March 1, 2013 Deadline For Compliance With Health Insurance Exchange Notice Provisions Extended

 

The Employee Benefits Security Administration (EBSA) has announced that the notice requirement of Fair Labor Standards Act (FLSA) Sec. 18B will not take effect on March 1, 2013, as originally planned. In recently-released frequently asked questions (FAQ), the EBSA explained that Sec. 18B requires certain employers to provide each employee, upon hiring, with: (1) a written notice informing the employee of the existence of state exchanges, their services, and contact information; (2) a statement that, if the employer plan’s share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs, the employee may be eligible for a premium tax credit if he or she purchases a plan through a state exchange; and (3) advice that, upon the purchase of a plan through an exchange, the employee may lose any employer contribution to an offered health plan, as well as the opportunity to exclude that contribution from federal income tax. Current employees also were to be given the same notice no later than March 1, 2013.

The EBSA states that, until the necessary regulations and/or guidance are actually issued and become applicable, compliance with Sec. 18B is not necessary. Guidance may take the form of model, generic language that could be used to satisfy the notice requirement. The EBSA also is considering allowing employers to satisfy the notice requirement by providing employees information based on the employer coverage template found in the preamble of recently-issued proposed regulations. That template would be available for download at the relevant state exchange website.

Integrated HRAs. In the FAQ, the EBSA also details requirements for the compliance of health reimbursement arrangements (HRAs) with Public Health Service Act (PHSA) Sec. 2711, which, as added by the Patient Protection and Affordable Care Act (ACA), generally prohibits the imposition of lifetime or annual limits on the dollar value of essential health benefits by plans and issuers. The interim final regulations implementing Sec. 2711 contained, in the preamble, information on the application of Sec. 2711 to HRAs and other account-based arrangements. HRAs that are integrated with other coverage as part of a group health plan would not violate PHSA Sec. 2711, if the other coverage alone would be in compliance with that section.

The EBSA has clarified, however, that an employer-sponsored HRA cannot be integrated with either individual market coverage or an employer plan providing coverage through individual policies, for purposes of complying with PHSA Sec. 2711. An HRA used to purchase coverage on the individual market would not, therefore be considered to be integrated with that individual market coverage.

Among other advice, the EBSA also states in the new FAQ that it is anticipating that the following will be announced: regardless of whether or not an HRA is integrated with other group health plan coverage, any unused amounts either credited before Jan. 1, 2013, or credited in 2013 under the terms of an HRA as in effect on Jan. 1, 2013, may be used even after Dec. 31, 2013 to reimburse medical expenses without violating PHSA Sec. 2711. However, if the HRA terms as of Jan. 1, 2013 did not prescribe a set amount to be credited in 2013, or did not prescribe the timing of those amounts, any amounts may not be credited at a faster rate than that applied during 2012, nor may they exceed amounts credited for 2012.

Medicare Part D. For those employers that provide Medicare Part D coverage through Employer Group Waiver Plans (EGWPs), the EBSA also is stating that, for EGWPs that only provide coverage to retirees, non-Medicare supplemental drug benefits are exempt from the health coverage requirements of title XXVII of the PHSA, Part 7 of ERISA, and Chapter 100 of the Code. In response to the question of whether or not self-insured prescription drug coverage that supplements the standard Medicare Part D coverage through EGWPs must comply with those health coverage requirements, the EBSA has responded that, pending further guidance, it will not take any enforcement action against a group health plan that is an EGWP just because the non-Medicare supplemental drug benefit does not comply with the health coverage requirements of the above-listed provisions of the PHSA, ERISA, and the Code.

Warnings about “indemnity insurance.” Also exempt, as an excepted benefit, from the health coverage requirements of XXVII of the PHSA, Part 7 of ERISA, and Chapter 100 of the Code, is certain fixed indemnity coverage under a group health plan.

It has come to the EBSA’s attention that the number of health insurance policies labeled as fixed indemnity coverage has risen significantly. Therefore, the EBSA is reminding employers and practitioners that a fixed indemnity insurance policy under a group health plan provides excepted benefits only if all three of the following requirements are met:

• benefits must be provided under a separate policy, certificate, or contract of insurance;

• there must be no coordination between the provision and the exclusion of benefits under any group health plan maintained by the same plan sponsor; and

• benefits must be paid for an event without regard to whether or not any group health plan maintained by the same plan sponsor provides benefits with respect to that same event.

Also, to be considered to be fixed indemnity insurance, the insurance must pay a fixed dollar amount per day or other period of hospitalization or illness regardless of the expenses incurred.

The EBSA points out that situations have come up where a policy is advertised as fixed indemnity insurance, but it covers doctors’ visits at $50 per visit, hospitalization at $100 per day, various surgical procedures at different dollar rates per procedure, and/or prescription drugs at $15 per prescription. Since the doctors’ visits, surgery, and prescription drugs are not paid for on a per-period basis, but, instead, payment is determined based on the type of service performed, that policy would not constitute fixed indemnity insurance, and it would not meet the conditions for excepted benefits.

PCORI fee. Finally, a temporary annual fee, known as the PCORI fee, was imposed on sponsors of certain self-insured health plans by the ACA for plan years ending on or after Oct. 1, 2012 and before Oct. 1, 2019. For certain organizations (MEWAs, VEBAs, and plans established or maintained by two or more employers or jointly by one or more employers and one or more employee organizations,), the plan sponsor is the association, committee, joint board of trustees, or other similar groups of representatives who establish or maintain the plan.

The EBSA is advising that, for a multiemployer plan, the plan sponsor liable for the PCORI fee, who would generally be an independent joint board of trustees, would not be prohibited from paying the PCORI fee out of plan assets, since, as the EBSA points out, the board would have no source of funding independent of plan assets with which to pay it.

This is generally not the case, however, for other plan sponsors, such as a group of employers that exist for reasons other than to solely sponsor and administer a plan. Rarely, certain organizations, such as VEBAs that provide retiree-only health benefits where the sponsor is a trustee or board of trustees with no funding independent of plan assets, and existing solely to sponsor and administer the plan, could use plan assets to pay the PCORI fee.

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