Updates on Notices from CMS & IRS and the Implications for Employers

The Center for Medicare and Medicaid Services (CMS) and the Internal Revenue Service (IRS) recently posted notices about changes affecting the Affordable Care Act (ACA) and Health Reimbursement Arrangements (HRAs.) In the past when these notices were released, they were recognized but not considered an especially high priority. Now, however, with the Executive Orders from the White House instructing agencies to simplify as much of the ACA as possible, these notices take on a little more urgency.

Here’s a brief breakdown of these recent notices, and the implications they will have for employers:

Notice from CMS

The Notice of Benefit and Payment Parameters is issued annually and has been updated for small group and individual plan requirements. While not many of the updates were noteworthy for employers or brokers, there was some importance for carriers. The latest notice from CMS, issued October 27^th had a little more for employers and brokers to take note of:

• Federal Small Group Health Options: Changes to the Federal Small Group Health Options (SHOP) exchanges would put much of the work on the carriers and brokers certified to sell in the Federally Facilitated Exchange (FFE).  The intent is to cut back on the cost of running the Federal SHOP. The goal seems to be pushing more of the small group enrollment to the carriers with less going through the Marketplace. This doesn’t necessarily apply to state-based exchanges, but they can use some or all of the new flexibility if they choose. It doesn’t appear yet that New York, Connecticut or Rhode Island will follow suit, but we’ll wait until these states have had a chance to digest the new rules
• Essential Health Benefits: Beginning in 2019, states could vary their benchmark plan to alter some of the mandated set of benefits for small group and individual plans, more commonly known as Essential Health Benefits (EHBs.) This could limit some of the benefits currently in small group and individual health insurance plans.  While not directly impacting large group or self-funded plans, it could have a corollary effect depending on what our respective states decide to do.
• Premium Tax Credit Eligibility Verification: This applies to people in the Individual Marketplace who receive a subsidy. The proposed regulation would increase the data matching of those with income inconsistencies and potentially cut off subsidies for some who can’t substantiate varying amounts of income reported. In addition, it could force some to file an income tax return even if they hadn’t in the past.
• Cost Sharing: Cost sharing limits are raised to $7900 for individuals and $15,800 for other than individual coverage.

NOTE: These are still in proposed rule format and with no changes, could become law in December.

Notice from IRS

The IRS has reversed last year’s intent of not rejecting tax returns when the taxpayer hasn’t checked the box indicating whether or not they have health insurance.  If a taxpayer does not check the box, the form will be rejected and if not corrected and filed by April 17, 2018, it will be considered a late return subject to penalties.

Employer Mandate Penalties to be Assessed

Buzz around the industry suggests that Employer Shared Responsibility penalties are set to be issued by the end of the year for any large employer who did not offer coverage to some or all full-time employees.  Adding fuel to the rumor was the updated Q&A issued by Treasury last week with new content detailing the process of levying penalties on employers and how to deal with getting a notice from the IRS (Letter 226J) that at least one of their employees received a subsidy in the Marketplace for at least one month.  Stay tuned for more information.

Finally, the Mercer National Survey of Employer Sponsored Health Plans is out and reports, “employers have been able to contain the rise in health care costs this year to 2.6%, essentially on par with the 2.4% increase in 2016”. This of course raises questions for all employers whose renewal is more than 2.6%.  Keep in mind that this study only compares year-over-year increases and does not adjust for employers who switch from copay plans to high deductible plans. It also does not account for other cost-sharing services, such as specialty pharmacies, for example, that may have been implemented. As you know, many of these changes can have a significant effect on renewal prices by shifting costs to employees.  Remember, the vast majority of people incur less than $2,500 in medical costs in one year, so once the plan deductible hits $2,500, you won’t see significant price reductions beyond this point.

Stay tuned for the latest updates.