Integrated HRAs

A new option exists for employers when it comes to paying for employee health care coverage. On June 13^th, the U.S. Departments of the Treasury, Labor, and Health and Human Services (the Departments) issued a final rule allowing employers to use pretax dollars to subsidize employee premiums in the individual health insurance market. Now, employers of all sizes that do not offer a group coverage plan can fund a new health reimbursement arrangement (HRA) known as individual coverage HRA (ICHRA).

Previously, under the Affordable Care Act, employers were prevented from offering stand-alone HRAs that would allow an employee to purchase coverage on the individual market. That has changed. Employers now have the option to provide their workers and their families with tax-preferred funds to pay all or a portion of the cost of coverage that workers purchase in the individual market. The departments posted an FAQs regarding the new regulation. ICHRAs are advantageous to employers because they maintain the tax favored status that apply to a traditional group health plan. Additionally, another employer-sponsored insurance called Excepted Benefit HRAs (EBHRA) allows employers to finance an additional pretax $1,800 per year to reimburse employees for certain qualified medical expenses (such as premiums for vision and dental insurance) even if the employee opts out of enrollment in the traditional group plan.

Qualified Small Employer HRAs (QSEHRA) are still an attractive alternative to group coverage for smaller employers- those with fewer than 50 full-time employees. Under QSEHRAs, employers can give their employees money tax-free to purchase individual health policies through the ACA exchange, similar to ICHRAs. Employees can use these funds to pay all or part of the insurance plan premium or pay for out-of-packet medical costs. While ICHRAs are void of caps on annual allowance amounts, in 2019, QSEHRAs allowance amounts were capped at $5,150 for self-only employees and $10,450 for employees with a family. While ICHRAs are free of caps, employees who choose ICHRAs will not be able to receive any premium tax credit/subsidy for exchange-based coverage. In some instances, if an employer funds an ICHRA or a QSEHRA coupled with individual-market insurance, this will bar the individual-market coverage from becoming part of the Employee Retirement Income Security Act (ERISA).

If employers choose to offer ICHRAs, then the new regulations require a written notice be issued to all employees who are eligible. In this notice, employers need to include a provision that states the ICHRA may make them ineligible for a premium tax credit or subsidy when buying an Affordable Care Act exchange-based plan. ICHRAs will be available for plan years starting on or after January 1, 2020. Employers offering an ICHRA with a plan year that begins on January 1, 2020 should help eligible employees understand that they must enroll in individual health insurance coverage during the open enrollment period, November 1, 2019 through December 15, 2019, for individual health insurance coverage that takes effect on January 1, 2020.

ICHRAs and EBHRA are two new health insurance arrangements that could provide smaller employers with innovative and more cost-effective ways to finance worker health insurance coverage. The IRS has noted that including safe harbor provisions to ensure employers still satisfy the ACA’s affordability and minimum value requirements with ICHRAs will come out later this year.

© 2019 Vandenack Weaver LLC

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Protecting the Health Savings Account in Bankruptcy

Over a decade has passed since the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 created health savings accounts (HSA). Since that time, the use has grown to almost 14 million accounts, all receiving tax preferred treatment to help offset the out of pocket costs of a high-deductible health insurance plans.  While the use of HSAs has grown, questions regarding the safety of the funds from creditors has emerged.

The bankruptcy code is currently unclear regarding the protection of the HSA account from creditors. Certain states, such as Florida and Mississippi, expressly passed legislation that protects the debtor’s HSA from creditors during bankruptcy. Absent an express exemption, however, the question will depend upon whether the HSA is included in the estate of the chapter 7 bankrupt debtor.

Generally, the bankruptcy code includes all legal and equitable interests of the debtor. The exceptions include funds for healthcare, such as amounts withheld for a health plan regulated by state law. It is also arguable that the funds could be exempt under other provisions of the bankruptcy code. The issue, however, is that the bankruptcy code does not explicitly provide for HSAs, thus it is unclear whether they are exempt from the debtor’s bankruptcy estate. Recently, the Eighth Circuit Court of Appeals, whose jurisdiction includes Nebraska, held that the HSA does not fall within bankruptcy code exemptions and exceptions. For now, protecting the HSA from the bankruptcy estate is questionable and the result will vary significantly from one jurisdiction to another.

© 2016 Vandenack Williams LLC
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Nondiscriminatory Wellness Incentives

Federal agencies have issued final regulations for the Patient Protection and Affordable Care Act (PPACA).  Group health plans may not discriminate against individuals on the basis of health factors.  However, there is an exception to the nondiscrimination rules for wellness programs.  Wellness programs have been divided into two categories: (1) participatory wellness programs and (2) health-contingent wellness programs.

Participatory wellness programs must be set up to improve the health risk of all similarly situated individuals and not simply reward those who are already in good health.

Health contingent wellness programs must be designed to promote good health and prevent disease.  The program must not be overly burdensome, used to implicitly discriminate based on a health factor, and highly suspect in the method chosen.  The reward must allow a reasonable alternative standard, if it is unreasonably difficult because of an individual’s existing medical condition and it is medically inadvisable for an individual to attempt to satisfy the normal standard.  A plan does not need a specific reasonable alternative standard, but only the disclosure that one can be made available.

© 2013 Parsonage Vandenack Williams LLC

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Deadline for Patient Centered Outcomes Research (PCOR) Fee

July 31^st is the deadline to pay Patient Centered Outcomes Research “PCOR” fees established under the Patient Protection and Affordable Care Act (“PPACA”),   This deadline applies to all health insurance plan sponsors and health care insurers for a plan year that ends after Sept. 30, 2012 and before Jan. 1, 2013. The fee is paid with Form 720. The IRS has recently posted an updated of such form and a payment voucher on the IRS website.

The fee will be used to fund research regarding clinical effectiveness relating to patient centered outcomes. This research institute conducts research to help assist patients, clinicians, purchasers, and policy-makers in making informed health decisions.

© 2013 Parsonage Vandenack Williams LLC

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Governor Heineman Determines that Nebraska will have a Federal Healthcare Exchange

Governor Heineman announced that he has opted to have Nebraska adopt a Federal Healthcare Exchange.  In support  of his decision, Heineman pointed out that a State Healthcare Exchange would cost Nebraskans $470 million more than a Federal Healthcare Exchange.

Health care exchanges are mandated under the Patient Protection and Affordable Care Act.   A healthcare exchange is an organization in the health insurance market that is expected to ease the complications of shopping for coverage for consumers and small businesses.  Exchanges are expected to create a more organized and competitive market.  Exchanges will offer different health insurance  plans and will be organized  in a way that shows a clear comparison of available plan options based on price, benefits and services, and quality.  For individuals, a federal healthcare exchange will create a more efficient healthcare market while also making purchasing healthcare more affordable and understandable.

© 2012 Parsonage Vandenack Williams LLC

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Nebraska Will Wait to Implement Health Care Exchanges

Governor Heineman recently said Nebraska will wait to set up a health care exchange until the U.S. Supreme Court rules on whether the Patient Protection and Affordable Care Act (the “Act”) is constitutional.  The health care exchanges are intended to offer health insurance to those currently without coverage.  While Nebraska is planning a program in case the Act is ruled constitutional, Governor Heineman said it does not make sense to build a formal proposal until the Court has decided.  The Act requires states to have a health care exchange plan certified by January of 2013.

© 2011 Parsonage Vandenack Williams LLC

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HHS Offers HIT Grants to Help States Establish Exchanges

The Department of Health and Human Services (“HHS”) has announced that five states will receive grants to design the technology needed for health insurance exchanges.

States (and coalitions of states) have the opportunity to compete for the two-year “Early Innovator” grants, which will help pay the cost of developing and implementing the information technology infrastructure for establishing the exchanges.  The models developed by the grant recipients will then be made available for other states to use to help establish their exchanges.

The grants will be awarded by February 15, 2011.  They will be given to states with ambitious but attainable proposals that have the ability to generate IT models that can serve as best practices.

HHS has not determined how much money grant recipients will receive.  Rather, HHS will look to the states to determine how much their proposals would cost.

The Patient Protection and Affordable Care Act of 2010 (“PPACA”) requires states to implement the insurance exchanges by 2014, which are envisioned as websites to compare insurance plans.

© 2010 Parsonage Vandenack Williams LLC

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Tax Alert: Key Provisions of New Healthcare Law

The PVW Healthcare Newsletter was mailed out to our clients this month, addressing many issues and concernes regarding the new Health Care Bill.

The electronic version can be viewed by clicking the following link:

http://www.pvwlaw.com/CM/Articles/00133334.pdf.

© 2010 Parsonage Vandenack Williams LLC

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Payments of Penalties for Being Uninsured Under the Healthcare Bill

Starting in 2014, the Patient Protection and Affordable Care Act requires most United States residents to obtain health insurance and establishes a penalty for being uninsured. Here are several important facts about the law and its requirements:

• The penalty will be the greater of a flat dollar amount per person that rises to $695 in 2016 and is indexed by inflation thereafter (the penalty for children will be half that amount and an overall cap will apply to family payments) or a percentage of the household’s income that rises to 2.5 percent for 2016 and later years (also subject to a cap).
• It is estimated that about 21 million nonelderly residents will be uninsured in 2016, but most will not face the penalty.
  • For instance, unauthorized immigrants are exempted from the requirement to obtain health insurance.
  • Others will be subject to the requirement but exempted from the penalty (i.e., because they will have income low enough that they do not have to file an income tax return, because they are members of Indian tribes, or because the premium they would have to pay would exceed a specified share of their income).
  • Individuals may also be granted waivers from the penalty because of hardship and may be exempted from the mandate on the basis of their religious beliefs.
• Of those who are subject to the penalty, many will voluntarily report on their tax returns that they are uninsured and pay the required amount. Still, others will try to avoid making payments.
• Thus, the estimates presented here take into account probable compliance rates, as well as the ability of the IRS to administer and collect the penalty.
• In total, about 4 million people are projected to pay a penalty because they will be uninsured in 2016.  This includes uninsured dependents that have the penalty paid on their behalf.

© 2010 Parsonage Vandenack Williams LLC

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Senate Health Care Bill Overcomes Hurdle for Final Passage

Senate Democrats have obtained the needed 60^th vote approving a procedural motion to move the health care reform bill toward final passage on Christmas Eve.  Vote for final passage was 60-40, completely divided on party lines.  Not one Republican in the Senate voted for the health care reform bill. 

Once the bill clears the Senate, House and Senate negotiators will begin negotiations for joining two very different House and Senate bills.  The Senate bill, which is expected to cost $871 billion over ten years, would extend coverage to 31 million uninsured Americans by expanding Medicaid, offering new insurance subsidies, and creating a national insurance marketplace.  The Senate bill would also raise the Medicare Payroll Tax for individuals making over $200,000 and couples over $250,000. Additionally, insurance companies could no longer deny insurance over pre-existing conditions or set a lifetime on benefits.  But the bill has been trimmed from its original form.  The government-run insurance option has been eliminated, along with the proposed substitute for the public option by expanding Medicare eligibility to individuals as young as 55. 

© 2009 Parsonage Vandenack Williams LLC

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