Use Care Before Using “Skinny Plan” Option As Code Section 4980H Tool

March 9, 2014

Employers considering skinny plans and the brokers, third party administrators (TPAs), insurers and consultants recommending the use of these arrangements alone or as part of a broader health plan design should seek qualified legal advice for help with structuring and implementing these arrangements to avoid potential traps and missteps that could trigger unanticipated benefits, costs and/or tax consequences.  While offering some potential for certain employers, employers must carefully evaluate the potential suitability, benefits, risks and resultant responsibilities of including skinny plan options in their group health benefit offerings and ensure that any such arrangements are properly designed and administered to comply with applicable requirements.

Why Code Section 4980H Has Fueled Growing Skinny Plan Option Hype

Over the past year, many brokers and consultants have advocated that employers adopt a “preventive only” or “skinny plan” to low paid or other groups of employees as a means of avoiding liability for the potential $165 per month “employer shared liability payment” now scheduled to take effect for employers of more than 100 employees on January 1, 2015 and later for employers of more than 50 employees under Internal Revenue Code (Code) Section 4980H(a) (the “A Penalty”).

The Code Section 4980H rules are only one of a plethora of federal mandates and rules applicable to group health plans and their employers under federal law as a result of the health care reforms of the Patient Protection & Affordable Care Act (ACA) as well as a host of previously enacted federal laws.

Enthusiasm for the skinny plan option has been fueled by IRS guidance originally in IRS Notice 2013-54 and its subsequent publication in February 2014 of its final regulations implementing Code Section 4980H that reflect that most plans that pay or provide for reimbursement of medical care costs might qualify as the “minimum essential coverage” necessary to avoid triggering the penalty under Code Section 4980H(a) as long as the arrangement is not an “excepted benefit plan” for purposes of ACA.

While a properly implemented “skinny plan” option may work for many employers with self-insured health plans, getting past the Code Section 4890H(a) employer shared responsibility payment doesn’t necessarily mean that the employer won’t face liability under Code Section 4980H.  Furthermore, getting past Code Section 4980H isn’t all that employers, insurers, brokers and consultants need to consider when designing group health plans.  In fact, an improperly designed skinny plan that avoids triggering liability under Code Section 4980H could trigger much greater liability than the penalty that the employer hoped to avoid by using the skinny plan.

While a full understanding of all the potential implications that may affect a decision to offer a skinny plan is beyond the scope of this short article, it often is helpful to begin by understanding first the mechanics of Code Section 4980H and its employer-shared responsibility payments.

Code Section 4980H Employer Shared Responsibility Penalty Basics

The A Penalty is one of two potential employer shared responsibility payments that Code Section 4980H may impose against a “large employer” that fails to provide the necessary coverage mandated to avoid triggering liability under Code Section 4980H.  Under Code Section 4980H, there are two potential penalties that could be triggered:  the penalty under Code Section 4980H(a) commonly called the “A Penalty” or the penalty under Code Section 4989H(b) commonly called the “B Penalty.”  Understanding the skinny plan hype starts with understanding the basics and applicability of these two potential penalties.

First, the Code Section 4980H penalty doesn’t apply as long as the employer either doesn’t have 50 or more full-time employees or non of its full-time employees enroll in subsidized health coverage through a health insurance exchange.  Also, neither penalty under Code Section 4980H applies to any employer until at the earliest, January 1, 2015, when under the delayed effective date announced by the Obama Administration, employers with 100 or more full-time employees will become subject to Code Section 4980H.  Employers of 50 to 99 full-time employees enjoy an even further delayed effective date and employers of fewer than 50 full-time employees are exempt.

The A Penalty under Code Section 4980H(a) results when a large employer fails to offer employee and dependent coverage providing “minimum essential coverage” to is full-time employees.  The month A-Penalty amount generally will equal the result of the total number of all full-time employees of the employer minus 30, multiplied by $165 per month.

Just because an employer avoids the A Penalty by offering a plan providing minimum essential coverage to all employees does not necessarily mean it avoids liability under Code Section 4980H.  An employer offering the minimum essential coverage under a group health plan to all employees needed to get past the A Penalty generally still risks liability under Code Section 4980H to pay the “B Penalty” of $250 per month for any employee who actually enrolls in health care coverage through a Health Insurance Exchange whose family adjusted gross income is less than 400% of the Federal Poverty Level (approximately $98,000), unless the skinny plan or another group health plan offered to the employee by the employee both:

  • Provides both minimum essential coverage and the required “minimum value” within the meaning of Code Section 4980H; and
  • Doesn’t require the full-time employee to contribute more than 9.5% of his family adjusted gross income to qualify for the coverage offered under the group health plan.

Thus, while offering a skinny plan to all full-time employees may allow an employer to avoid liability for the A Penalty, an employer offering a skinny plan risks liability for the B Penalty of $250 per month for each employee whose family adjusted gross income is less than 400% of the Federal Poverty Level who actually choses to enroll in the richer health care coverage offered through the Health Insurance Exchanges rather than the skinny plan offered by the employer.

Since ACA provides subsidies for many employees with family adjusted gross incomes of less than 400% of the Federal Poverty Level, offering only a skinny plan alone creates a risk for employers that employ a significant number of these lower paid employees that employees will choose to enroll in health insurance coverage offered through the Health Insurance Exchange with subsidies rather than the skinny plan.  To the extent that this occurs, the offering of the skinny plan actually may increase the liability under Code Section 4980H of that employer for that employee from $165 per month to $250 per month.  Some skinny plan proponents may pooh-pooh this risk, arguing that the cost for an employer that incurs the B Penalty will not be higher because See Code § 4980H(b)(2) caps the amount of the B Penalty at the amount of the A Penalty.  While it technically is true that this means that the amount of the B Penalty will not exceed the amount of the A Penalty that the employer would have incurred had it not provided any coverage, the fact remains that the cost to the employer could still be greater because in addition to the B Penalty, the employer also will have incurred the cost of coverage and compliance to provide the skinny plan in addition to the B Penalty incurred.  Accordingly, employers considering this approach need to carefully evaluate their workforce to assess the potential exposure to B Penalties before assuming that avoiding the A Penalty is the best option for their organization and options to mitigate their downside exposures.

To reduce this risk, many consultants and brokers may suggest that the employer adopt a group health plan that offers all full-time employees the option to choose either to enroll in a skinny plan, to enroll in a group health plan coverage option that provides minimum essential coverage offering minimum value at a higher cost than the cost of the skinny plan coverage, or to forego coverage under the group health plan.  Since current IRS guidance states that offering group health plan coverage under a group health plan providing both minimum value and minimum essential coverage with an employee premium of less than 9.5 percent of family adjusted gross income will avoid liability under for the B Penalty for an employee even if an employee who otherwise would qualify for a subsidy choses to enroll in health insurance coverage through the Health Insurance Exchange, this design, properly implemented, may allow the employer to avoid liability under Code Section 4980H.  However, this is not all that an employer needs to worry about.  In fact, unless the group health plans including the skinny plan meets other rules and the discrimination rules applicable to the group health plan and the cafeteria plan through which the enrollment choices are offered meet applicable nondiscrimination requirements, the employer may create unanticipated exposures equal to or greater to the Code Section 4980H liability that the employer seeks to avoid.

Other Traps To Step To Beyond Code Section 4980H May Carry Bigger Risks

Code Section 4980H is only one of several issues that employers contemplating offering skinny plan designs alone or along with an alternative minimum essential coverage, minimum value group health plan coverage option must consider a plethora of other applicable laws and regulations, some of the most significant of which are highlighted in the following paragraphs.

First, when deciding the skinny plan or other group health plan design, employers and their insurers, brokers, administrators and consultants need to ensure that the benefit plan coverage, benefits and other terms meet all applicable mandates of applicable federal, and in the case of insured, multiple employer welfare arrangements (MEWAs) and certain staffing and leasing company arrangements, ACA’s insured plan mandates and other applicable state insurance rules.  Federal law imposes a wide range of mandates on group health plans beyond the requirements of Code Section 4980H.  These include additional coverage, benefit, and nondiscrimination rules added to the Employee Retirement Income Security Act (ERISA), the Code, the Public Health Services Act and other provisions of the Social Security Act, by laws like the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), the Health Insurance Portability & Accountability Act (HIPAA), Code health and cafeteria plan nondiscrimination rules, federal laws mandating coverage for breast cancer, newborns and mothers, mental health and substance abuse, ACA’s coverage, benefit, non-discrimination, procedural and other reforms and various other requirements.  Where a group health plan is or is treated as insured, ACA, as well as state insurance regulations impose additional mandates.  Any group health plan must be designed to meet these rules.  Because ACA and state insurance requirements for insured, MEWA and other arrangements subject to regulation as insured group health programs generally mandate that the arrangement meet ACA’s essential health benefit requirements as well as other ACA and state insurance mandates, current federal and state regulations generally make it unlikely that a skinny plan option that qualifies as minimum essential coverage plans can be offered through an insured, a MEWA or other arrangement subject to regulation as an insured program.  Even where the arrangement is self-insured, ACA and other the inclusion of prescription drug or wellness benefits covering a wide range of conditions and treatments along with an otherwise skinny plan design many trigger mental health parity or other mandates often overlooked by brokers and consultants promoting these arrangements. While guidance is still evolving, there also exists a risk that the scope of mandates also can be greater than expected if the skinny plan is offered with an insured “limited benefit” or other insurance benefit arrangement in a manner that is considered integrated with the skinny plan. Furthermore, regardless if the arrangement is insured or self-insured, failure to comply with these mandates can trigger significant liability including in the case of many of these rules, the obligation to self-identify, self-report, self-assess, and pay penalties under Code Section 6039D of a minimum penalty of the greater of $2500 or $100 per day, as well as any other liability as otherwise applies under ERISA and the Code to participants, the IRS and DOL, or both.

Second, even if the arrangement is self-insured, employers, their administrators, brokers, consultants and advisors need to monitor whether the arrangement is discriminatory under the group health plan nondiscrimination rules or cafeteria plan discrimination rules of the Code.  Particularly where it is possible that highly compensated or key employees will enroll in coverage or a richer coverage option, while lower paid workers will forego enrollment or chose the skinny plan over enrolling in a richer minimum value, minimum essential coverage option, an employer must test to determine if the arrangement discriminates in favor of key or highly compensated employees for purposes of Code Section 125.  If so, at minimum, the employer will want to ensure that its cafeteria plan is drafted to require and that discriminatory contributions are recharacterized and reported to highly compensated and key employees as after-tax, taxable contributions.  It also is equally important that the discriminatory status of the arrangement under Code Section 105(h) be considered for a self-insured program and to the extent that the arrangement is discriminatory that income be reported to highly compensated employees as well.  It should be noted that the harsh nondiscrimination rules and draconian liabilities that can result from offering a discriminatory insured group health plan would add nondiscrimination concerns to the challenges of designing an insured skinny plan that could comply with applicable mandates discussed earlier.

Use Care When Considering Or Using Skinny Plan Design

Accordingly, while some employers may benefit from including a properly designed and implemented skinny plan option in their group health plan design, employers need to act carefully to ensure that the design is appropriate and properly integrated and administered. Those considering these plans should use care (a) to ensure that the plan is self-insured and not an insured plan or MEWA subject to ACA’s insurance reforms and/or state mandates; (b) meet all required federal and state mandates; (c) are tested for potential discrimination issues under Code sections 125 and 105(h); (d) are not paired with insurance contracts considered to be excepted insurance policies in a way that is considered integrated to trigger unexpected mandates and costs; and (e) when an employer group has a large group of subsidy-eligible employees, that the offering of a skinny plan doesn’t result in an increase in the employer’s Code Section 4980H liability by triggering the larger Code Section 4980H(b) penalty of $250 per month instead of the smaller Code Section 4980H(a) penalty of $165 per month.

For Advice, Training & Other Resources

If you need assistance monitoring these and other regulatory policy, enforcement, litigation or other developments, or to review or respond to these or other workforce, benefits and compensation, performance and risk management, compliance, enforcement or management concerns, the author of this update, attorney Cynthia Marcotte Stamer may be able to help.

Board Certified in Labor & Employment Law, Past Chair of the ABA RPTE Employee Benefit & Other Compensation Arrangements Group, Co-Chair and Past Chair of the ABA RPTE Welfare Plan Committee, Vice Chair of the ABA TIPS Employee Benefit Plans Committee, an ABA Joint Committee On Employee Benefits Council representative, Past Chair of the ABA Health Law Section Managed Care & Insurance Section, a Fellow in the American College of Employee Benefit Counsel, ABA, and State Bar of Texas, Ms. Stamer has more than 25 years’ experience advising health plan and employee benefit, insurance, financial services, employer and health industry clients about these and other matters. Ms. Stamer has extensive experience advising and assisting health plans and insurers about ACA, and a wide range of other plan design, administration, data security and privacy and other compliance risk management policies.  Ms. Stamer also regularly represents clients and works with Congress and state legislatures, EBSA, IRS, EEOC, OCR and other HHS agencies, state insurance and other regulators, and others.   She also publishes and speaks extensively on health and other employee benefit plan and insurance, staffing and human resources, compensation and benefits, technology, public policy, privacy, regulatory and public policy and other operations and risk management concerns. Her publications and insights appear in the Health Care Compliance Association, Atlantic Information Service, Bureau of National Affairs, World At Work, The Wall Street Journal, Business Insurance, the Dallas Morning News, Modern Health Care, Managed Healthcare, Health Leaders, and a many other national and local publications.

You can review other recent human resources, employee benefits and internal controls publications and resources and additional information about the employment, employee benefits and other experience of the Cynthia Marcotte Stamer, PC here. If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile www.cynthiastamer.com or by registering to participate in the distribution of these and other updates on our HR & Employee Benefits Update distributions here including:

If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information including your preferred e-mail by creating or updating your profile here. For important information about this communication click here

NOTE:  This article is provided for educational purposes.  It is does not establish any attorney-client relationship nor provide or serve as a substitute for legal advice to any individual or organization.  Readers must engage properly qualified legal counsel to secure legal advice about the rules discussed in light of specific circumstances.

The following disclaimer is included to ensure that we comply with U.S. Treasury Department Regulations.  The Regulations now require that either we (1) include the following disclaimer in most written Federal tax correspondence or (2) undertake significant due diligence that we have not performed (but can perform on request).

ANY STATEMENTS CONTAINED HEREIN ARE NOT INTENDED OR WRITTEN BY THE WRITER TO BE USED, AND NOTHING CONTAINED HEREIN CAN BE USED BY YOU OR ANY OTHER PERSON, FOR THE PURPOSE OF (1) AVOIDING PENALTIES THAT MAY BE IMPOSED UNDER FEDERAL TAX LAW, or (2) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED TRANSACTION OR MATTER ADDRESSED HEREIN.

©2014 Cynthia Marcotte Stamer. Limited, non-exclusive right to republished granted to Solutions Law Press, Inc. All other rights reserved.


HHS Extends Proposed EDI Rule Time to 4/3 To Get More Input From Self-Insured Plans, TPAs

March 6, 2014

Third party administrators  (TPAs), self-insured health plans and concerned payers and plan sponsors now have a little more time to comment on the Department of Health & Human Services (HHS) proposed rule, “Administrative Simplification: Health Plan Certification of Compliance.”

HHS announced its extension to April 3, 2014 of the comment period today in specific hopes that it will receive additional comments from TPAs  and self-insured plans

The Certification of Compliance for Health Plans proposed rule is different from previous Health Insurance Portability and Accountability Act (HIPAA) Administrative Simplification regulations because it affects more and different types of entities.

For example, many third party administrators, self-funded health plans, and group health plans that have not been impacted by previous HIPAA Administrative Simplification requirements will be affected by this rule, even if they do not directly conduct HIPAA covered transactions.

As proposed, the proposed rule would require controlling health plans to submit documentation on or before December 31, 2015. It would also establish penalty fees for a controlling health plan that fails to comply with the Certification of Compliance requirements.

HHS says that the goal of the extension of the comment period is to provide these entities with time to understand and offer feedback on the business impacts of the Certification of Compliance proposed rule. HHS encourages these entities to submit feedback so that their comments and suggestions can be considered during the policy-making process.

 For Representation, Training & Other Resources

If you need assistance monitoring these and other regulatory policy, enforcement, litigation or other developments, or to review or respond to these or other workforce, benefits and compensation, performance and risk management, compliance, enforcement or management concerns, the author of this update, attorney Cynthia Marcotte Stamer may be able to help.

Board Certified in Labor & Employment Law, Past Chair of the ABA RPTE Employee Benefit & Other Compensation Arrangements Group, Co-Chair and Past Chair of the ABA RPTE Welfare Plan Committee, Vice Chair of the ABA TIPS Employee Benefit Plans Committee, Vice President of the North Texas Health Care Compliance Professionals Association, Past Chair of the ABA Health Law Section Managed Care & Insurance Section and the former Board Compliance Chair of the National Kidney Foundation of North Texas, Ms. Stamer has more than 25 years’ experience advising health plan and employee benefit, insurance, financial services, employer and health industry clients about these and other matters. Ms. Stamer has extensive experience advising and assisting health care providers, health plans, their business associates and other health industry clients to establish and administer medical privacy and other compliance and risk management policies, to health care industry investigation, enforcement and other compliance, public policy, regulatory, staffing, and other operations and risk management concerns. The scribe for the ABA JCEB Annual Agency Meeting with the Office of Civil Rights (OCR) for the past several years who has worked on medical and other privacy concerns throughout her career, she regularly designs and presents HIPAA and other risk management, compliance and other training for health plans, employers, health care providers, professional associations and others, defends covered entities and business associates against OCR, FTC and other privacy and data security investigations, serves as special counsel in litigation arising from these concerns and is the author of several highly regarded publications on HIPAA and other privacy and security concerns.

Ms. Stamer also regularly works with OCR, FTC, USSS, FBI and state and local law enforcement on privacy, data security, health care, benefits and insurance and other matters, publishes and speaks extensively on medical and other privacy and data security, health and managed care industry regulatory, staffing and human resources, compensation and benefits, technology, public policy, reimbursement and other operations and risk management concerns. Her publications and insights appear in the Health Care Compliance Association, Atlantic Information Service, Bureau of National Affairs, World At Work, The Wall Street Journal, Business Insurance, the Dallas Morning News, Modern Health Care, Managed Healthcare, Health Leaders, and a many other national and local publications. For instance, Ms. Stamer for the third year will serve as the appointed scribe for the ABA Joint Committee on Employee Benefits Agency meeting with OCR. Her insights on HIPAA risk management and compliance frequently appear in medical privacy related publications of a broad range of health care, health plan and other industry publications Among others, she has conducted privacy training for the Association of State & Territorial Health Plans (ASTHO), the Los Angeles Health Department, the American Bar Association, the Health Care Compliance Association, a multitude of health industry, health plan, insurance and financial services, education, employer employee benefit and other clients, trade and professional associations and others.  You can get more information about her HIPAA and other experience here.

You can review other recent human resources, employee benefits and internal controls publications and resources and additional information about the employment, employee benefits and other experience of the Cynthia Marcotte Stamer, PC here. If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile www.cynthiastamer.com or by registering to participate in the distribution of these and other updates on our HR & Employee Benefits Update distributions here including:

If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information including your preferred e-mail by creating or updating your profile here. For important information concerning this communication click here©2014 Cynthia Marcotte Stamer. Limited, non-exclusive right to republished granted to Solutions Law Press, Inc. All other rights reserved.


New OCR Guidance Assigns More HIPAA Homework Health Plans, Providers, Business Associates and Employers

March 5, 2014

Think your health plan, health care organization, health care clearinghouse or their business associates has health care privacy covered?  Think again.

A series of supplemental guidance issued by the Department of Health & Human Services Office of Civil Rights (OCR) in recent weeks is giving health care providers, health plans, health care clearinghouses (Covered Entities) and their business associates even more to do in reviewing and updating their policies, practices and training for handing protected health information (PHI) beyond bringing their policies and practices into line with OCR’s restatement and update to the Modifications to the HIPAA Privacy, Security, Enforcement, and Breach Notification Rules Under the Health Information Technology for Economic and Clinical Health Act and the Genetic Information Nondiscrimination Act; Other Modifications to the HIPAA Rules; Final Rule (Omnibus Final Rule) OCR published January 25, 2013.

Covered Entities generally have been required to comply with most requirements the Omnibus Final Rule’s restated regulations restating OCR’s regulations implementing the Health Insurance Portability & Accountability Act (HIPAA) Privacy, Security and Breach Notification Rules to reflect HIPAA amendments enacted by the Health Information Technology for Economic and Clinical Health (HITECH) Act since the Omnibus Final Rule took effect on March 26, 2013 and to have updated business associate agreements in place since September 23, 2013.  Meanwhile, the Omnibus Final Rule generally has required business associates have updated business associate agreements in place and otherwise to have come into compliance with all of the applicable requirements of the Omnibus Final Rule since September 23, 2013.  Although these deadlines are long past, many Covered Entities and business associates have yet to complete the policy, process and training updates required to comply with the rule changes implemented in  the Omnibus Final Rule.

Even if a Covered Entity or business associate completed the updates required to comply with the Omnibus Final Rule, however, recent supplemental guidance published by OCR means that most organizations now have even more work to do on HIPAA compliance. This includes the following supplemental guidance on its interpretation and enforcement of HIPAA against Covered Entities and business associates published by OCR since January 1, 2014 alone:

Beyond this 2014 guidance, Covered Entities and their business associates also should look at enforcement actions and data as well as other guidance OCR issued during 2013 after publishing the Omnibus Final Rule such as:

With OCR stepping up both audits and enforcement and penalties for violations higher than ever since the HITECH Act amended HIPAA, Covered Entities and business associates should act quickly to review and update their policies, practices and training to implement any adjustments needed to maintain compliance and manage other risks under these ever-evolving HIPAA standards.

When conducting these efforts, Covered Entities and business associates not only carefully watch for and react promptly to new OCR guidance and enforcement actions, but also document their commitment and ongoing compliance and risk management activities to help support their ability to show their organization maintains the necessary “culture of compliance” commitment needed to mitigate risks in the event of a breach or other HIPAA violation and take well-documented, reasonable steps to encourage their business associates to do the same.    When carrying out these activities, most covered entities and business associates also will want to take steps to monitor potential responsibilities and exposures under other federal and state laws like the privacy and data security requirements that often apply to personal financial information, trade secrets or other sensitive data under applicable federal and state laws and judicial precedent.

 For Representation, Training & Other Resources

If you need assistance monitoring these and other regulatory policy, enforcement, litigation or other developments, or to review or respond to these or other workforce, benefits and compensation, performance and risk management, compliance, enforcement or management concerns, the author of this update, attorney Cynthia Marcotte Stamer may be able to help.

Board Certified in Labor & Employment Law, Past Chair of the ABA RPTE Employee Benefit & Other Compensation Arrangements Group, Co-Chair and Past Chair of the ABA RPTE Welfare Plan Committee, Vice Chair of the ABA TIPS Employee Benefit Plans Committee, Vice President of the North Texas Health Care Compliance Professionals Association, Past Chair of the ABA Health Law Section Managed Care & Insurance Section and the former Board Compliance Chair of the National Kidney Foundation of North Texas, Ms. Stamer has more than 25 years’ experience advising health plan and employee benefit, insurance, financial services, employer and health industry clients about these and other matters. Ms. Stamer has extensive experience advising and assisting health care providers, health plans, their business associates and other health industry clients to establish and administer medical privacy and other compliance and risk management policies, to health care industry investigation, enforcement and other compliance, public policy, regulatory, staffing, and other operations and risk management concerns. The scribe for the ABA JCEB Annual Agency Meeting with the Office of Civil Rights (OCR) for the past several years who has worked on medical and other privacy concerns throughout her career, she regularly designs and presents HIPAA and other risk management, compliance and other training for health plans, employers, health care providers, professional associations and others, defends covered entities and business associates against OCR, FTC and other privacy and data security investigations, serves as special counsel in litigation arising from these concerns and is the author of several highly regarded publications on HIPAA and other privacy and security concerns.

Ms. Stamer also regularly works with OCR, FTC, USSS, FBI and state and local law enforcement on privacy, data security, health care, benefits and insurance and other matters, publishes and speaks extensively on medical and other privacy and data security, health and managed care industry regulatory, staffing and human resources, compensation and benefits, technology, public policy, reimbursement and other operations and risk management concerns. Her publications and insights appear in the Health Care Compliance Association, Atlantic Information Service, Bureau of National Affairs, World At Work, The Wall Street Journal, Business Insurance, the Dallas Morning News, Modern Health Care, Managed Healthcare, Health Leaders, and a many other national and local publications. For instance, Ms. Stamer for the third year will serve as the appointed scribe for the ABA Joint Committee on Employee Benefits Agency meeting with OCR. Her insights on HIPAA risk management and compliance frequently appear in medical privacy related publications of a broad range of health care, health plan and other industry publications Among others, she has conducted privacy training for the Association of State & Territorial Health Plans (ASTHO), the Los Angeles Health Department, the American Bar Association, the Health Care Compliance Association, a multitude of health industry, health plan, insurance and financial services, education, employer employee benefit and other clients, trade and professional associations and others.  You can get more information about her HIPAA and other experience here.

You can review other recent human resources, employee benefits and internal controls publications and resources and additional information about the employment, employee benefits and other experience of the Cynthia Marcotte Stamer, PC here. If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile www.cynthiastamer.com or by registering to participate in the distribution of these and other updates on our HR & Employee Benefits Update distributions here including:

If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information including your preferred e-mail by creating or updating your profile here. For important information concerning this communication click here©2014 Cynthia Marcotte Stamer. Limited, non-exclusive right to republished granted to Solutions Law Press, Inc. All other rights reserved.


Agencies Clarify Applicability of ACA Out-Of-Pocket Versus Deductible Cost Sharing Limitations

March 4, 2014

Non-grandfathered self-insured and large group health plans must comply with the out-of-pocket limits in 2014 but pending further guidance are excused from the duty to comply with deductible limitations imposed by the cost-sharing limitations of the Patient Protection & Affordable Care Act (ACA) according to new guidance jointly published February 20, 2013 by the Departments of Labor (DOL), Health and Human Services (HHS), and the Treasury (collectively, the “Departments”) in “FAQS About Affordable Care Act Implementation (Part XII)” (hereafter, the “FAQ”).  However, the FAQ includes a transitional rule that allows plans to apply separate out-of-pocket maximums to prescription drug coverage and other group health plan for 2014, to allow them time to adjust contracts in response to the requirement.

ACA Cost-Sharing Limits

Public Health Service (PHS) Act § 2707(b), as added by the ACA, requires a group health plan to ensure that any annual cost-sharing imposed under the plan does not exceed the limitations provided for under ACA §§1302(c)(1) and (c)(2). § 1302(c)(1) of ACA requires that group health plans limit out-of-pocket maximums while ACA § 1302(c)(2) limits deductibles for employer-sponsored plans.

ACA Deductible Limits

The FAQ clarifies that pending further guidance, self-insured group health plans and large group health plans currently are not generally required to comply with ACA’s deductible limitations.  According to the FAQ, the Departments currently view the deductible limits as generally applicable only to non-grandfathered small group insurance coverage and qualified health plans offered in the small group market. Additionally, the FAQ notes that pursuant to ACA § 1302(c)(2)(C), small group market health insurance coverage may exceed the annual deductible limit if it cannot reasonably reach a given level of coverage (metal tier) without exceeding the deductible limit.

In contrast, the FAQ states about self-insured and large group health plans, the Departments intend to engage in future rule making to implement PHS Act § 2707(b) with respect to self-insured and large group health plans.  However, the FAQ reports that the Departments continue to believe that only plans and issuers in the small group market are required to comply with the deductible limit described in ACA § 1302(c)(2).

The Departments invite interested parties to submit comments or other input relative to these deliberations no later than April 22, 2013 to e.ohpsca-2707.ebsa@dol.gov.

Until that rule making is promulgated and effective, however, the FAQ states that a self-insured or large group health plan can rely on the Departments’ stated intention to apply the deductible limits imposed by § 1302(c)(2) of the ACA only on plans and issuers in the small group market.  Accordingly, only plans and issuers in the small group market currently must comply with the ACA deductible limitations pending further guidance.

ACA Annual Out-Of-Pocket Maximum

In contrast, the FAQ confirms that all non-exempt, non-grandfathered group health plans – including self-insured and large and small insured group health plans must comply with ACA’s annual limits on out-of-pocket maximums.

The FAQ reaffirms statements in the preamble to the HHS final regulation on standards related to essential health benefits that the Departments read PHS Act § 2707(b) as requiring all non-grandfathered group health plans subject to ACA to comply with the annual limitation on out-of-pocket maximums described in ACA § 1302(c)(1).

While stating all non-grandfathered non-exempt group health plans generally must comply with the out-of-pocket maximum rules, the Departments recognize in the FAQ that the use by many plans of multiple service providers to help administer benefits (such as one third-party administrator for major medical coverage, a separate pharmacy benefit manager, and a separate managed behavioral health organization) may create compliance challenges since separate plan service providers may impose different levels of out-of-pocket limitations and may use different

methods for crediting participants’ expenses against any out-of-pocket maximums. To allow plans time to implement the arrangements to adjust plans and coordinate communications, the FAQ states that only for the first plan year beginning on or after January 1, 2014, where a group health plan or group health insurance issuer uses more than one service provider to administer benefits that are subject to the annual limitation on out-of-pocket maximums under ACA §§ 2707(a) or 2707(b), the Departments will consider the annual limitation on out-of-pocket maximums to be satisfied if the following conditions are satisfied:

  • The plan complies with the requirements with respect to its major medical coverage (excluding, for example, prescription drug coverage and pediatric dental coverage);
  • To the extent the plan or any health insurance coverage includes an out-of-pocket maximum on coverage that does not consist solely of major medical coverage (for example, if a separate out-of-pocket maximum applies with respect to prescription drug coverage), such out-of-pocket maximum does not exceed the dollar amounts set forth in ACA § 1302(c)(1); and
  • The plan complies with existing regulations implementing Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) which prohibit a group health plan (or health insurance coverage offered in connection with a group health plan) from applying a cumulative financial requirement or treatment limitation, such as an out-of-pocket maximum, to mental health or substance use disorder benefits that accumulates separately from any such cumulative financial requirement or treatment limitation established for medical/surgical benefits.

Accordingly, while the FAQ generally allows plans using separate vendors to separately apply out-of-pocket maximums to prescription drug coverage from medical benefits generally, this is not allowed to be accomplished where the effect would be to impose an annual out-of-pocket maximum on all medical/surgical benefits and a separate annual out-of-pocket maximum on all mental health and substance use disorder benefits in violation of the MHPAEA.

The FAQ is one of many clarifications and other guidance implementing the ACA Rules.  Compliance with these requirements as implemented is critical, as group health plans and insurers, their fiduciaries and sponsors face a myriad of exposures for violating these and other health plan rules.  In the case of these and many other federal health plan rules, this includes an often overlooked obligation imposed under Internal Revenue Code  § 6039D to self-identify, self-report and pay excises taxes under that provision in the event of a violation, as well as traditionally applicable ERISA exposures for violating federal benefit and coverage mandates.  In light of these risks, health insurers, group health plan sponsors, fiduciaries and service providers are urged to act diligently to amend their plans and take other necessary arrangements to administer their programs in accordance with the applicable rules.

For Representation, Training & Other Resources

If you need assistance monitoring these and other regulatory policy, enforcement, litigation or other developments, or to review or respond to these or other workforce, benefits and compensation, performance and risk management, compliance, enforcement or management concerns, the author of this update, attorney Cynthia Marcotte Stamer may be able to help.

Board Certified in Labor & Employment Law, Past Chair of the ABA RPTE Employee Benefit & Other Compensation Arrangements Group, Co-Chair and Past Chair of the ABA RPTE Welfare Plan Committee, Vice Chair of the ABA TIPS Employee Benefit Plans Committee, Vice President of the North Texas Health Care Compliance Professionals Association, Past Chair of the ABA Health Law Section Managed Care & Insurance Section and the former Board Compliance Chair of the National Kidney Foundation of North Texas, Ms. Stamer has more than 25 years’ experience advising health plan and employee benefit, insurance, financial services, employer and health industry clients about these and other matters. Ms. Stamer has extensive experience advising and assisting health care providers, health plans, their business associates and other health industry clients to establish and administer medical privacy and other compliance and risk management policies, to health care industry investigation, enforcement and other compliance, public policy, regulatory, staffing, and other operations and risk management concerns. She regularly designs and presents HIPAA and other risk management, compliance and other training for health plans, employers, health care providers, professional associations and others.

Ms. Stamer also regularly works with OCR, FTC, USSS, FBI and state and local law enforcement on privacy, data security, health care, benefits and insurance and other matters, publishes and speaks extensively on medical and other privacy and data security, health and managed care industry regulatory, staffing and human resources, compensation and benefits, technology, public policy, reimbursement and other operations and risk management concerns. Her publications and insights appear in the Health Care Compliance Association, Atlantic Information Service, Bureau of National Affairs, World At Work, The Wall Street Journal, Business Insurance, the Dallas Morning News, Modern Health Care, Managed Healthcare, Health Leaders, and a many other national and local publications. For instance, Ms. Stamer for the third year will serve as the appointed scribe for the ABA Joint Committee on Employee Benefits Agency meeting with OCR. Her insights on HIPAA risk management and compliance frequently appear in medical privacy related publications of a broad range of health care, health plan and other industry publications Among others, she has conducted privacy training for the Association of State & Territorial Health Plans (ASTHO), the Los Angeles Health Department, the American Bar Association, the Health Care Compliance Association, a multitude of health industry, health plan, insurance and financial services, education, employer employee benefit and other clients, trade and professional associations and others.  You can get more information about her HIPAA and other experience here.

You can review other recent human resources, employee benefits and internal controls publications and resources and additional information about the employment, employee benefits and other experience of the Cynthia Marcotte Stamer, PC here. If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile www.cynthiastamer.com or by registering to participate in the distribution of these and other updates on our HR & Employee Benefits Update distributions here including:

If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information including your preferred e-mail by creating or updating your profile here. For important information concerning this communication click here©2014 Cynthia Marcotte Stamer. Limited, non-exclusive right to republished granted to Solutions Law Press, Inc. All other rights reserved.


Medicare Secondary Payer Mandatory Reporting Threshold Clarified

March 4, 2014

The Centers for Medicare & Medicaid Services (CMS) has revised its guidance in its Non-Group Health Plan (NGHP) User Guide to clarify the reporting threshold for certain liability (including Self-Insurance) Settlements, Judgment Awards, or other Payments under the provisions of the Medicare Secondary Payer Mandatory Reporting Provisions in Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007, 42 U.S.C. 1395y(b)(7)&(b)(8) (the “Secondary Payer Mandatory Reporting Provisions”)

CMS announced revision to the NGHP User Guide in a February 28, 2014 CMS Alert.  According to the Alert:

  • The current mandatory reporting threshold for liability insurance (including self-insurance) Total Payment Obligation to the Claimant (TPOC) is $2000 and over for TPOCs dated on or after October 1, 2013.
  • The mandatory reporting threshold for liability (including self-insurance) TPOCs dated October 1, 2014 and after is changing from $300 to $1000. If the most recent TPOC Date is on or after October 1, 2014, and the cumulative TPOC Amount is greater than $1000, the TPOC(s) must be reported no later than the end of the RRE’s submission timeframe in the quarter beginning January 1, 2015.
  • Error code CJ07 has not been updated to reflect this change. Further guidance will be provided at a later date about changes to this error code to coincide with the new reporting threshold of $1000.

CMS reports that these changes will also be applied to the downloadable version of the MMSEA Section 111 Coordination of Benefits Secure Website (COBSW) User Guide, available on the COBSW.

The Secondary Payer Mandatory Reporting Provisions are designed to aid CMS in enforcing rules that require that group health insurance plans and third party liability payments be treated as primary and entitle CMS to subrogate to and recover amounts paid from Medicare from these sources as well as other penalties and interest from beneficiaries, providers, plans and others. For additional information about the Secondary Payer Mandatory Reporting Provisions, see here.

For Representation, Training & Other Resources

If you need assistance monitoring these and other regulatory policy, enforcement, litigation or other developments, or to review or respond to these or other workforce, benefits and compensation, performance and risk management, compliance, enforcement or management concerns, the author of this update, attorney Cynthia Marcotte Stamer may be able to help.

Board Certified in Labor & Employment Law, Past Chair of the ABA RPTE Employee Benefit & Other Compensation Arrangements Group, Co-Chair and Past Chair of the ABA RPTE Welfare Plan Committee, Vice Chair of the ABA TIPS Employee Benefit Plans Committee, Vice President of the North Texas Health Care Compliance Professionals Association, Past Chair of the ABA Health Law Section Managed Care & Insurance Section and the former Board Compliance Chair of the National Kidney Foundation of North Texas, Ms. Stamer has more than 25 years’ experience advising health plan and employee benefit, insurance, financial services, employer and health industry clients about these and other matters. Ms. Stamer has extensive experience advising and assisting health care providers, health plans, their business associates and other health industry clients to establish and administer medical privacy and other compliance and risk management policies, to health care industry investigation, enforcement and other compliance, public policy, regulatory, staffing, and other operations and risk management concerns. She regularly designs and presents HIPAA and other risk management, compliance and other training for health plans, employers, health care providers, professional associations and others.

Ms. Stamer also regularly works with OCR, FTC, USSS, FBI and state and local law enforcement on privacy, data security, health care, benefits and insurance and other matters, publishes and speaks extensively on medical and other privacy and data security, health and managed care industry regulatory, staffing and human resources, compensation and benefits, technology, public policy, reimbursement and other operations and risk management concerns. Her publications and insights appear in the Health Care Compliance Association, Atlantic Information Service, Bureau of National Affairs, World At Work, The Wall Street Journal, Business Insurance, the Dallas Morning News, Modern Health Care, Managed Healthcare, Health Leaders, and a many other national and local publications. For instance, Ms. Stamer for the third year will serve as the appointed scribe for the ABA Joint Committee on Employee Benefits Agency meeting with OCR. Her insights on HIPAA risk management and compliance frequently appear in medical privacy related publications of a broad range of health care, health plan and other industry publications Among others, she has conducted privacy training for the Association of State & Territorial Health Plans (ASTHO), the Los Angeles Health Department, the American Bar Association, the Health Care Compliance Association, a multitude of health industry, health plan, insurance and financial services, education, employer employee benefit and other clients, trade and professional associations and others.  You can get more information about her HIPAA and other experience here.

You can review other recent human resources, employee benefits and internal controls publications and resources and additional information about the employment, employee benefits and other experience of the Cynthia Marcotte Stamer, PC here. If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile www.cynthiastamer.com or by registering to participate in the distribution of these and other updates on our HR & Employee Benefits Update distributions here including:

If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information including your preferred e-mail by creating or updating your profile here. For important information concerning this communication click here©2014 Cynthia Marcotte Stamer. Limited, non-exclusive right to republished granted to Solutions Law Press, Inc. All other rights reserved.


3/3 Deadline To Comment On HHS Proposed Health Plan Certification of EDI Compliance Rule

March 3, 2014

Today (March 3, 2014) is the deadline for controlling health plans  (“CHPs) and other concerned parties to comment on the “Administrative Simplification: Health Plan Certification of Compliance” rule (Proposed Rule) published by the Department of Health & Human Service (HHS) on January 2, 2014.  If adopted as published, CHPs would be required to prepare and file the required certification with HHS by December 15, 2015.

HHS plans to use the Proposed Rule to implement the requirement of Section 1173(h)(1)(A) of the Patient Protection and Affordable Care Act (ACA) that CHPs file a statement with HHS certifying that the health plan is in compliance with the adopted standards and operating rules for electronic transactions for Eligibility for a health plan, health care claim status, health care electronic funds transfers (EFT) and remittance advice transactions established as part of the Standards for Electronic Transactions Final Rule (ET Standards) of the Health Insurance Portability and Accountability Act (HIPAA) Administrative Simplification Requirements (the “First Certification”).

Beyond the First Certification, ACA Section 1173(h)(1)(B) separately mandates health plan certification of compliance by December 31, 2015 for the following HIPAA transactions: Health care claims or equivalent encounter information, enrollment and disenrollment in a health plan, health plan premium payments, health claims attachments, and referral certification and authorization. Meanwhile ACA section 1173(h)(5) of the Act mandates that health plans meet certification of compliance requirements for later versions of the standards and operating rules.

The Proposed Rule only covers the First Certification. Guidance on the other certification rules will be separately published.

When adopted, the Proposed require that CHPs to submit the First Certification to HHS on or before December 31, 2015 certifying and demonstrating the CHPs compliance with these adopted standards and operating rules for three electronic transactions.

The following Table 1 displays the specific standards and operating rules to which the requirements for the First Certification of compliance apply.

To comply with the First Certification requirement, CHPs will have to conduct the necessary testing to be able to verify that the CHP has conducted testing and verified the health plan’s compliance with HIPAA’s electronic transactions standards for health plans concerning:

  • Eligibility for health plan coverage
  • Health care claim status
  • Health care electronic funds transfers (EFT) and remittance advice

The Proposed Rule proposes the requirements for certification and the penalties that will apply to a CHP that fails to comply with the certification of compliance requirements.

HHS is accepting public comments on the proposed rule through March 3, 2014.

For Representation, Training & Other Resources

If you need assistance monitoring these and other regulatory policy, enforcement, litigation or other developments, or to review or respond to these or other workforce, benefits and compensation, performance and risk management, compliance, enforcement or management concerns, the author of this update, attorney Cynthia Marcotte Stamer may be able to help.

Board Certified in Labor & Employment Law, Past Chair of the ABA RPTE Employee Benefit & Other Compensation Arrangements Group, Co-Chair and Past Chair of the ABA RPTE Welfare Plan Committee, Vice Chair of the ABA TIPS Employee Benefit Plans Committee, Vice President of the North Texas Health Care Compliance Professionals Association, Past Chair of the ABA Health Law Section Managed Care & Insurance Section and the former Board Compliance Chair of the National Kidney Foundation of North Texas, Ms. Stamer has more than 25 years’ experience advising health plan and employee benefit, insurance, financial services, employer and health industry clients about these and other matters. Ms. Stamer has extensive experience advising and assisting health care providers, health plans, their business associates and other health industry clients to establish and administer medical privacy and other compliance and risk management policies, to health care industry investigation, enforcement and other compliance, public policy, regulatory, staffing, and other operations and risk management concerns. She regularly designs and presents HIPAA and other risk management, compliance and other training for health plans, employers, health care providers, professional associations and others.

Ms. Stamer also regularly works with OCR, FTC, USSS, FBI and state and local law enforcement on privacy, data security, health care, benefits and insurance and other matters, publishes and speaks extensively on medical and other privacy and data security, health and managed care industry regulatory, staffing and human resources, compensation and benefits, technology, public policy, reimbursement and other operations and risk management concerns. Her publications and insights appear in the Health Care Compliance Association, Atlantic Information Service, Bureau of National Affairs, World At Work, The Wall Street Journal, Business Insurance, the Dallas Morning News, Modern Health Care, Managed Healthcare, Health Leaders, and a many other national and local publications. For instance, Ms. Stamer for the third year will serve as the appointed scribe for the ABA Joint Committee on Employee Benefits Agency meeting with OCR. Her insights on HIPAA risk management and compliance frequently appear in medical privacy related publications of a broad range of health care, health plan and other industry publications Among others, she has conducted privacy training for the Association of State & Territorial Health Plans (ASTHO), the Los Angeles Health Department, the American Bar Association, the Health Care Compliance Association, a multitude of health industry, health plan, insurance and financial services, education, employer employee benefit and other clients, trade and professional associations and others.  You can get more information about her HIPAA and other experience here.

You can review other recent human resources, employee benefits and internal controls publications and resources and additional information about the employment, employee benefits and other experience of the Cynthia Marcotte Stamer, PC here. If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile www.cynthiastamer.com or by registering to participate in the distribution of these and other updates on our HR & Employee Benefits Update distributions here including:

If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information including your preferred e-mail by creating or updating your profile here. For important information concerning this communication click here©2014 Cynthia Marcotte Stamer. Limited, non-exclusive right to republished granted to Solutions Law Press, Inc. All other rights reserved.