New ACA Student Health Insurance Guidance Allows College Payment Of Working Students’ Student Health Insurance Premiums Post 2016

October 21, 2016

Colleges and other institutions of higher education within the meaning of the Higher Education Act of 1965 (schools) may continue until further notice to pay or subsidize student health insurance coverage premiums for students performing work-study or other services for the school as part of their financial aid package without fear of prosecution for violation of the group market reform requirements of the Patient Protection & Affordable Care Act (ACA), according to ACA guidance jointly published by the Departments of Labor (DOL), Health and Human Services (HHS), and the Treasury (collectively, the Tri-Agencies) today.

Many schools have arrangements in place with insurers under which students can purchase individual policies providing health insurance coverage (“student health insurance coverage”), which are individual policies required to comply with the individual market reforms of the ACA other than as provided in the student health insurance guidance issued by HHS. See 45 CFR 147.145.

Of course, the agreement between the college and the student health insurance coverage issuer makes the coverage available for purchase by most if not all students attending the school by paying the specified premium.  In some cases, however, the school might include in a student’s financial aid package a reduction to the cost of coverage of the otherwise applicable premium for student health insurance through a credit, offset, reimbursement, stipend, or similar arrangement (a premium reduction arrangement). If the student also performs services under a workstudy or other relationship, however, Tri-Agency guidance interpreting the Group Market Reforms could present a problem unless qualifies for an exemption from the Tri-Agencies’ interpretation of the Group Market Reforms as prohibited employers from paying or reimbursing individual health insurance policy premiums of employees..

The Tri-Agencies’ first announced their interpretation of the Group Market Reforms as prohibiting employer reimbursement of individual health insurance premiums in 2013.  Technical Release 2013-03 announced that employers sponsoring arrangements under which the employer directly pays or reimburses premiums for employees’ individual health insurance coverage directly, or through a cafeteria plan pre-tax premium program, health flexible spending account arrangement (health FSA), health reimbursement arrangement (HRA),  or other employer arrangement would incur excise taxes liability under section 4980D of the Internal Revenue Code and other penalties and liabilities for violating the ACA Group Market Reform rules.  This Tri-Agency Guidance states that because by their very definition, these arrangements promise to reimburse or pay medical expenses on the employee’s behalf only up to a certain dollar amount each year, employer-sponsored arrangements that pay or reimburse employees for individual health insurance premiums generally violate the prohibition on annual dollar limits under Public Health Services (PHS) Act section 2711 and the requirement to provide certain preventive services without cost sharing under PHS Act section 2713 unless properly integrated with a group health plan that otherwise complies with ACA requirements.  Furthermore, because the Tri-Agencies also construe the ACA market reforms as preventing the integration of EPPs and individual health insurance coverage, the Tri-Agencies’ guidance also states that an arrangement through which an employer reimburses or directly pays the premium for individual coverage violates the ACA market reform rules. Accordingly, unless otherwise exempted from coverage, this Tri-Agency guidance would prohibit schools from reimbursing students providing services to the school for student health insurance premiums.

Under Tri-Agency guidance published in February, 2016, the Tri-Agencies previously announced they would not that a premium reduction arrangement provided by a school to a student fails to satisfy PHS Act section 2711 or 2713 if the arrangement is offered in connection with other student health coverage (insured or self-insured) for a plan year or policy year beginning before January 1, 2017, but until October 21, 2016, did not address the post-2016 treatment of these arrangements .  See Technical Release 2016-01;  Notice 2016-17, Insurance Standards Bulletin, Application of the Market Reforms and Other Provisions of the Affordable Care Act to Student Health Coverage.

Under guidance jointly published October 21, 2016, however, the Tri-Agencies extended their policy of non-enforcement with respect to school student health insurance premium reimbursement arrangements beyond its previously announced December 31, 2016 expiration date.  FAQs About Affordable Care Act Implementation Part 33 (“FAQ 33”) jointly published by the Tri-Agencies states that “pending further guidance, the Tri-Agencies consider it appropriate to further extend the enforcement relief provided in the February 5, 2016 guidance and will not assert that a premium reduction arrangement offered by an institution of higher education fails to satisfy PHS Act section 2711 or 2713 if the arrangement is offered in connection with student health coverage (insured or self-insured).

About The Author

Cynthia Marcotte Stamer is a noted Texas-based management lawyer and consultant, author, lecture and policy advocate, recognized for her nearly 30-years of cutting edge management work as among the “Top Rated Labor & Employment Lawyers in Texas” by LexisNexis® Martindale-Hubbell® and as among the “Best Lawyers In Dallas” for her work in the field of  “Labor & Employment,”“Tax: Erisa & Employee Benefits,” “Health Care” and “Business and Commercial Law” by D Magazine.

Board Certified in Labor & Employment Law by the Texas Board of Legal Specialization, a Fellow in the American College of Employee Benefit Counsel, past Group Chair and current Defined Contribution Plans Committee Co-Chair, Groups and Substantive Committee and Membership Committee Members, past Welfare Plans Committee Chair and Co-Chair, and former Fiduciary Responsibility Vice Chair of the American Bar Association (ABA) RPTE Section Employee Benefits Group, Vice Chair of the ABA Tort & Insurance Practice Section Employee Benefits Committee, current ABA International Section Life Sciences Committee Vice Chair, past Chair of the ABA Health Law Section Managed Care & Insurance Interest Group, former ABA Joint Committee on Employee Benefits Council Representative and Marketing Committee Chair and a prolific author and highly popular speaker and consultant, Ms. Stamer helps management manage.

Ms. Stamer’s legal and management consulting work throughout her nearly 30-year career has focused on helping organizations and their management use the law and process to manage people, process, compliance, operations and risk. Highly valued for her rare ability to find pragmatic client-centric solutions by combining her detailed legal and operational knowledge and experience with her talent for creative problem-solving, Ms. Stamer helps public and private, domestic and international businesses, governments, and other organizations and their leaders manage their employees, vendors and suppliers, and other workforce members, customers and other’ performance, compliance, compensation and benefits, operations, risks and liabilities, as well as to prevent, stabilize and cleanup workforce and other legal and operational crises large and small that arise in the course of operations.

Ms. Stamer works with businesses and their management, employee benefit plans, governments and other organizations deal with all aspects of human resources and workforce, internal controls and regulatory compliance, change management and other performance and operations management and compliance. She supports her clients both on a real time, “on demand” basis and with longer term basis to deal with daily performance management and operations, emerging crises, strategic planning, process improvement and change management, investigations, defending litigation, audits, investigations or other enforcement challenges, government affairs and public policy.

For additional information about this topic or  Ms. Stamer, see CynthiaStamer.com or contact Ms. Stamer via email here or via telephone to (469) 767-8872.

About Solutions Law Press, Inc.™

Solutions Law Press, Inc.™ provides human resources and employee benefit and other business risk management, legal compliance, management effectiveness and other coaching, tools and other resources, training and education on leadership, governance, human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal control and operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press, Inc.™ resources at http://www.Solutionslawpress.com.

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. ©2016 Cynthia Marcotte Stamer. Non-exclusive right to republish granted to Solutions Law Press, Inc.™. All other rights reserved.

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These statements and materials are for general informational and purposes only. They do not establish an attorney-client relationship, are not legal advice, and do not serve as a substitute for legal advice. Readers are urged to engage competent legal counsel for consultation and representation in light of the specific facts and circumstances presented in their unique circumstance at any particular time. No comment or statement in this publication is to be construed as an admission.  The author reserves the right to qualify or retract any of these statements at any time. Likewise, the content is not tailored to any particular situation and does not necessarily address all relevant issues.  Because the law is rapidly evolving and rapidly evolving rules makes it highly likely that subsequent developments could impact the currency and completeness of this discussion. The presenter and the program sponsor disclaim, and have no responsibility to provide any update or otherwise notify any participant of any such change, limitation, or other condition that might affect the suitability of reliance upon these materials or information otherwise conveyed in connection with this program. Readers may not rely upon, are solely responsible for, and assume the risk and all liabilities resulting from their use of this publication.

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ACA Prohibits Employer Paying Individual Health Premiums For Employees, IRS Says Again

March 22, 2015

Employers cannot pay for or reimburse employees for any portion of the cost for the employee to buy individual health insurance coverage for himself or his family from a Health Insurance Exchange or “Marketplace” established as part of the health care reforms of the Patient Protection & Affordable Care Act (ACA) or otherwise.  That’s the message of new IRS Notice 2015-17. Employers that since 2013 have paid for or reimbursed employers for individual health insurance costs through a cafeteria plan or otherwise in 2014 should contact qualified legal counsel experienced in the health plan rules of ACA and federal health plan rules to discuss their practice, the extent to which any payments or reimbursements previously paid can qualify for special temporary relief granted to small employers under IRS Notice 2015-17, and what if any corrective action the employer needs to take to correct any compliance concerns associated with current or prior year’s practice of paying for or reimbursing individual health policy costs.

Although certain brokers and consultants continue to aggressively promote arrangements under which employers pay for or reimburse employees for individual health policy premiums as a way for employers to circumvent some of the challenges for employers of offering health coverage to employees under the group health plan rules of ACA, the IRS, DOL and HHS have made clear since early 2013 that they view such practices as prohibited by ACA’s Market Reforms, regardless of whether the payment or reimbursement is done on a pre-tax or after-tax basis, or done through a formal “plan” or through any other employer payment plan or arrangement.  See FAQs About Affordable Care Act Implementation (Part XI) issued by the Department of Labor (DOL) and Department of Health & Human Services (HHS) on January 24, 2013; Notice 2013-54 and DOL Technical Release 2013-03 issued on September 13, 2013; IRS FAQ on Employer Healthcare Arrangements; and FAQs About Affordable Care Act Implementation (Part XXII) issued by DOL  and HHS on November 6, 2014.

While reaffirming the IRS, HHS and DOL’s previous guidance indicating that ACA’s Market reforms prohibit employer payment plans, Notice 2015-17 also:

  • Announces temporary transitional relief from excise tax penalties under Code § 4980D for certain arrangements maintained by qualifying small employers that maintained such arrangements in 2014.
  • Provides additional guidance on the tax treatment of employer payment plans; and
  • Supplements and clarifies the guidance provided in Notice 2013-54 and other guidance about ACA’s prohibition of employer payment plans.

In light of this guidance, any employer currently maintaining such arrangement immediately should consult with qualified legal counsel within the scope of attorney-client privilege about their arrangement, among other things to evaluate:

  • The legality of the existing and proposed arrangements and their liability and other implications on the employer’s compliance with ACA and resulting liabilities and responsibilities resulting therefrom in light of the additional guidance on the tax treatment of such arrangements set forth in Notice 2015-17, as well as previously published IRS and other Tri-Agencies guidance about employer payment plans; and
  • Whether any action needs to be taken to address any potential violation of Tri-Agency rules resulting from the arrangement.

When conducting this evaluation, employers and others  should use care not to over-estimate the scope of the temporary relief announced in Notice 2015-17.  First, the relief announced in 2015-17 only applies for the 2014 tax year for certain small employers from the self-reporting and excise tax liability provisions of Internal Revenue Code (Code) § 4980D for failure to satisfy market reforms in relation to the specific arrangements detailed in Notice 2015-17.  In this respect, Notice 2015-17’s transition relief only applies for the 2014 tax year to employer healthcare arrangements that are :

  • Employer payment plans, as described in Notice 2013-54, if the plan is sponsored by an employer that is not an Applicable Large Employer (ALE) under Code § 4980H(c)(2) and §§54.4980H-1(a)(4) and -2;
  • S corporation healthcare arrangements for 2-percent shareholder-employees;
  • Medicare premium reimbursement arrangements; and
  • TRICARE-related health reimbursement arrangements (HRAs).

When evaluating an existing, previous or proposed employer payment arrangement, employers and others involved should consider taking steps to arrange for their discussions and evaluations to be conducted in a manner that positions the party or parties to be able to claim attorney-client privilege of the discussions and to protect such privileges against waiver to the extent possible.  In this respect, employers and others involved in such arrangements should be cognizant that certain evidentiary privileges such as accountant-client privilege that sometimes might apply for certain tax representation purposes may provide less reliable evidentiary discovery protection than attorney-client privileges under the circumstances as  discussions with accountants or other non-attorney consultants or advisors typically do not generally provide protection like attorney-client privilege in non-tax civil litigation by private plaintiffs or enforcement actions by certain of the Tri-Agencies of potential violations of the ACA Market Reform prohibition.

ACA’s prohibition against employer payment of individual health insurance policy premiums is only one of an ever-growing list of ACA and other federal health plan rules that employers and other group health plan sponsors and their plans must meet.  Many of these rules also fall under a Sarbanes-Oxley style provision of the Code that requires most employers to evaluate and maintain their health plan’s compliance with the applicable rule or self-report and self-assess and pay the applicable penalty for the violation when filing their health plan’s annual Form 5500.  With the 2014 plan year Form 5500 filing deadline rapidly approaching, employers and their health plan fiduciaries, insurer and vendors will want to act quickly to review, identify and develop a plan with legal counsel to address any potential concerns with the market reform and other requirements of federal law promptly.

For Advice, Training & Other Resources

If your business need legal advice about the your health or other employee benefit or human resources practices, assistance assessing or resolving potential past or existing compliance exposures, or monitoring and responding 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 receive these and other updates here.  Recent examples of these updates include:

About Solutions Law Press

Solutions Law Press™ provides business risk management, legal compliance, management effectiveness and other resources, training and education on human resources, employee benefits, data security and privacy, insurance, health care and other key compliance, risk management, internal controls and operational concerns. If you find this of interest, you also be interested reviewing some of our other Solutions Law Press resources at www.solutionslawpress.com.

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 at here or e-mailing this information here.

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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.

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