he or she had MEC for the month during which the expense was incurred. This proof must consist of either:
- A document from a third party (for example, the insurer) showing that the employee had coverage (for example, an insurance card or explanation of benefits) and an attestation by the employee that the coverage was MEC; or
- An attestation by the employee stating that the employee had MEC, the date the coverage began and the name of the coverage provider.
Notice 2017-67 includes model attestation language that employers may use. The initial proof of MEC must be provided with respect to each individual whose expenses are eligible for reimbursement before the first expense reimbursement. Following the initial proof, the employee must attest with each new request for reimbursement during the plan year that the employee and the individual whose expenses are being reimbursed (if different) continue to have MEC. This attestation can be part of the form for requesting reimbursement.
Employers that sponsor QSEHRAs must report the amount of payments and reimbursements that an eligible employee is entitled to receive from the QSEHRA for the calendar year in box 12 of the employee’s Form W-2 using code FF, without regard to the payments or reimbursements actually received. Notice 2017-67 provides detailed rules for this reporting.
In addition, Notice 2017-67 confirms that an employer providing a QSEHRA is not required to provide IRS Forms 1095-B (Section 6056 statements) to covered employees. However, a QSEHRA is subject to the Patient-Centered Outcomes Research Institute (PCORI) fee, which applies for plan years ending before Oct. 1, 2019.
Employers that sponsor QSEHRAs may contribute to employees’ HSAs and may allow employees to make pre-tax HSA contributions through a Section 125 plan.
Notice 2017-67 also addresses how QSEHRA coverage impacts an individual’s eligibility for HSA contributions. To be HSA-eligible, an individual must be covered by a high deductible health plan (HDHP) and not be covered by other health coverage that provides benefits below the HDHP minimum deductible. According to the IRS, if the QSEHRA only reimburses health insurance premiums, it will not cause an individual to be ineligible for HSA contributions. However, individuals who are covered by QSEHRAs that reimburse any medical expenses, including cost sharing, are not eligible for HSA contributions.
New Rules for Disability Benefit Claims May Be Delayed - October 2017
On Dec. 16, 2016, the Department of Labor (DOL) released a final rule to strengthen the claims and appeals requirements for plans that provide disability benefits and are subject to the Employee Retirement Income Security Act (ERISA). The final rule is currently scheduled to apply to claims that are filed on or after Jan. 1, 2018. However, on Oct. 12, 2017, the DOL proposed to delay the final rule for 90 days—until April 1, 2018.
According to the DOL, concerns have been raised that the final rule will impair workers’ access to disability benefits by driving up costs and increasing litigation. During the delay, the DOL will review the final rule to determine whether it is unnecessary, ineffective or imposes costs that exceed its benefits, consistent with President Donald Trump’s executive order on reducing regulatory burdens.
Sponsors of ERISA plans that include disability benefits should continue to monitor the status of the final rule. If the new requirements take effect, entities that administer disability claims will be required to provide new procedural protections to disability claimants.
Section 503 of ERISA requires every employee benefit plan to:
- Provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied, setting forth the specific reasons for the denial, written in a manner calculated to be understood by the participant; and
- Afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate named fiduciary of the decision denying the claim.
The DOL first adopted claims procedure regulations for employee benefit plans in 1977. In 2000, the DOL updated its claims procedure regulations by improving and strengthening the minimum requirements for employee benefit plans, including plans that provide disability benefits. Effective for plan years beginning on or after Sept. 23, 2010, the Affordable Care Act (ACA) amended ERISA to include enhanced internal claims and appeals requirements for group health plans.
Additional Protections for Disability Claimants
The final rule requires that plans, plan fiduciaries and insurance providers comply with additional procedural protections when dealing with disability benefit claimants. The final rule includes the following requirements for the processing of claims and appeals for disability benefits:
- Improvement to Basic Disclosure Requirements: Benefit denial notices must contain a more complete discussion of why the plan denied a claim and the standards used in making the decision.
- Right to Claim File and Internal Protocols: Benefit denial notices must include a statement that the claimant is entitled to receive, upon request, the entire claim file and other relevant documents. Benefit denial notices also have to include the internal rules, guidelines, protocols, standards or other similar criteria of the plan that were used in denying a claim or a statement that none were used.
- Right to Review and Respond to New Information Before Final Decision: The final rule prohibits plans from denying benefits on appeal based on new or additional evidence or rationales that were not included when the benefit was denied at the claims stage, unless the claimant is given notice and a fair opportunity to respond.
- Avoiding Conflicts of Interest: Plans must ensure that disability benefit claims and appeals are adjudicated in a manner designed to ensure the independence and impartiality of the persons involved in making the decision. For example, a claims adjudicator or medical or vocational expert could not be hired, promoted, terminated or compensated based on the likelihood of the person denying benefit claims.
- Deemed Exhaustion of Claims and Appeal Processes: If plans do not adhere to all claims processing rules, the claimant is deemed to have exhausted the administrative remedies available under the plan, unless the violation was the result of a minor error and other specified conditions are met. If the claimant is deemed to have exhausted the administrative remedies available under the plan, the claim or appeal is deemed denied on review without the exercise of discretion by a fiduciary and the claimant may immediately pursue his or her claim in court.
- Certain Coverage Rescissions Are Adverse Benefit Determinations Subject to the Claims Procedure Protections: Rescissions of coverage, including retroactive terminations due to alleged misrepresentation of fact (for example, errors in the application for coverage), must be treated as adverse benefit determinations that trigger the plan’s appeals procedures. Rescissions for nonpayment of premiums are not covered by this provision.
- Notices Written in a Culturally and Linguistically Appropriate Manner: Similar to the ACA standard for group health plan notices, the final rule requires that benefit denial notices be provided in a culturally and linguistically appropriate manner in certain situations.
On Oct. 10, 2017, the DOL issued a proposed rule that would delay the applicability of the final rule by 90 days—until April 1, 2018. According to the DOL, after the final rule was published, concerns were raised that its new requirements will impair workers’ access to these benefits by driving up costs.
The DOL concluded that, consistent with President Trump’s policy on alleviating unnecessary regulatory burdens, it is appropriate to give the public an additional opportunity to submit comments on the potential impact of the final rule. The DOL stated that it will review these comments as part of its effort to examine regulatory alternatives. Based on its review, the DOL may decide to allow all or part of the final rule to take effect as written, propose a further extension, withdraw the final rule or propose amendments to the final rule.
Medicare Part D Notices Are Due by Oct. 14, 2017 - September 2017
Each year, Medicare Part D requires group health plan sponsors to disclose to individuals who are eligible for Medicare Part D and to the Centers for Medicare and Medicaid Services (CMS) whether the health plan’s prescription drug coverage is creditable. Plan sponsors must provide the annual disclosure notice to Medicare-eligible individuals before Oct. 15, 2017—the start date of the annual enrollment period for Medicare Part D. CMS has provided model disclosure notices for employers to use.
This notice is important because Medicare beneficiaries who are not covered by creditable prescription drug coverage and who choose not to enroll in Medicare Part D when first eligible will likely pay higher premiums if they enroll at a later date. Thus, although there are no specific penalties associated with this notice requirement, failing to provide the notice may trigger adverse employee relations issues.
Employers should confirm whether their health plans’ prescription drug coverage is creditable or non-creditable and prepare to send their Medicare Part D disclosure notices by Oct. 14, 2017. To make the process easier, employers who send out open enrollment packets prior to Oct. 15 often include the Medicare Part D notices in these packets.
A group health plan’s prescription drug coverage is considered creditable if its actuarial value equals or exceeds the actuarial value of standard Medicare Part D prescription drug coverage. In general, this actuarial determination measures whether the expected amount of paid claims under the group health plan’s prescription drug coverage is at least as much as the expected amount of paid claims under the Medicare Part D prescription drug benefit. For plans that have multiple benefit options (for example, PPO, HDHP and HMO), the creditable coverage test must be applied separately for each benefit option.
CMS has provided two model notices for employers to use:
A Model Creditable Coverage Disclosure Notice for when the health plan’s prescription drug coverage is creditable; and
A Model Non-creditable Coverage Disclosure Notice for when the health plan’s prescription drug coverage is not creditable.
These model notices are also available in Spanish on CMS’ website.
Employers are not required to use the model notices from CMS. However, if the model language is not used, a plan sponsor’s notices must include certain information, including a disclosure about whether the plan’s coverage is creditable and explanations of the meaning of creditable coverage and why creditable coverage is important.
The creditable coverage disclosure notice must be provided to Medicare Part D-eligible individuals who are covered by, or who apply for, the health plan’s prescription drug coverage. An individual is eligible for Medicare Part D if he or she:
- Is entitled to Medicare Part A or is enrolled in Medicare Part B; and
- Lives in the service area of a Medicare Part D plan.
In general, an individual becomes entitled to Medicare Part A when he or she actually has Part A coverage, and not simply when he or she is first eligible. Medicare Part D-eligible individuals may include active employees, disabled employees, COBRA participants and retirees, as well as their covered spouses and dependents.
As a practical matter, group health plan sponsors often provide the creditable coverage disclosure notices to all plan participants.
Timing of Notices
At a minimum, creditable coverage disclosure notices must be provided at the following times:
- Prior to the Medicare Part D annual coordinated election period—beginning Oct. 15 through Dec. 7 of each year
- Prior to an individual’s initial enrollment period for Medicare Part D
- Prior to the effective date of coverage for any Medicare-eligible individual who joins the plan
- Whenever prescription drug coverage ends or changes so that it is no longer creditable or becomes creditable
- Upon a beneficiary’s request
If the creditable coverage disclosure notice is provided to all plan participants annually before Oct. 15 of each year, items (1) and (2) above will be satisfied. “Prior to,” as used above, means the individual must have been provided with the notice within the past 12 months. In addition to providing the notice each year before Oct. 15, plan sponsors should consider including the notice in plan enrollment materials provided to new hires.
Method of Delivering Notices
Plan sponsors have flexibility in how they must provide their creditable coverage disclosure notices. The disclosure notices can be provided separately, or if certain conditions are met, they can be provided with other plan participant materials, like annual open enrollment materials. The notices can also be sent electronically in some instances.
As a general rule, a single disclosure notice may be provided to the covered Medicare beneficiary and all of his or her Medicare Part Deligible dependents covered under the same plan. However, if it is known that any spouse or dependent who is eligible for Medicare Part D lives at a different address than where the participant materials were mailed, a separate notice must be provided to the Medicare-eligible spouse or dependent residing at a different address.
Creditable coverage disclosure notices may be sent electronically under certain circumstances. CMS has issued guidance indicating that health plan sponsors may use the electronic disclosure standards under Department of Labor (DOL) regulations in order to send the creditable coverage disclosure notices electronically. According to CMS, these regulations allow a plan sponsor to provide a creditable coverage disclosure notice electronically to plan participants who have the ability to access electronic documents at their regular place of work, if they have access to the sponsor's electronic information system on a daily basis as part of their work duties.
The DOL’s regulations for electronic delivery require that:
- The plan administrator use appropriate and reasonable means to ensure that the system for furnishing documents results in actual receipt of transmitted information;
- Notice is provided to each recipient, at the time the electronic document is furnished, of the significance of the document; and
- A paper version of the document is available on request.
Also, if a plan sponsor uses electronic delivery, the sponsor must inform the plan participant that the participant is responsible for providing a copy of the electronic disclosure to their Medicare-eligible dependents covered under the group health plan.
In addition, the guidance from CMS indicates that a plan sponsor may provide a disclosure notice electronically to retirees if the Medicare-eligible individual has indicated to the sponsor that he or she has adequate access to electronic information. According to CMS, before individuals agree to receive their information via electronic means, they must be informed of their right to obtain a paper version, how to withdraw their consent and update address information, and any hardware or software requirements to access and retain the creditable coverage disclosure notice.
If the individual consents to an electronic transfer of the notice, a valid email address must be provided to the plan sponsor and the consent from the individual must be submitted electronically to the plan sponsor. According to CMS, this ensures the individual’s ability to access the information as well as ensures that the system for furnishing these documents results in actual receipt. In addition to having the disclosure notice sent to the individual’s email address, the notice (except for personalized notices) must be posted on the plan sponsor’s website, if applicable, with a link on the sponsor’s home page to the disclosure notice.
Disclosure to CMS
Plan sponsors are also required to disclose to CMS whether their prescription drug coverage is creditable. The disclosure must be made to CMS on an annual basis, or upon any change that affects whether the coverage is creditable. At a minimum, the CMS creditable coverage disclosure notice must be provided at the following times:
- Within 60 days after the beginning date of the plan year for which the entity is providing the form;
- Within 30 days after the termination of the prescription drug plan; and
- Within 30 days after any change in the creditable coverage status of the prescription drug plan.
Plan sponsors are required to provide the disclosure notice to CMS through completion of the disclosure form on the CMS Creditable Coverage Disclosure webpage. This is the sole method for compliance with the CMS disclosure requirement, unless a specific exception applies.
HIPAA Nondiscrimination Rules - August 2017
The Health Insurance Portability and Accountability Act (HIPAA) prohibits group health plans and group health insurance issuers from discriminating against individuals with regard to eligibility, premiums or coverage based upon a health status-related factor.
In addition, the Affordable Care Act (ACA) made a number of important changes to the HIPAA nondiscrimination provisions. Many of these ACA changes became effective for plan years beginning on or after Jan. 1, 2014. However, some ACA changes, such as the prohibition on preexisting condition exclusions for enrollees under age 19, became effective in prior years.
While the HIPAA nondiscrimination rules are not new requirements for group health plans, employers should take the opportunity to regularly review their health plans to confirm they do not violate any of the provisions within the HIPAA nondiscrimination rules, as amended by the ACA.
Links And Resources
- The Department of Labor has a self-compliance tool that includes a checklist for compliance with HIPAA’s nondiscrimination rules.
Final regulations on HIPAA’s nondiscrimination rules for wellness programs.
Health Status-Related Factors
HIPAA identifies these as health status-related factors:
- Health status;
- Medical condition (both physical and mental illnesses);
- Claims experience;
- Receipt of health care;
- Medical history;
- Genetic information;
- Evidence of insurability; and
The ACA added the following broad, “catch all” category to the list of health status-related factors: any other health status-related factor determined appropriate by the Department of Health and Human Services (HHS).
Similarly Situated Individuals
The HIPAA nondiscrimination rules generally apply within a group of similarly situated individuals. As a general rule, employers that offer health insurance benefits to their employees may not treat individuals within a group of similarly situated individuals differently. However, certain individuals may be treated as distinct groups of similarly situated individuals for purposes of the HIPAA nondiscrimination rules.
For example, an employer may provide different health benefits for employees in different groups if the distinction between the groups is based upon a bona fide employment-based classification.
The following employment classifications may reflect bona fide business practices:
- Full-time versus part-time employees;
- Date of hire;
- Geographic location;
- Membership in a collective bargaining unit;
- Length of service; and
- Current versus former employees.
Discrimination in Eligibility
Employers and health insurance issuers may not discriminate with respect to eligibility between similarly situated employees based upon a health factor. Eligibility rules include those related to enrollment, the effective date of coverage and eligibility for benefit packages. Employers may not require an employee to pass a physical examination in order to be eligible to enroll in the health plan, even if the individual is a late enrollee, or exclude individuals from coverage because they participate in dangerous activities or have a history of high health claims.
Discrimination in Premiums
Employers may not charge an individual within a group of similarly situated individuals a different rate for coverage based upon that individual’s health factors. However, if an employer has a wellness program in place that complies with HIPAA’s requirements governing wellness plans, an employer may establish premium contribution rates that vary based upon an individual’s participation in the wellness program.
HIPAA does not prohibit a health insurance issuer from considering all relevant health factors of the applicants in order to establish aggregate rates for coverage provided under a group health plan. However, the issuer is required to blend the individual-by-individual rates into an overall group rate and provide a per participant rate to the employer. Employers may not charge an individual within a group of similarly situated individuals a different rate for coverage based upon that individual’s health factors.
A group health plan or issuer may include benefit limitations within their health plan so long as they apply uniformly to all similarly situated individuals under the health plan. For example, coverage may be denied for treatment that is not medically necessary. While limits or exclusions applicable to all similarly situated employees are permissible under the HIPAA nondiscrimination rules, employers and issuers must also determine whether the plan design violates laws such as the Americans with Disabilities Act (ADA) and the Pregnancy Discrimination Act.
In the event an employer or issuer implements a plan design change effective at the beginning of the plan year, it will not be considered to be directed at any one individual. However, a plan design change implemented in the middle of the plan year will be reviewed under a facts and circumstances test to determine if the changes were made in anticipation of a specific individual’s claim for treatment—which violates the HIPAA nondiscrimination rules.
PreExisting Condition Limitations and Exclusions
While HIPAA allowed the use of preexisting condition limitations and exclusions, it applied certain restrictions and required that the limitation or exclusion be applied uniformly to all similarly situated individuals. Effective for plan years beginning on or after Sept. 23, 2010, the ACA prohibited a plan or issuer from imposing preexisting condition exclusions for enrollees under age 19. Effective for plan years beginning on or after Jan. 1, 2014, preexisting condition exclusions for all enrollees are prohibited.
An employer or issuer may not delay enrollment in the health plan until an employee is actively at work, unless individuals who are absent from work due to any health factor are treated, for purposes of health coverage, as if they are actively at work.
Non-confinement clauses are most often used to allocate responsibility for coverage of individuals that are confined to a hospital at the time an employer moves its coverage from one issuer to another. A plan or issuer may not deny coverage or delay an individual’s effective date for coverage because the individual is confined to a hospital.
Final regulations under HIPAA address the interaction between HIPAA and state laws that require the prior carrier to continue to cover expenses incurred as a result of a confinement which began while the prior carrier insured the confined individual. The application of these state laws allows an issuer to delay coverage to an individual who is confined because state law requires the prior issuer to continue to pay claims related to that confined individual until the confinement ends. The final regulations make it clear that an issuer, regardless of state law, must make an individual’s coverage effective even when that individual is confined to a hospital. The regulations indicate that the state laws be used as a coordination of benefits provision, but confirm that an individual’s effective date under the new issuer’s health plan cannot be delayed due to confinement.
Source of Injury Restrictions
An employer may not charge an employee a higher premium or deny enrollment in the health plan based upon an employee’s participation in a dangerous or hazardous activity (for example, skydiving or bungee jumping). However, the health plan may exclude coverage for treatment of injuries related to the participation in these activities.
A health plan may not exclude benefits because they are related to an act of domestic violence or a medical condition. For example, a health plan may not exclude coverage for treatment of self-inflicted injuries sustained in connection with an attempted suicide if the injuries were also caused by a medical condition such as depression. The final HIPAA regulations clarify that benefits may not be denied for injuries resulting from a medical condition even if the medical condition was not diagnosed before the injury.
More Favorable Treatment of Individuals
Employers and issuers are not prohibited from establishing more favorable rules for eligibility for individuals with an adverse health factor, such as a disability, than for individuals without an adverse health factor. The following example demonstrates an acceptable and common plan provision that treats individuals with a health factor more favorably.
Example: An employer offers a health plan that provides benefits for eligible employees, their spouses and dependents. Dependents are eligible for coverage until they reach age 26. However, dependent children who are disabled are eligible for coverage beyond the age of 26.
Health Reimbursement Arrangements
Health reimbursement arrangements (HRAs) are tax-favored accounts intended to reimburse employees for medical expenses not otherwise covered by the health plan. Unused funds within an HRA may be carried over from year to year. The final regulations address whether HRAs with a carry-over feature violate the HIPAA nondiscrimination rules by including the following example.
Example: An employer sponsors a group health plan that is available to all current employees. Under the plan, the medical care expenses of each employee (and the employee’s dependents) are reimbursed up to an annual maximum amount. The maximum reimbursement amount with respect to an employee for a year is $1500 multiplied by the number of years the employee has participated in the plan, reduced by the total reimbursements for prior years.
This example clarifies that even though unused employer-provided medical care reimbursement amounts carried forward from year to year varies among employees within the same group of similarly situated individuals based upon prior claims experience, the HRA does not violate the HIPAA nondiscrimination rules. Employees who have participated in the plan for the same length of time are eligible for the same total benefit over that length of time and the restriction on the maximum reimbursement amount is not directed at any individual participants or beneficiaries based on any health factor.
The Genetic Information Nondiscrimination Act of 2008 (GINA) included provisions related to genetic information that affect the HIPAA nondiscrimination rules. Genetic information is defined as information about genetic tests of an individual or the individual’s family members, information about the manifestation of a family member’s disease or disorder and an individual’s request for or receipt of genetic services. Genetic information also includes information about the fetus of a pregnant individual or family member or embryo in the case of assisted reproductive technology.
Specifically, GINA prohibits a group health plan from:
- Adjusting premiums or contribution amounts based on genetic information;
- Requesting or requiring an individual or an individual’s family member to undergo a genetic test (this does not apply to health care providers);
- Requesting, requiring or purchasing genetic information prior to or in connection with enrollment in the plan; or
- Using genetic information for underwriting purposes.
However, group health plans may use the results of genetic tests for payment purposes as defined by the HIPAA Privacy Rules, as long as the minimum amount of information necessary is used. Also group health plans may request genetic information for research purposes if all applicable requirements are met.
The final HIPAA regulations provided guidance on when wellness programs comply with the HIPAA nondiscrimination rules. The ACA codified the HIPAA rules for nondiscriminatory wellness plans, while also increasing the maximum permissible reward that can be offered under health-contingent wellness programs. Effective in 2014, the wellness program incentive limit increased to 30 percent of the premium (50 percent for wellness programs designed to prevent or reduce tobacco use).
On June 6, 2013, final regulations were issued on the ACA’s nondiscrimination requirements for wellness plans. These rules became effective for plan years beginning on or after Jan. 1, 2014 and apply to both grandfathered and non-grandfathered plans. While the final regulations generally retain the HIPAA rules’ nondiscrimination requirements for health-contingent wellness programs, there are some important differences that may require changes to the design and operation of wellness plans.
New Fiduciary Rule Takes Effect for HSAs - July 2017
In April 2016, the Department of Labor (DOL) released a final rule that expands who is considered a “fiduciary” when providing investment advice to retirement plans and their participants. The final rule’s guidance also applies to individual retirement accounts (IRAs) and health savings accounts (HSAs). After being delayed, the final rule became effective on June 9, 2017.
Under the rule, a person is a fiduciary if the person receives compensation for providing investment advice with the understanding that it is based on the particular needs of the person being advised or that it is directed at a specific plan sponsor, plan participant or account owner. Fiduciary status is significant because fiduciaries are required to act in their clients’ best interests and may be held personally liable in the event of a fiduciary breach.
Individuals who provide advice on HSAs may be considered fiduciaries if their communications rise to the level of investment recommendations covered by the final rule. Employers should review their arrangements with HSA service providers to determine if the providers will qualify as fiduciaries under the new rule. Advisors should also review their business practices in light of the final rule’s expanded definition and make any necessary modifications.
The Employee Retirement Income Security Act (ERISA) and the federal Internal Revenue Code (Code) impose standards of conduct on individuals who manage an employee benefit plan and its assets, who are called fiduciaries. For example, fiduciaries are required to act prudently and solely in the interest of plan participants and beneficiaries. Fiduciaries can be held personally liable for losses when there is a fiduciary breach of duty. In addition, certain transactions are prohibited in order to prevent dealings with parties who may be in a position to exercise improper influence over the plan.
Under ERISA and the Code, people who give investment advice for a fee are considered fiduciaries, regardless of whether that fee is paid directly by the customer or by a third party.
According to the DOL, the final rule compels more investment advisors to put their clients’ best interests first by requiring them to comply with federal fiduciary standards and the prohibited transaction rules. It also distinguishes activities that are not investment advice, like education. In addition, the final rule includes certain exemptions from the prohibited transaction rules, including a best interest contract (BIC) exemption that allows common types of compensation to be paid if the terms of the exemption are satisfied.
The final rule’s expanded definition of fiduciary originally was set to take effect on April 10, 2017. However, this effective date was delayed by 60 days—until June 9, 2017—in response to a memorandum issued by President Donald Trump that directed the DOL to re-examine the final rule and consider whether it should be revised or rescinded. Although the final rule became effective on June 9, 2017, the DOL has indicated that the rule’s requirements may not align with President Trump’s deregulation goals and that changes may be proposed in the future. On June 29, 2017, the DOL issued a request for comments in connection with its continued examination of the final fiduciary rule.
Other provisions of the final fiduciary rule related to prohibited transaction exemptions for investment advisors are scheduled to take effect on Jan. 1, 2018. Until this time, HSA investment advisors that rely on the BIC exemption will only be required to comply with the exemption’s impartial conduct standards.
Covered Employee Benefits
In addition to ERISA plans and IRAs, the final rule covers HSAs, Archer medical savings accounts, Coverdell Education Savings Accounts and ERISA-covered 403(b) plans. While acknowledging that HSAs generally hold fewer assets and may exist for shorter durations than IRAs, the DOL determined that HSA owners are entitled to receive the same protections from conflicted investment advice as IRA owners. The DOL also recognized that HSAs may have associated investment accounts that can be used as long-term savings accounts for retiree health care expenses.
In addition, the DOL clarified that the final rule does not apply to recommendations to welfare plans (such as health plans, disability plans or term life insurance) where they do not contain an investment component.
Under the final rule, a person is a fiduciary if the person receives compensation for providing investment advice with the understanding that it is based on the particular needs of the person being advised or that it is directed to a specific plan sponsor, plan participant or account owner.
Investment advice includes:
* Investment recommendations, which means advice on buying, holding, selling, or exchanging securities or other investment property, or advice on investing securities or other property after a rollover or distribution from a plan.
* Investment management recommendations, which means advice on investment policies or strategies, portfolio compensation, selection of others to provide investment advice or investment management services, selection of investment account arrangements (for example, brokerage versus advisory), or recommendations with respect to rollovers, transfers or distributions from a plan or IRA.
Also, to become a fiduciary, the person providing the investment advice must:
- Represent or acknowledge that he or she is acting as a fiduciary under ERISA or the Code;
- Provide investment advice pursuant to a written or verbal agreement, arrangement or understanding that the advice is based on the particular needs of the advice recipient; or
- Direct investment advice regarding the advisability of a particular investment or management decision to a specific recipient(s).
In the final rule, the DOL clarifies that some common communications do not meet the definition of “recommendation,” and, thus, do not constitute fiduciary investment advice.
A plan sponsor, service provider or others can provide investment educational information without becoming a fiduciary.
General communications that a reasonable person would not view as an investment recommendation, such as general circulation newsletters, remarks or presentations in widely attended speeches and conferences or general marketing materials, are not investment advice.
Service providers or third-party administrators that offer a “platform” or selection of investment alternatives for a defined contribution retirement plan (for example, a 401(k) plan) without regard to the individualized needs of the plan, its participants or beneficiaries are not providing investment advice.
The final rule explains that a plan sponsor’s employee does not become a fiduciary by providing advice to a plan fiduciary or to another employee, provided the person receives no fee or other compensation, direct or indirect, in connection with the advice beyond the employee’s normal compensation for work performed for the employer.
This exclusion also covers communications between employees, such as human resources department staff who communicate to other employees about the plan and its distribution options, as long as they meet certain conditions (that is, they are not registered or licensed advisors under securities or insurance laws and only receive their normal compensation for work performed for the employer).
The DOL’s final rule also includes some broad exemptions that are intended to provide fiduciary advisors with flexibility to continue many common fee and compensation practices, as long as certain protections are in place to ensure that their advice is in their clients’ best interest.
The DOL’s webpage on the final rule includes links to the final rule and related prohibited transaction exemptions. It also includes links to frequently asked questions on the final rule and fact sheets that describe the final rule’s requirements.
OSHA Signals Intention to Delay Electronic Reporting - June 2017
The Occupational Safety and Health Administration’s (OSHA) electronic reporting rule requires certain establishments to report information electronically from their OSHA Forms 300, 300A and 301. The rule also requires OSHA to create a website that can be used to submit the required information. Under the rule, the first reports are due by July 1, 2017.
However, on a recent update to its recordkeeping webpage, OSHA indicated it will not be ready to receive electronic workplace injury and illness reports by the established deadline. No new reporting deadline has been adopted yet.
OSHA has not officially delayed the July 1, 2017, deadline, but its website will not be ready to receive electronic reports from employers by this time.
Affected establishments should continue to record and report workplace injuries as required by law and should monitor these developments to learn whether a new reporting deadline will be adopted.
Strategic Benefit Planning - May 2017
Competitive employee benefits packages are essential for attracting and retaining quality employees, but continuing to offer them can be tough with the rising cost of health care squeezing an already tight budget. Cutting benefits may seem like a necessary reality for some companies, but could have serious long-term consequences.
Retaining employees throughout these rocky economic times is vital so that your company remains competitive and positioned favorably in its industry when the economy rebounds. One remedy could be implementing a strategic benefit plan, which will help you find ways to contain or even cut costs while still offering competitive benefits.
What is a strategic benefit plan?
A strategic benefit plan is a three-to-five-year plan crafted by you and your CMR Risk & Insurance Services, Inc. representative that outlines goals, strategies and action plans in regards to your employee benefits program. In creating the plan, you and your broker will strategically analyze ways to contain costs through various plan improvements. This approach is a methodical and logical long-term approach to benefit planning, as opposed to making decisions year to year, and will provide a thought-out road map for your future benefits.
What are the benefits of implementing one?
At the company level, creating a strategic benefit plan will help greatly with internal budget planning and can also be incorporated into your corporate strategic plan. This will bring HR and employee benefits into larger strategic conversations and ensure that a competitive benefits package continues to be available.
Employees will also see the benefit from a strategic benefit plan in many ways. First of all, by finding ways to cut and contain costs for the company, the employee will likely reap some of the savings as well. In addition, this type of plan will provide assurance for employees worried about their benefits. Next to job security, employees worry most about their benefits and compensation, namely that they could be reduced or cut at any time.
Studies have shown that workplace morale is strongly linked to the quality of employee benefits, so reassuring employees that their benefits will continue is a beneficial move for companies. The strategic benefits plan can include an employee communication initiative, which will keep employees informed and assured on the future status of their benefits package.
Facts About the Flu - April 2017
The flu is an infection of the respiratory tract caused by the influenza virus. It usually causes mild to severe illness, but sometimes it can cause fatal complications.
A person who has the flu often feels some or all of these symptoms:
- Fever and/or chills
- Cough and/or sore throat
- Nasal congestion
- Muscle or body aches
- Stomach ailments such as nausea, vomiting and diarrhea (more common in children than adults)
How the Flu is Spread
The flu spreads primarily when someone coughs, sneezes or talks, allowing the virus to become airborne and then infect other people. It can also spread if a healthy individual touches a surface that was previously touched by an infected person, and then the healthy individual touches his or her own mouth, eyes or nose. People are typically contagious from the day before symptoms start until seven days after symptoms appear.
The timing of the flu virus is very unpredictable and can vary from season to season. Flu activity most commonly peaks in the United States between December and February; however, seasonal flu activity can begin as early as October and continue as late as May.
If You Get the Flu
If you contract the flu, it is important to take good care of yourself. The Centers for Disease Control and Prevention (CDC) recommends the following:
- Stay home from work! It’s your best chance for recovery, and you will avoid spreading the disease to others.
- Get sufficient sleep.
- Drink plenty of fluids.
- Take over-the-counter (OTC) medications appropriate for your symptoms.
- Most people do not need medical care, but consult your doctor if you are concerned. Also, seek immediate medical attention if you have any of the warning signs discussed on the next page.
Serious complications can arise from the flu, including bacterial pneumonia, ear infections, sinus infections, dehydration and worsening of chronic medical conditions. This is why it is crucial to prevent contracting the virus in the first place.
These simple steps should be taken in order to avoid the flu:
- Get a yearly flu vaccine. It is the most important step in protecting against the virus. Flu vaccines are needed on a yearly basis because the body’s immune response to a vaccination declines over time and because flu viruses are constantly mutating.
- Take preventive actions. Cover your mouth when you sneeze or cough. Try to avoid close contact with sick people and avoid touching your eyes, nose and mouth. Wash your hands often or use alcohol-based hand sanitizer.
- Take antiviral drugs if your doctor recommends them. These are prescription drugs that fight the flu by keeping the viruses from reproducing in your body.
- Maintain a healthy immune system by eating healthy food, exercising, getting adequate sleep, controlling your stress level and avoiding smoking.
Occasionally, the flu can cause serious medical complications. It is important to seek immediate medical treatment if someone with the flu displays any of these signs.
In children, emergency warning signs include:
- Fast breathing (or difficulty breathing)
- Bluish skin color
- Not drinking enough fluids
- Not waking up or interacting with people
- Being so irritable the child does not want to be touched
- Flu-like symptoms improve, but then return with a fever and a worse cough
- Fever with a rash
In adults, emergency warning signs are:
- Difficulty breathing or shortness of breath
- Pain or pressure in the chest or abdomen
- Sudden dizziness
- Severe or persistent vomiting
- Flu-like symptoms that improve, but then return with a fever and a worse cough
The CDC recommends yearly flu shots for all individuals over six months of age. Vaccination is especially important for people who are at high risk for serious flu complications, such as young children, pregnant women, people with chronic medical conditions and people 65 years and older. While there are many different flu viruses, the seasonal flu vaccine is designed to protect against the main flu viruses that research suggests will cause the greatest spread of illness during the upcoming flu season; however, it is still possible to become ill from a strain of influenza not included in the vaccine. Even so, antibodies from a vaccination of one flu virus can sometimes provide protection against different but related viruses, and all recipients of a flu vaccine will be protected from the two main A-strains of flu, which are generally considered the most dangerous.
There are several flu vaccine options, which will greatly expand flu shot choices for people who would otherwise be ineligible to receive a vaccination. The offerings include a four-strain vaccine and nasal spray; a high-dose three-strain flu shot; two egg-free versions; and a shot that does not go beneath the skin.
All vaccines protect against both Type A strains of influenza (H1N1 and H3N2), as well as a Type B strain. The four-strain, or quadrivalent, vaccine protects against both strains of Type B as well as the Type A strains. It has been difficult in the past to predict which B strain would become dominant in a given season, so the quadrivalent vaccine protects against both.
Additionally, a high-dose flu shot containing four times the usual dosage is offered to older adults and other people with weakened immune systems as a way of boosting their bodies’ responses to the virus.
Finally, people with an aversion to needles can choose to receive a “microneedle” version of the vaccine that is applied to the skin instead of the arm muscle.
Different flu shots are approved for people of different ages; there are even flu shots that are approved for use in people as young as six months of age. For many vaccine recipients, more than one type or brand of vaccine may be appropriate. Where more than one type of vaccine is appropriate and available, no preferential recommendation is made by the CDC for use of any influenza vaccine product over another. If you have questions about which vaccine is best for you, talk to your doctor or another health care provider.
Contrary to popular belief, you cannot contract the flu from the flu vaccine—but sometimes side effects mimic those of the flu, such as a headache, low fever and/or nasal congestion. However, these will only persist for a maximum of 24 hours.
These people should NOT get a flu vaccine without first consulting their physician:
- Those who have had a severe reaction or have developed Guillain-Barre syndrome within six weeks of getting an influenza vaccination; and
- Children under six months of age.
Benefit Plans: Tax Considerations - March 2017
Employee benefits can be complex to administer, particularly in terms of taxation. It is important to understand the tax implications for both the employer and employee. This article will explain the general considerations related to the taxation of employee benefits.
Employer Tax Implications
Employers can usually deduct amounts that they spend on employee benefits as a trade or business expense when filing taxes. In order to be deductible as a trade or business expense, the expense must meet the following criteria:
- It is an ordinary and necessary expense of the employer’s trade or business.
- The IRS defines “ordinary” as common and accepted in your trade or business. A “necessary” expense is one that is helpful and appropriate for your business; it need not be indispensable to be considered necessary.
- The expense must be paid or incurred during the tax year in which it is deducted.
- This depends on whether your company uses a cash method or accrual method of accounting. If using a cash method, the expense is deductible in the year it is paid. If accrual method is used, the expense is deductible in the year it is incurred.
- The expense must be connected with the trade or business conducted by the taxpayer (employer).
- This requirement simply differentiates a business with a primary purpose of achieving income or profit from a sporadic hobby or activity that happens to make money.
It is also important to remember for noncash benefits that the employer may deduct only the cost of the benefit (though the value of the benefit must be included in the employee’s gross income).
Employee Tax Implications
The employer is also responsible for determining if various benefits should be included in the employees’ gross income for tax purposes. Generally, a benefit must be included in the employee’s taxable income unless specifically excluded by the IRS. Many employee benefits are expressly excluded from gross income by the IRS, including health insurance, life insurance (up to a limit), education assistance, flexible spending accounts, child care expenses, legal assistance and more. Visit www.irs.gov for a complete list. In addition, some benefits are tax-deferred until the employee receives the benefit, such as qualified retirement benefits.
For benefits that are taxable, you must answer the following questions to determine the appropriate tax treatment of that particular benefit:
- Who is subject to the tax? Even if the benefit applies to someone else (like educational expenses for a child or a benefit for a spouse), the employee is generally the one who should be taxed.
- When is the benefit taxable? Generally, the benefit counts as income when the benefit is actually received. One exception is the “constructive receipt” of a benefit (when the employee is legally entitled to a benefit, even if it is not in his or her possession). One example is funds in an account that are available to the employee at any time; these would be taxed once they become available, even if the employee hasn’t spent them.
- How much of the benefit is taxed? For noncash benefits, the value of the benefit is more important than the actual cost to the employer. The value of a benefit is determined by the “fair market value,” not including any amount that the employee had to contribute or any amount specifically excluded by a provision of the law. Fair market value is the amount a hypothetical person would pay an objective third-party for that particular benefit.
Benefits that are not included in taxable income are also likely excludable from Social Security, Medicare and unemployment insurance taxes. The employer, however, does need to consider any special rules, such as nondiscrimination rules, to be met for certain employees. Also, some benefits only allow a certain portion to be non-taxable; the employer should be aware of any limits.
How Repealing the ACA could affect Employer Sponsored Health Plans - February 2017
Since the Affordable Care Act (ACA) was enacted in 2010, employers and health insurance issuers have had to make numerous changes to employer-sponsored group health plans offered to employees. If the ACA is repealed, many plan terms may no longer be required. These changes may be beneficial for employers, but could be confusing or, in some cases, unwelcome for employees.
The ultimate impact of repealing the ACA will depend on the specific details of the repeal, and any replacement, that is enacted. While steps have been made toward repeal, it is unclear what impact those steps may have or what an ACA replacement will look like.
The initial steps, including an executive order issued by President Donald Trump, have no immediate impact on the ACA. No ACA provisions or requirements have been eliminated or delayed at this time. However, employers should be aware of potential changes to their plans if the ACA is repealed.
Impact on Employer-sponsored Plans
Listed below are a number of ACA provisions that have a significant impact on employer-sponsored group health plans. Additional requirements apply to plans in the small group market, such as premium rating restrictions and the requirement to offer an essential health benefits package. Although it is unclear which, if any, of these provisions will be affected in the future (and to what degree), it is helpful for employers to be aware of the potential impact on their employer-sponsored coverage.
Prohibition on Lifetime and Annual Limits
The ACA prohibits health plans from imposing lifetime and annual limits on the dollar value of essential health benefits. “Essential health benefits” are a core set of items and services intended to reflect the scope of benefits covered by a typical employer. The ACA’s lifetime and annual limit restrictions ensure that coverage for essential health benefits may not be cut off once an enrollee reaches a certain dollar amount for a year or over his or her lifetime. However, plans may impose annual limits on specific covered benefits that are not essential health benefits.
Out-of-pocket Maximum Limit
Under the ACA, non-grandfathered group health plans are subject to an annual limit on total enrollee cost-sharing for essential health benefits, known as an out-of-pocket maximum. For the 2017 plan year, out-of-pocket expenses may not exceed $7,150 for self-only coverage and $14,300 for family coverage. Once an enrollee reaches the out-of-pocket maximum for the year, he or she is not responsible for additional cost-sharing for essential health benefits for the remainder of the year.
Waiting Period Limit
The ACA prohibits group health plans and group health insurance issuers from applying any waiting period that exceeds 90 days. A “waiting period” is the period of time that must pass before coverage for an employee or dependent who is otherwise eligible to enroll in the plan becomes effective. This waiting period limit does not require an employer to offer coverage to any particular employee or class of employees, including part-time employees. It only prevents an otherwise eligible employee (or dependent) from having to wait more than 90 days before coverage under a group health plan becomes effective.
Prohibition on Pre-existing Condition Exclusions
Under the ACA, group health plans and health insurance issuers may not impose pre-existing condition exclusions on any covered individual, regardless of the individual’s age. A pre-existing condition exclusion is a limitation or exclusion of benefits related to a condition based on the fact that the condition was present before the individual’s date of enrollment in the employer’s plan. The prohibition on pre-existing condition exclusions is particularly helpful for individuals who lose employer-sponsored coverage (for example, due to a job loss or change), to ensure that coverage cannot be denied for an existing health condition once the individual enrolls in a new health plan.
Dependent Coverage to Age 26
The ACA requires group health plans and health insurance issuers that provide dependent coverage to children on their parents’ plans to make coverage available until the adult child reaches age 26. This provision does not require plans and issuers to offer dependent coverage at all. It only requires plans that otherwise offer dependent coverage to make that coverage available until the adult child reaches age 26. This requirement is intended to ensure that young adults have health insurance coverage until they can transition to their own health plan.
Preventive Care Coverage Requirement
The ACA requires non-grandfathered health plans to cover certain preventive health services (including additional preventive health services for women) without imposing cost-sharing requirements for the services. In general, this means that plans are required to cover services such as immunizations, annual checkups, and regular health and cancer screenings without charging a copayment or applying an annual deductible. For women, the ACA also requires coverage of additional services, such as well-women visits and contraceptives.
Prohibition on Rescissions
The ACA prohibits group health plans and health insurance issuers from rescinding coverage for covered individuals, except in the case of fraud or intentional misrepresentation of a material fact. A “rescission” is a cancellation or discontinuance of coverage that has a retroactive effect (such as one that treats a policy as void from the time of enrollment). When a coverage rescission occurs, the insurance company is no longer responsible for medical care claims that they had previously accepted and paid.
The ACA imposes the following three “patient protection” requirements on group health plans related to the choice of a health care professional and requirements relating to benefits for emergency services:
- Plans and issuers that require designation of a participating primary care provider must permit each participant, beneficiary and enrollee to designate any available participating primary care provider (including a pediatrician for children).
- Plans and issuers that provide obstetrical/gynecological (OB/GYN) care and require a designation of a participating primary care provider may not require preauthorization or referral for OB/GYN care.
- Plans and issuers that provide hospital emergency room benefits must provide those benefits without requiring prior authorization, and without regard to whether the provider is an in-network provider.
The Process for Repeal
The steps that have already been taken to begin the process of repealing the ACA include a budget resolution and an executive order. However, there are certain legal and practical limitations on what can be accomplished through budget reconciliation and executive orders.
Budget Reconciliation Process
On Jan. 13, 2017, the U.S. Congress passed a budget resolution for fiscal year 2017 that will be used to draft legislation to repeal certain ACA provisions. This budget resolution is a nonbinding spending blueprint that is used to create federal budget legislation through a process called “reconciliation.” House and Senate committees targeted Jan. 27, 2017, to draft a budget reconciliation bill following the budget resolution, but recognized that the process will likely take longer. Once drafted, a reconciliation bill can be passed by both houses with a simple majority vote.
However, a full repeal of the ACA cannot be accomplished through the budget reconciliation process. A budget reconciliation bill can only address ACA provisions that directly relate to budgetary issues—specifically, federal spending and taxation. A full ACA repeal must be introduced as a separate bill that would require 60 votes in the Senate to pass.
On Jan. 20, 2017, President Trump signed an executive order directing federal agencies to waive, delay or grant exemptions from ACA requirements that may impose a financial burden. The executive order on the ACA is a broad policy directive that gives federal agencies authority to eliminate or fail to enforce any number of ACA requirements, as permitted by law. It does not include specific guidance regarding any particular ACA requirement or provision, and does not change any existing regulations. An executive order cannot, itself, repeal the ACA or any ACA provisions.
Until the new heads of federal agencies are in place, it is difficult to know how the ACA will be impacted. As a result, the executive order’s specific impact will remain largely unclear until the new administration is fully in place and can begin implementing these changes. In any case, the immediate impact of the executive order will likely be small, since it will take time to implement policies, regulations and other subregulatory guidance to carry out the directives. In addition, health insurance policies for 2017 are already in place, and state law, in many cases, prohibits significant changes from being made midyear.