Trending ACA topics are focus of ALI-CLE webcast

Speakers at a recent ALI-CLE webcast on the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) pointed to an assortment of ACA topics that are expected to be important in the coming year. Speakers Alden J. Bianchi (Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.) and Micheal Collins (Gibson, Dunn & Crutcher LLP) first reminded audience members of some basics regarding Code Sec. 4980I’s excise tax on high cost health plans, aka the “Cadillac Tax.”

Cadillac tax. This 40% excise tax is imposed on the portion of a health plan’s aggregate cost of “applicable coverage” that is in excess of a statutory dollar limit. Employers should keep in mind that this includes health flexible spending accounts (health FSAs), health savings accounts (HSAs), Archer medical savings accounts (Archer MSAs), governmental plans, multiemployer plans, and coverage for specific diseases or illnesses to the extent excludable or deductible from gross income. The speakers theorized that executive physicals and HRAs will likely be included as applicable coverage in future guidance.

Certain on-site medical clinics are included, they advised, but not those that offer only de minimis medical care to employees. The IRS has sought comments on whether or not the on-site medical clinics that provide immunizations, allergy injections, nonprescription pain relievers, and treatment of workplace injuries should also be included for purposes of calculating the excise tax.

Retiree coverage could trigger Cadillac Tax. Retiree coverage is also included for purposes of calculating the Cadillac Tax. Presumably this should not be a problem for employers that offer affordable coverage to retirees on the same terms that they offer it to current employees. It should be kept in mind, however, that if the cost of retiree health coverage is high, as such plans that cover primarily older segments of the population often are, at that point, the substantially higher premiums could trigger the Cadillac tax. This is especially worrisome if an employer has a lot of early retirees.

COBRA reminders. Employers also need to remember that, in light of the U.S. Supreme Court’s decisions in Obergefell v. Hodges and United States v. Windsor, under an employer’s health plan that includes spousal coverage, same-sex spouses are also “qualified beneficiaries.” Previously, COBRA did not apply to these situations, although the speakers noted that many employers voluntarily offered COBRA-type rights in certain circumstances.

Issues such as divorce will now create similar headaches for same-sex situations as opposite-sex ones for COBRA purposes. For example, Bianchi and Collins pointed out that, sometimes, a company does not know that a former employee who is covered under COBRA has gotten a divorce, and if the former employee drops the ex-spouse’s coverage, the ex-spouse will then file suit against the company. They cautioned that third party administrators (TPAs) tasked with providing COBRA notices will often disclaim responsibility in their contracts for these situations, and then it is incumbent upon employers to follow up. Monitoring TPAs and spot-checking with terminated employees is also advised, they said.

Wellness programs. The speakers pointed to three lawsuits filed that have been filed by the EEOC with regard to corporate wellness programs. EEOC v. Honeywell International Inc. involves the EEOC’s claim that Honeywell’s wellness program was not “voluntary” when it required a $1,500 premium surcharge from employees who did not complete biometric screening test. Such employees were also not eligible for employer contributions to their HSAs.

What’s interesting about the Honeywell case, one speaker said, is that it brings up an issue under the Genetic Information and Nondiscrimination Act (GINA), whereby Honeywell was also imposing penalties on employees whose spouses refused to take the biometric screenings. The EEOC is arguing that the screenings would involve protected health information of employees’ family members. Under GINA, it is illegal to discriminate against or request information from employees with regard to genetic information, and this includes information about the manifestation of a disease or disorder in a family member. Previously, it was assumed that GINA only applies to protected information of job applicants, employees, and their genetically-related family members, as opposed to spouses.

Two other recent cases revolving around wellness program issues are EEOC v. Orion Energy Systems, Inc. and EEOC v. Flambeau Inc. In Orion, an employee who opted out of a health risk assessment was charged 100% of the health plan premium (premiums were otherwise fully paid for by the employer) and was fired. Flambeau involved an employee whose medical insurance was canceled after he failed to complete a health risk assessment and biometric screening.

SOURCE: ALI-CLE webcast, “Trending Affordable Care Act Topics & Related Issues,” September 21, 2015.

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