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Final Rule Clarifies Application of 30-Day Maximum for Orientation Periods

Late Friday afternoon, the Departments of Treasury, Labor and Health and Human Services (the “Departments”) issued final regulations (the “Final Rule”) clarifying the interaction between a reasonable and bona fide employment-based orientation period and the 90-day waiting period limitation under the Affordable Care Act (“ACA”).


For plan years beginning on or after January 1, 2014, ACACircle a Date prohibits a group health plan from applying a waiting period of more than 90 days. Contemporaneous with the February 24, 2014 issuance of final regulations on the 90-day limitation, the Departments issued proposed regulations addressing employee orientation periods.  Such proposed regulations provide that conditioning plan eligibility on an employee’s completion of a reasonable and bona fide employment-based orientation period would be permissible if the orientation period does not exceed one month and the maximum 90-day waiting period begins on the first day after the orientation period.

Final Rule

The Final Rule adopts the proposed orientation period rule and offers some additional clarification.  Although a plan may impose substantive eligibility criteria (i.e., being in an eligible job classification, achieving job-related licensure requirements specified in the plan, or satisfying a reasonable and bona fide employment-based orientation period) , it may not impose conditions that are mere subterfuges for the passage of time.

Under the Final Rule, the conditioning of plan eligibility on an employee’s completion of a reasonable and bona fide employment

COBRA Participants: Act Quickly to Maximize Cost Savings with ACA Special Enrollment Opportunity

Health Insurance and MoneyIn a recent CMS Bulletin, the Department of Health & Human Services announced a one-time special enrollment period for individuals who are currently eligible for, or enrolled in, COBRA continuation coverage to enroll in qualified health plans in the Marketplace.  This special enrollment period applies to the Federally Facilitated Marketplace (FFM) and ends July 1, 2014.

A person eligible for, or enrolled in, COBRA coverage is generally permitted to enroll in the Marketplace only (i) when the person is initially eligible for COBRA or has exhausted his or her COBRA coverage rights, (ii) during annual open enrollment, or (iii) during some other special enrollment period.  This one-time special enrollment period allows eligible individuals in states that utilize the FFM to terminate their COBRA coverage and enroll in qualified health plans offered through the FFM without regard to the standard enrollment period restrictions.  In the absence of another special enrollment period, the next general enrollment opportunity would be the annual open enrollment period commencing November 15, 2014.

Such a switch may allow COBRA participants to realize savings by obtaining affordable (possibly subsidized) medical insurance coverage through a public exchange.  Employers, who also stand to benefit by moving COBRA participants to alternative coverage, should consider promptly notifying COBRA participants of this limited special enrollment opportunity.

Note:  This special enrollment period does not apply to a State-Based Marketplaces unless it

Hurry and Get Your HPID — or NOT!

Health Plan

Update: See our subsequent post here.

On September 5, 2012, the U.S. Department of Health and Human Services (HHS) published final regulations governing the requirement that health plans obtain a Health Plan Identifier number (HPID).  The purpose of the HPID is to increase standardization within certain covered electronic transactions (e.g., claims, benefit payments and coordination of benefits), which is currently fraught with a system of multiple identifiers that differ in length and format.

So while the HPID is not a new development, it is gaining the attention of plan sponsors since the deadline for health plans to obtain an HPID is November 5, 2014 (a one-year extension is available for small health plans).

HPID Requirement

Under the regulations, the requirement to obtain an HPID applies only to a Controlling Health Plan (CHP).  A CHP is a health plan that (1) controls its own business activities, actions or policies OR (2) is controlled by an entity that is not a health plan. Consequently, most employer-sponsored health plans meet the criteria of a CHP and must obtain a HPID.

In contrast, a Subhealth Plan (SHP) is eligible for but is not required to obtain a HPID.  An SHP is defined as a health plan whose business activities, actions or policies are directed by a CHP. Unfortunately, the regulations do not address what it means for a CHP to

Don’t Miss the April 15th Deadline to File a Protective Refund Claim for 2010 FICA Tax!

As you may recall from our earlier post, the 6th Circuit held in U.S. v. Quality Stores, that severance payments made to employees in connection with an involuntary reduction in force were not “wages” subject to FICA taxes. This decision was contrary to published IRS guidance and created a split in the courts. In October of last year, the United States Supreme Court agreed to review the case and on January 14th, it heard oral arguments. The Supreme Court is expected to issue a ruling by the end of June.

Taxpayers may be entitled to a FICA tax refund if the decision is upheld by the Supreme Court on appeal. In order to preserve the right to a refund, taxpayers must file a protective claim before the applicable statute of limitations runs. As we previously reported in a post last year, the deadline to file a protective order for severance payments made in 2009 was April 15, 2013. At this time, the deadline to file a protective claim for 2010 severance payments is quickly approaching on April 15, 2014. We encourage any employer who made involuntary severance payments in 2010 to consider filing a protective claim now on Form 941-x in order to preserve the right to a refund if the 6th Circuit decision is upheld.


IRS Guidance on HRAs, FSAs and EAPs: Plan Amendments May be Required

October 15, 2013


Among the many reforms under the Affordable Care Act (“ACA”) is the prohibition on imposing annual dollar limits on essential health benefits (“Annual Dollar Limit Prohibition”).  In addition, non-grandfathered group health plans must provide certain preventive services without any cost-sharing requirements (“Preventive Services Requirement”).  There has been wide-spread speculation as to how these market reforms would affect health reimbursement arrangements (“HRAs”), health flexible spending accounts (“FSAs”) and other employer reimbursement arrangements.

Health Reimbursement Arrangements

In the preamble to 2010 interim final regulations, Treasury and the Departments of Labor and Health and Human Services (“Departments”) stated that an HRA that is integrated with a group health plan that complies with the Annual Dollar Limit Prohibition, would be acceptable (despite the HRA having an annual dollar limit) since the combined benefit satisfies the Annual Dollar Limit Prohibition.

In 2013 FAQs, the Departments explained that an HRA will not be considered to be integrated with a primary group health plan offered by an employer unless the HRA is available only to employees who are covered under the primary group plan and such group plan satisfies the Annual Dollar Limitation Prohibition.

Notice 2013-54 (“Notice”) provides additional guidance and imposes new requirements on the integration of HRAs with major medical plans. According to the IRS, an employer-sponsored HRA cannot be integrated with individual market coverage. Therefore, an HRA used to purchase coverage on the individual market will violate the Annual Dollar Limit Prohibition.  Not only an HRA but any other type

UPDATE: Health Insurance Marketplace Notice: RELAX!…BUT DON’T PLAY DEAD

Health care reform created a new Section 18B of the Fair Labor Standards Act (“FLSA”) to require employers to furnish notice of the coverage options available through Health Insurance Marketplace to employees. The Secretary of Labor delegated responsibility for regulations under the new law to the Department of Labor’s Employee Benefits Security Administration (“EBSA”).

The new notice requirement was to take effect on March 1, 2013.  However, in a set of FAQs published on January 24, 2013, the EBSA concluded that the notice requirement should be delayed for several reasons.  The EBSA anticipated that distribution of the notices would take place in the late summer or fall of 2013, which would coordinate with the open enrollment period for Exchanges (see our earlier post).

On May 8 2013, the EBSA published Technical Release 2013-02, which offered guidance on various aspects of the marketplace notice, including the required content, timing and delivery of the notice.  Under the guidance, employers are required to provide the marketplace notice to current employees before October 1, 2013, by first-class mail or electronically according to the DOL’s electronic disclosure safe harbor.  The Release also included two model marketplace notices (see our other earlier post).

Earlier this month, the EBSA issued its sixteenth set of FAQs on health care reform and confirmed that an employer will have satisfied its notice obligation  if another party provides a timely and complete notice.  The FAQs also contained a cautionary reminder that all employees must receive the notice

After Liberty, Pruitt and Halbig Challenges Threaten PPACA

Last year the nation awaited the fate of the Patient Protection and Affordable Care Act (“PPACA”) as the U.S. Supreme Court considered National Federation of Independent Business v. Sebelius. Today, two lesser-known Federal cases threaten to undermine not just the individual mandate but possibly the entire PPACA structure for expanding health care coverage for all Americans.

PPACA requires the creation of a health insurance exchange (“Exchange”) in each State that will serve as a competitive marketplace where individuals and small businesses can purchase private health insurance. If a State refuses to establish an Exchange then the Federal government must implement and operate one.

Section 1401 of PPACA provides that premium assistance is available to taxpayers who are enrolled in coverage through an Exchange established by the State under Section 1311 of PPACA. Nonetheless, the Internal Revenue Service (“IRS”) promulgated a regulation that bases eligibility for premium assistance subsidies on enrollment in coverage through any Exchange, including a Federally-established Exchange. Specifically, the regulation states that subsidies shall be available to anyone “enrolled in one or more qualified health plans through an Exchange,” and subsequently defines an “Exchange” to mean “a State Exchange, regional Exchange, subsidiary Exchange and Federally-facilitated Exchange.”

Pruitt v. Sebelius (U.S. District Court for the Eastern District of Oklahoma) and Halbig v. Sebelius (U.S. District Court for the District of Columbia) challenge the IRS regulation expanding the availability of premium subsidies to individuals enrolled in a Federally-operated Exchange. The plaintiffs claim that

CMS Integrity Standards Offer Further Details on State-Based Health Insurance Marketplaces

On Friday, the Centers for Medicare and Medicaid Services (“CMS”) issued a proposed rule addressing various issues relating to exchanges, small business health options program (“SHOP”) and qualified health plan (“QHP”) issuers.  Most of the 250+ pages detail proposed standards intended to ensure the oversight and financial integrity of such entities.  This post focuses on the provisions addressing consumer protections, applications for individual coverage, and administration of premium tax credits and cost-sharing reductions.

Qualified Health Plan Issuers

Beginning October 1, individuals will be able to shop for QHPs offered by issuers through state-based marketplaces (“Exchange”).  QHP  issuers that seek to directly enroll individuals through an Exchange will be required to meet certain minimum consumer protection requirements, including ensuring that their websites provide standardized comparative information on each available QHP offered and premium and cost-sharing information, providing summaries of benefits and coverages, identifying whether a plan is a bronze, silver, gold or platinum metal level or a catastrophic plan, disclosing the results of any enrollee satisfaction survey, notifying applicants of the availability of other QHP products through the Exchange, etc.  The issuer’s website must clearly distinguish between the QHPs for which the individual is eligible and non-QHPs that the issuer may offer and display a link to or describe how to access the Exchange website.  A QHP issuer seeking to directly enroll applicants must also enter into an agreement with the Exchange before its customer service representatives may assist individuals in the individual market with applying for an eligibility determination

The Final (And Not Interim Final) Regulations on Wellness Programs

While the EEOC continued to grapple with what level of financial incentives is acceptable under nondiscrimination laws (e.g., GINA and ADA), the DOL, HHS and Treasury (the “Departments”) issued final regulations addressing incentives for nondiscriminatory wellness programs in group health plans.  The final regulations generally follow the proposed regulations issued by the Departments last November (see our prior post here), including increasing the maximum incentive threshold for health-contingent wellness programs from 20% to 30% (50% in the case of tobacco related programs) of the total cost of coverage, and provide numerous clarifications. For an overview of the new wellness rules, which are effective for plan years beginning on or after January 1, 2014, please see our recent client alert.

In addition to the usual commentary, the preamble to the regulations include a report of the findings of a study of wellness programs sponsored by the DOL and HHS and conducted by the Rand Corp.  Seventy-three percent of respondents that offered wellness programs believed that they improved employee health and 52% believed that they reduced costs.  Larger employers were more positive in believing that wellness programs reduced costs (68% versus 51%).

Although the evidence on the effectiveness of wellness programs was, in some previous studies, found to be promising, it was not conclusive and may not be supported by the Rand survey. In a 2010 survey conducted by Buck Consultants, 40% of employers measured the impact of their wellness program, and of these, 45% reported

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