by admin | Apr 12, 2024 | Compliance
AFFORDABLE CARE ACT INFORMATION REPORTING
Beginning in 2024, most employers obligated to report under the Affordable Care Act (ACA) must file returns electronically by March 31, 2024. Employers filing fewer than 10 returns a year are allowed to use paper filing. Since March 31 falls on a weekend, the deadline this year is April 1, 2024.
Applicable large employers (ALEs) and smaller employers with self-insured health plans are required to e-file Forms 1095-C or 1095-B, as well as the accompanying Forms 1094-C or 1094-B, using the IRS’ Affordable Care Act Information Returns (AIR) system. Employers can apply for a 30-day extension for filing these forms by submitting Form 8809 by the original due date.
2023 HEALTH SAVINGS ACCOUNT CONTRIBUTIONS AND CORRECTIONS
For employers offering a health savings account (HSA), contributions toward the 2023 HSA limits and corrections for the 2023 calendar year must be made by April 15, 2024. Employers and employees can contribute to HSAs and make adjustments until the tax filing deadline, which is typically the individual’s tax filing due date.
Contributions that exceed the annual allowed limit are subject to a 6% tax on the excess contribution. That tax is assessed each year that the excess funds and their earnings remain in the account. Additionally, excess contributions are taxed as income.
Remember that using HSA funds for non-qualified expenses can result in significant penalties. Individuals under age 65 who use HSA money for non-qualified expenses will face a 20% penalty and pay income taxes on the withdrawal. After age 65, HSA funds may be used for non-qualified expenses without incurring the 20% penalty, however the funds will be considered taxable income.
EMPLOYER CONSIDERATIONS
Employers should ensure that employees are aware of the annual contribution limits and the deadline for contribution adjustments, as well as potential tax penalties.
PREPARING FOR JUNE PRESCRIPTION DRUG DATA (RXDC) REPORTING
The third season of Prescription Drug Data Collection (RxDC) reporting is underway, with the annual deadline set for June 1 each year, reporting on the previous calendar year. The Consolidated Appropriations Act requires all group medical plans to file a report with the Centers for Medicare & Medicaid (CMS) detailing the cost and other medical data for the group health plans’ prescription drug and other benefits, excluding excepted benefits. RxDC reporting is mandatory regardless of the group’s insurance status, size, or whether it is a grandfathered plan.
The filing must be completed electronically through the CMS Enterprise Portal. While employers are ultimately responsible for RxDC filing, most third-party administrators (TPAs) pharmacy benefit managers (PBMs) contracted to provide services to the group health plan will assist or submit filings on behalf of the group health plan.
Changes for 2024 RxDC Reporting
The average monthly premium calculation has been simplified. Instead of calculating per member per month, this is stated as the total annual premium divided by 12.
CMS has introduced restrictions on data aggregation. Data in files D1 and D3 through D8 must match the level of detail in the D2 file. This means that if the D2 data is specific to an employer’s plan, the data in files D3 through D8 must be equally specific.
EMPLOYER CONSIDERATIONS
- Insurance carriers will handle RxDC reporting on behalf of employers with fully insured plans. However, employers should confirm with carriers that the reporting has been completed and provide any necessary information.
- Employers with self-insured plans have final responsibility for RxDC filing. If they rely on TPAs or PBMs to assist with filing, it’s crucial to ensure that it is completed on time.
NEW YORK CITY WORKERS ALLOWED TO SUE FOR SICK LEAVE VIOLATIONS
On March 20, the New York City Council enacted a provision allowing an individual to initiate a private legal action against employers for non-compliance with the Earned Safe and Sick Time Act (ESSTA).
Individuals may now file lawsuits for alleged violations of the Act directly in court, bypassing the need to file an administrative complaint with the Department of Consumer and Worker Protection. Legal action can be initiated within two years from the date the individual became aware or should have been aware of the alleged violation and may seek penalties, injunctive and declaratory relief, legal fees, costs, and other pertinent damages against the violating entity or individual.
Under the Act, the amount of safe and sick leave provided is contingent on the size of the employer.
- Employers with 100 or more employees are required to provide up to 56 hours of paid leave annually.
- Employers with 5 to 99 employees must offer up to 40 hours of paid leave annually.
- Small employers with four or fewer employees and an annual net income exceeding $1 million are obligated to provide up to 40 hours of paid leave. In contrast, if the employer’s net income is less than $1 million, they are only required to offer up to 40 hours of unpaid leave annually.
- Employers with one or more domestic workers must provide up to 40 hours of paid leave annually, with an increase to 56 hours for employers with 100 or more domestic workers.
Eligible employees are entitled to use accrued safe and sick leave immediately, including newly hired personnel. In cases of unforeseen leave, employers cannot mandate advance notice but can request documentation for absences exceeding three consecutive workdays. Employers must provide employees with written policy details regarding safe and sick leave, including information about accrued, utilized, and total leave balances, either on paystubs or via an accessible electronic system.
Significant amendments to the were implemented on October 15, 2023, to clarify the Act:
- The assessment of an employer’s size is based on the total number of employees nationwide, determined by the peak number of concurrently employed staff within a calendar year.
- Full time, part-time, joint employees, and employees on leave of absence are included in the employee count for determining employer size.
- Employees telecommuting from outside New York City are not considered employed within the city.
- Employees based outside of New York City that are “expected to regularly perform work in New York City during a calendar year” will be counted, but only for hours worked by the employee within New York City.
EMPLOYER CONSIDERATIONS
In light of these developments, it is imperative for New York City employers to thoroughly review their safe and sick leave policies to ensure full compliance and mitigate the risk of potential litigation.
QUESTION OF THE MONTH
Q: If an employee carries her full family on a qualified high deductible health plan (QHDHP) but her children are mandated to also be enrolled in Medicaid, can she contribute the full family amount to her health savings account (HSA)?
A: If the owner of the HSA (employee) is only eligible for the HDHP and the employee has enrolled in family coverage, the employee can contribute the full family limit to the HSA even if the employee’s dependents are not otherwise eligible due to Medicaid.
Answers to the Question of the Week are provided by Kutak Rock LLP. Kutak Rock provides general compliance guidance through the UBA Compliance Help Desk, which does not constitute legal advice or create an attorney-client relationship. Please consult your legal advisor for specific legal advice.
| This information is general in nature and provided for educational purposes only. It is not intended to provide legal advice. You should not act on this information without consulting legal counsel or other knowledgeable advisors. |
| ©2024 United Benefit Advisors |
by admin | Apr 8, 2024 | Employee Benefits
No matter whether it is anticipated or unexpected, a hospital stay is expensive. According to HealthCare.gov, the average 3-day hospital stay in the United States costs around $30,000. Health insurance will cover some of the costs if you are admitted to the hospital, but you may have other out-of-pocket costs. Hospital Indemnity Insurance can help cover expenses that result from a hospital visit and unexpected emergencies.
What is Hospital Indemnity Insurance?
Hospital Indemnity Insurance is a supplemental insurance policy that that can be added to an existing insurance plan to cover costs due to having to stay in the hospital; it provides cash payments for hospital-related expenses. Because the money is paid directly to you, you can use the money however you want. It’s typically used to cover daily living expenses, to make up for lost income or to pay for out-of-pocket medical expenses, such as your deductible, copay or coinsurance.
Unlike medical plans, there are no deductibles to meet with a hospital indemnity plan. As soon as you incur a qualified event, you can file a claim and start receiving benefits. Hospital indemnity policies pay out a set amount of money depending on the medical service performed. With this payment model, called a fee-for-service model, you don’t have to worry about in-network versus out-of-network coverage since you receive the same payout regardless of your medical provider.
What Does a Hospital Indemnity Policy Cover?
The coverage your plan will provide depends on your plan selection but generally, most plans cover:
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Hospital Stay (with or without surgery)
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Intensive Care Unit (ICU) Stay
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Critical Care Unit (CCU) Stay
Some plans may also cover:
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Outpatient Surgery
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Ambulances
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Emergency Room Visits
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Outpatient X-Ray or Diagnostic Images
Accident Insurance vs. Hospital Indemnity Insurance
The biggest difference between accident and hospital indemnity insurance is that accident coverage pays out after specific accidents, while indemnity coverage pays out after certain types of hospital stays. Both serve as supplementary health plans designed to aid with expenses not covered by your primary medical insurance.
Accident insurance pays out after a qualifying injury, such as burns, a broken arm or a laceration. Conversely, hospital indemnity coverage is triggered by specific hospital care, typically termed as inpatient hospital care. Both policies offer cash payouts that can go towards your healthcare expenses, or daily living expenses such as food and rent.
by admin | Mar 26, 2024 | Health Insurance
Everyone needs health insurance but many people don’t fully understand it. One important concept to understand is your deductible. A deductible is the amount of money that must be paid for covered services before the health insurance company begins paying for expenses.
For an individual plan, the deductible is straightforward. But family plans are a bit more complex.
Embedded vs. Non-Embedded Deductibles
Family health insurance plans can have one of two types of deductibles:
- Embedded Deductible (includes an individual and family deductible)
- Non-Embedded (Aggregate) Deductible (includes only a family deductible)
Understanding the specific type in your plan and how it operates can help you prepare for out-of-pocket healthcare costs.
Embedded Deductible: Each family member has an individual deductible in addition to the overall family deductible. Meaning if an individual in the family reaches his or her deductible before the family deductible is reached, his or her services will be paid by the insurance company. However, these will be paid solely for that family member. Once multiple family members’ medical expenses add up and surpass the family deductible, the insurer would begin to pay covered medical expenses for all members of the family. This applies even if a member did not meet their individual deductible.
Typically, embedded deductibles are exactly half of the entire family deductible. For example, the family could have a deductible of $10,000 and individual deductibles of $5,000 for every covered member of the family.
Embedded Deductible Example
Ashley and Robert have a family health plan that covers them and their two children. Each family member has a $4,000 individual deductible, and they have a $8,000 family deductible. Ashley meets her $4,000 deductible after giving birth to their son in March who was in the hospital for an extra week. Their daughter, Emma, has surgery in May and meets her $4,000 individual deductible in April, which means the family deductible of $8,000 has now been met. Later in the year, when Robert needs shoulder surgery, he only owes a co-payment because the family deductive was already met.
Non-Embedded Deductible: There is no individual deductible. So, the overall family deductible must be reached, either by an individual or by the family, for the insurance company to pay for services. The non-embedded deductible is most common in high insurance health plans.
Non-Embedded (Aggregate) Deductible Example
Marc and his family have a health plan with a non-embedded deductible. The family deductible is $10,000. Son Ben dislocated his shoulder and medical care cost $700. Daughter Victoria had acute appendicitis that required surgery costing $3,300. Marc had an accident while working on his farm which resulted in a hospital stay costing over $6,000. The combined out-of-pocket expenses from Marc, Ben, and Victoria’s medical treatments met the family deductible. Any further medical care for anyone in the family will be covered by the insurance company according to the plan benefits.
No matter what type of deductible your health plan uses, keep in mind that you must personally cover that amount before your insurance kicks in. When you understand how deductibles work and how it impacts your family’s household budget, you can make wise, informed choices to set aside funds for your family’s medical expenses.
by admin | Mar 18, 2024 | Compliance
In early February, a federal class action lawsuit was filed against Johnson & Johnson (JNJ) and its plan fiduciaries, alleging overpayment for prescription drugs within its prescription drug plan. The complaint alleges that under the Employee Retirement Income Security Act of 1974 (ERISA), JNJ’s plan fiduciaries are obligated to diligently compare service providers, seek cost-effective options, and monitor expenses. It is claimed that the plan fiduciaries failed to act prudently by agreeing to terms with a pharmacy benefit manager (PBM) that resulted in excessive costs for numerous drugs compared to other market options.
The lawsuit highlights the importance of transparency in facilitating comparisons between prescription drug prices across different plans or pharmacies and underscored significant risks faced by health and welfare plan fiduciaries. Publicly available information on drug prices enables individuals – including class action plaintiff attorneys – to scrutinize plan expenses, further emphasizing the need for prudent fiduciary actions.
EMPLOYER CONSIDERATIONS
Given the evolving landscape and heightened litigation risks, health plan fiduciaries should take proactive steps to mitigate litigation exposure and safeguard the interests of plan participants:
- Establish a fiduciary committee dedicated to health and welfare benefits and delegate responsibilities accordingly.
- Engage qualified consultants to assess PBMs and prescription drug arrangements, ensuring impartiality.
- Review and negotiate terms of PBM agreements, fee structures, and formularies to ensure reasonability.
- Collect and analyze benchmark information from various sources to evaluate vendor agreements.
- Scrutinize compensation arrangements for reasonability and conflicts of interest.
- Periodically solicit proposals from PBMs and vendors to reassess market competitiveness.
- Document all policies, procedures, and decisions regarding vendor selection and performance monitoring to demonstrate procedural prudence.
UNITEDHEALTHCARE CYBERATTACK IMPACTS MILLIONS
Change Healthcare, a division of UnitedHealthcare’s Optum, was the target of a cyberattack resulting in significant disruptions to prescription orders at thousands of pharmacies nationwide. The impact in the U.S. has been profound, as parent company Optum provides services to more than 60,000 pharmacies and care for more than 100 million consumers.
While it works to recover, the company has isolated services related to billing, claims management, payment, and data exchanges, forcing some healthcare organizations and systems to revert to manual procedures. Full restoration of services remains pending. The American Hospital Association recommended that companies using Optum services temporarily disconnect from them.
Change Healthcare processes approximately 15 billion transactions annually, impacting a significant portion of U.S. patient records, including prescriptions, dental, clinical, and other medical needs. The disruption has led to difficulties in verifying patients’ insurance coverage for prescriptions, forcing some individuals to pay in cash. While larger pharmacy chains like Walgreens have reported limited effects, smaller pharmacies heavily reliant on Change Healthcare for insurance verification and billing services are facing significant challenges.
The attack highlights the vulnerability of healthcare data, especially patients’ private medical records, in the face of cyber threats. Federal officials are closely monitoring the situation, emphasizing the need to strengthen cybersecurity resilience across the healthcare ecosystem.
EMPLOYER CONSIDERATIONS
Given the ongoing disruptions and potential risks to data security, affected employers should:
- Remain vigilant and communicate any updates or developments to enrollees.
- Encourage employees to exercise caution regarding any unusual communications or activities related to prescription orders or insurance verification.
- Stay informed about further updates from Change Healthcare and UnitedHealth Group regarding the restoration of services and any measures to enhance cybersecurity.
UPDATED INSTRUCTIONS RELEASED FOR JUNE 1 RXDC REPORTING
The No Surprises Act, as part of the Consolidated Appropriations Act, 2021 (CAA), requires employer-sponsored health plans to comply with annual prescription drug data collection (RxDC) reporting to provide transparency in prescription drug and health care spending. Data is reported to the U.S. Department of Labor (DOL), the Department of the Treasury (Treasury), and the Department of Health and Human Services (HHS) to monitor spending trends and facilitate regulatory control measures.
The reporting deadline for the 2023 reference year data is June 1, 2024. The Centers for Medicare & Medicaid Services (CMS) has issued revised instructions and templates for RxDC reporting. The instructions are mostly consistent with prior years; however, one significant change is the new enforcement of the “aggregation restriction” beginning with the 2023 reference year. The restrictions will limit the ability of plan sponsors to have their vendors report certain data on their behalf.
Additional changes in the instructions for the 2023 reference year reporting include prescription exclusions and simplified calculations.
Failure to comply with RxDC reporting requirements may result in penalties under Internal Revenue Code Section 4980D of $100 per day.
EMPLOYER CONSIDERATIONS
- Ensure timely completion of the RxDC reporting for calendar year 2023 by June 1, 2024.
- Confirm filing status with insurance carriers for fully insured plans or follow up with third party administrators (TPAs), pharmacy benefit managers (PBMs), or administrative services only providers (ASOs) for self-insured plans.
- Provide necessary information requested by relevant parties for reporting.
- Determine whether data should be reported on a plan level or aggregated basis.
- Consider requesting pharmacy data reporting on a plan level basis to access detailed pharmacy benefit spend information.
2025 EMPLOYER SHARED RESPONSIBILITY PENALTIES
The IRS has released the 2025 employer shared responsibility payments under the Affordable Care Act (ACA). Applicable large employers (ALEs) may face penalties for failing to provide minimum essential coverage to 95% of full-time employees, or for offering coverage that is not affordable or does not meet minimum value. The adjusted penalty amounts for 2025 will be $2,900 per full-time employee for Penalty “A” (a $70 decrease from 2024) and $4,350 per full-time employee for Penalty “B” (a $110 decrease from 2024).
EMPLOYER CONSIDERATIONS
To avoid penalties, ALEs should consistently ensure full-time employees receive minimum essential coverage that meets affordability and minimum value standards. The IRS uses Letter 226-J to notify ALEs of potential penalties, with a response form included for ALEs to address proposed penalties. Employers and advisors should remain vigilant for this letter to promptly review and respond accordingly.
QUESTION OF THE MONTH
Q: What are the time and dollar limits for flexible spending arrangements (FSA) and FSA carryovers?
A: For 2024, the most that can be deferred to an FSA is $3,200 (a $150 increase from 2023). The amount of a 2024 FSA balance that can be carried over into 2025 is $640 (up from $610 in 2023). A carryover is only available if the FSA does not offer a grace period. The carryover amount can be used all year.
A grace period, on the other hand, is the amount of time in a new year that an employee can incur and be reimbursed for claims from the prior year’s balance. A grace period can be as long as 2 ½ months after the close of the plan year (usually the calendar year). So, if an employee has $1,000 left in the 2023 FSA, that employee could incur $1,000 of reimbursable expense prior to March 15, 2024, and spend that $1,000 if the FSA uses a grace period. An FSA cannot have both a grace period and a carryover.
And finally, most FSAs offer a run-out period. This is a period after the close of the plan year when employees can submit claims incurred in the prior year. There is no maximum run-out period set by the IRS, but most employers (or FSA administrators) will set a limit of 60 to 90 days. The run-out period only allows people to submit claims incurred in the prior year, unlike the grace period, which allows new claims incurred prior to March 15 to be reimbursed.
This information is general in nature and provided for educational purposes only. It is not intended to provide legal advice. You should not act on this information without consulting legal counsel or other knowledgeable advisors.
©2023 United Benefit Advisors
