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Background

Back in 2016, Governor Brown signed Senate Bill 1234, which required the state’s Secure Choice Retirement Savings Investment Board to begin developing a workplace retirement savings program, known as CalSavers, for private sector workers whose employers do not offer a retirement plan.  The program is required to have minimal administrative requirements for employers, and state law protects employers from any liability or fiduciary responsibilities.  State law also requires that the program be exempt from ERISA.

This program launched a pilot initiative with a small group of participating employers in November, 2018, and beginning July, 2019, all employers could register for the program.  This program requires all California employers with 5 or employees to either provide a retirement plan for their workers, or register for CalSavers and facilitate employees’ contributions to Individual Retirement Accounts. 

Compliance Deadlines

CalSavers initiated compliance deadlines, depending on business size.  For employers with over 100 employees, the deadline is June 30, 2020.  For employers with 50-99 employees, the deadline is June 30, 2021, and for small employers with 5-49 employees, the deadline is June 30, 2022. 

I’ve personally heard fears and frustration from some California small employers, although I’m not sure those employers clearly understand what’s required of them.

Cost to Employer

So is there a cost to the employer to offer CalSavers?  “Although employers do not have to pay a fee to participate in CalSavers,” stated Marilyn Monahan of Monahan Law Office, “there are administrative responsibilities the employer has to be prepared to implement.  Planning ahead is essential.” 

These  administrative requirements result in an indirect cost to the employer, as someone will have to do the work from the employer’s office.

With the large employer (100 + employees) deadline fast approaching, I wanted to provide some helpful information to help calm the concerns.  Smaller employers have more time, but still, they need to be prepared, as it will take some clerical and payroll-related training for those designated to register and later, process the contributions, etc. 

CalSavers vs Company-Sponsored Retirement Plans

So what is the difference between setting up a CalSavers program and implementing your own retirement program for your employees?  Money, time and flexibility.  Setting up an employer-based retirement plan is not easy, and generally takes several months to set up. However, most employers with over 100 employees  already have some type of retirement program.  I personally think the largest percentage of enrollees will be the employers with under 100 employees.  Only four in ten small businesses reportedly offer any type of retirement program to their employees.  Lawmakers argue that this makes it very difficult for California employees working for small companies to properly prepare for retirement. 

Common statistics show that Americans are 15-times more likely to save for retirement when they have a savings plan or other retirement plan available at work. 

If an employer decides to set up their own company-sponsored retirement program, I highly recommend that they use the services of a qualified benefits consultant to assist them.  Many of the smaller employers, I’m guessing, may opt to just sign up for CalSavers.  Or they may sign up for CalSavers because they don’t know that their benefit consultants could, in many circumstances, assist them in this function.  Therefore, this is something consultants can and should consider discussing with their employer clients.  I do want to caution both consultants and employers that anyone assisting with a retirement plan should be qualified to do so.  Dabbling in pensions is dangerous, to say the least.  Health brokers that don’t do retirement plans may be tempted to jump into this market as an additional revenue stream.  I’d recommend you team up with another consultant or broker who has a lot of experience selling and servicing retirement plans.  Many can be sold only with securities licenses. 

Qualified employer-sponsored retirement plans include: Qualified pension plans; 401(k) plans; 403(a) plans; 403(b) plans; Simplified Employee Pension (SEP) plans; Savings Incentive Match Plan for Employees (SIMPLE) plans; Payroll deduction IRAs with automatic enrollment.

“For employers that do not want to bear the administrative burden and cost of setting up their own retirement plan, CalSavers is an opportunity to offer employees another way to save for their future,”  commented Marilyn Monahan.

Most employers use an outside payroll service, and these service providers may be able to assist with the majority of the processing work.  “If you use a payroll service,”  commented Marilyn Monahan, “consult with the vendor in advance to be certain the vendor can assist with the CalSavers implementation and on-going administration, and coordinate– and define– the responsibilities of the vendor and the employer in each step of the process.  Confirm whether there will be an additional charge, and amend the services agreement as necessary.” 

In my experience, most payroll companies will charge for this, as they tend to charge for each additional step and deduction the employer makes.  But, as Marilyn stated, it’s always best to do your homework up front, and not have any last minute surprises, especially financially.

It’s also important to note that the state program is likely to have less bells and whistles than an employer-sponsored retirement plan.  Employers may decide that starting their own plan will allow them to offer a plan that meets both the employer and employee needs. 

Employer Requirements—Whether Enrolling or Exempt

It’s important that employers understand that they are being asked to either enroll in CalSavers, or indicate that they are exempt if they already offer a retirement plan.  It is unclear to me whether this is mandatory or just requested (this is a question  I will ask at the OCAHU meeting on March 10th, but an email from CalSavers on February 20  stated “Employers that offer a qualified plan will register an exemption. Basically they’re going through the registration link and they will enter their EIN, CA payroll tax account number and access code. It will then ask them if they offer a qualified plan and then what type of plan. That will complete the exemption process.”). Employers should log onto the state’s website and begin their registration or exemption.  Employers will be required to (as the email from CalSavers said) enter their California Employer Payroll Tax Account Number from the EDD, their Federal Employer Identification Number (EIN/TIN) and a CalSavers access code.  There is help along the way for questions on the online registration process. 

Employers will also need to set up delegates or payroll representatives, then create a payroll list with eligible, participating employees.  Of course, after setup , the employer will have to have someone assigned to manage the account maintenance, like submitting contributions and updating payroll with new hires, etc. into the program. 

Payroll-Deducted Plan Setup

CalSavers was set up to be a payroll-deducted IRA plan, and auto-enrolling employees at a 5% contribution rate, with a 1% auto escalation, up to 8% of the employee’s salary.  Employees will be able to opt out of the program at any time, and the account can follow them if they change jobs in California. 

Automatic Enrollment

Employees who don’t opt out of the plan will automatically be enrolled 30 days after their hire date or eligibility date, and their contributions will be fully vested from the first day.  This is more favorable than some employer-sponsored retirement plans to the employees. 

Can Business Owners Participate?

Business owners in California can enroll in CalSavers also, as long as they are also an employee on payroll.  If they are not an employee but would like to participate, they will be allowed to do so, but contributions would have to come from a bank account rather than from the normal payroll deduction.

More Information 

If employers need more information on the CalSavers program, they can speak to a representative at 855 650-6916, or email clientservices@calsavers.com.  In addition, I’d recommend that members reading this article attend the OCAHU March lunch meeting, on March 10, from 11-1 at JT Schmid’s Anaheim, where OCAHU will host Jason Gilbert, representing CalSavers, to educate our members on the program.  You may even want to invite your clients.  ##

Author’s Note:  This article is not intended to provide legal advice.  I have gathered public information to assist you in understanding the basics of the employer mandate that requires employers not offering a retirement plan to register for the state-run CalSavers program. 

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IRS Extends Deadlines for Certain ACA Reporting

On December 2, 2019, the IRS issued Notice 2019-63, which provides transition relief for 2019 ACA reporting for applicable large employers. 

The transitional relief provides an extension for the due date for furnishing forms under Sections 6055 and 6056 for 2019 from January 31, 2020, to March 2, 2020.  It also extends good-faith transition relief from penalties related to 2019 information reporting under Sections 6055 and 6056, and provides an additional penalty relief related to furnishing 2019 forms to individuals under Section 6055. 

It’s important to note that the due date for filing forms with the IRS for 2019 is unchanged; February 28, 2020 for paper forms, or March 31, 2020 if filing electronically.

Notice 2019-63 provides an additional 31 days for furnishing the 2019 (individual) Form 1095-B and Forms 1095-C, extending this deadline from January 31, 2020 to March 2, 2020.  The IRS will not grant additional extensions of time up to 30 days to furnish Forms 1095-B and 1095-C because this extended deadline applies automatically to all reporting entities.  As a result, the IRS will not formally respond to any requests that have already been submitted for 30-day extensions of time for statements for 2019. 

Despite the extension, the IRS is encouraging employers and other coverage providers to  furnish 2019 statements to individuals as soon as they are able. 

Notice 2019-63 also extends transition relief from penalties for providing incorrect or incomplete information to reporting entities that can show that they have made good-faith efforts to comply with Sections 6055 and 6056 reporting requirements for 2019; this includes furnishing forms to individuals as well as filing with the IRS.  Basically, the relief applies to forms that have missing or inaccurate taxpayer ID numbers and dates of birth, as well as other information required on the return or statement.  No relief is provided for reporting entities that do not make a good-faith effort to comply or fail to file an information return or furnish a statement by the due dates (as extended). 

In determining good faith, the IRS takes into account whether a reporting entity made reasonable efforts to prepare for reporting the required information to the IRS and furnishing information to individuals.  The IRS also takes into account the extent to which the reporting entity made reasonable efforts to prepare for this reporting requirement. 

As I’m sure you’re aware, the individual mandate penalty has been reduced to zero beginning 2019¹.  Because of this, the IRS is studying whether and how Section 6055 reporting requirements will change, if at all, in future reporting years.   Because there is no penalty, the individual does not need the information on the Form 1095-B for his or her individual tax return.  However, reporting entities must continue to provide the Form 1095-B to individuals.

Notice 2019-63 provides relief from the penalty for failing to furnish a statement to individuals as required under Section 6055 in certain cases for 2019.  The IRS will not impose a penalty under Section 6722 against reporting entities for failing to furnish a Form 1095-B to responsible individuals in cases where two conditions are met: 

· The reporting entity prominently posts a notice on its website stating that responsible individuals may receive a copy of the 2019 Form 1095-B upon request, accompanied by an email address and a physical address to which a request may be sent, as well as a telephone number that responsible individuals can use to contact the reporting entity with any questions, and

The reporting entity furnishes a 2019 Form 1095-B to any responsible individual upon request within 30 days of the date the request is · received.

Special Considerations for Self-Funded Health Plans

Self-funded employers are generally required to use Form 1095-C, Part III to meet the reporting requirements, instead of Form 1095-B.  However, according to the notice, because of the combined reporting under sections 6056 and 6055 on the Form 1095-C for full-time employees of ALE members enrolled in a self-funded plan, the 2019 section 6055 furnishing relief does not extend to the requirement to furnish Forms 1095-C to full-time employees.  Accordingly, per the Notice, for full-time employees enrolled in self-funded health plans, penalties will continue to be assessed consistent with prior enforcement policies for any failure by ALE members to furnish Form 1095-C, including Part III, according to the instructions.  However, the 2019 section 6055 furnishing relief does extend to penalty assessments in connection with the requirement to furnish the Form 1095-C to any employee enrolled in an ALE member’s self-funded health plan who is not a full-time employee for any month in 2019.

Because these situations vary and can be complicated, we always recommend that you and/or your employer clients seek the advice of legal and/or tax professionals to see how these extensions apply to them. 

Trump Administration Releases Transparency in Coverage Proposed & Final Rules (CMS-9915-P)

On November 15, 2019, the Transparency in Coverage Proposed Rule was released by the Departments of Health & Human Services, Department of Labor, and Department of the Treasury, in response to President Trump’s executive order on Improving Price and Quality Transparency. 

Two rules were issued to take steps toward price transparency.  The first is the Calendar Year 2020 Outpatient Prospective Payment System (OPPS) & Ambulatory Surgical Center (ASC) Price Transparency Requirements for Hospitals to Make Standard Charges Public (final rule).  The second rule is the Transparency in Coverage Proposed Rule, that requires that pricing information be made publicly available. 

As Marilyn Monahan stated in her January-February Legal Brief, these rules are highly controversial and there has already been a lawsuit filed to stop the final rule.

In general, seven main cost-sharing information disclosure requirements are outlined, which must be made available to participants through and online, self-service tool. 

According to HHS Secretary Alex Azar, “President Trump has promised American patients ‘A+’ healthcare transparency, but right now our system probably deserves an ‘F’ on transparency.  President Trump is going to change that, with what will be revolutionary changes for our healthcare system.  Today’s transparency announcement may be a more significant change  to American healthcare markets than any other single thing we’ve done, by shining light on the costs of our shadowy system and finally putting the American patient in control.”  According to HHS, the Trump Administration is taking action toward making sure that insured and uninsured

Americans alike have the information necessary to get an accurate estimate of cost of the healthcare services they are seeking before they receive care.

In response to the Executive Order, HHS, DOL and Department of Treasury (collectively, the Departments) are issuing a proposed rule, “Transparency in Coverage” that would require most employer-based group health plans and health insurance issuers offering group and individual coverage to disclose price and cost-sharing information to plan participants, beneficiaries, and enrollees up fron.  With this information, according to HHS, patients will have accurate estimates of any out-of-pocket costs they must pay to meet their plan’s deductible, co-pay, or co-insurance requirements.  This will make previously unavailable price information accessible to patients and other stakeholders in a standardized way, allowing for easy comparisons. 

The seven main disclosures are:

• Estimated cost-sharing liability
• Accumulated amounts of responsibility, including deductible or OOP limits
• Negotiated rate, in dollars, for an in-network provider for a requested covered item or service
• Out-of-Network allowed amount for a requested item or service
• Itemized list of covered items and services for which  cost-sharing information is disclosed
• Notice of prerequisites to coverage
• Disclosure notice including various costs, balance bills, actual charges, and cost-sharing liability

If finalized, the proposed Transparency in Coverage rule would require health plans to:

• Give consumers real-time, personalized access to cost-sharing information, including an estimate of their cost-sharing liability for all covered healthcare items and services, through an online tool that most group health plans and health insurance issuers would be required to make available to all of their members, an in paper form, at the consumer’s request.  This requirement would empower consumers, according to HHS, to compare costs between specific providers before receiving care.
• Disclose on a public website their negotiated rates for in-network providers and allowed amounts paid for out-of-network providers.  This is intended to promote competition in pricing, as well as assist the consumer.

The rule (being finalized) will require hospitals to provide patients with clear, accessible information about their “standard charge” for the items and services they provide, including through the use of standardized data elements, making it easier to shop and compare across hospitals, as well as mitigate surprises.  The final rule will require hospitals to make their standard charges public in two ways beginning in 2021:

• Comprehensive Machine-Readable File:  Hospitals will be required to make public all hospital standard charges (including the gross charges, payer-specific negotiated charges, the amount the hospital is willing to accept in cash from a patient, and the minimum and maximum negotiated charges) for all items and services on the Internet in a single data file that can be read by other computer systems.  The file must include additional information such as common billing or accounting codes used by the hospital and a description of the item or service to provide common elements for consumers to compare standard charges from hospital to hospital.
• Display of Shoppable Services in a Consumer-Friendly Manner:  Hospitals will be required to make public payer-specific negotiated charges, the amount the hospital is willing to accept in cash from a patient for an item or service, and the minimum and maximum negotiated charges for 300 common shoppable services in a manner than is consumer-friendly and update the information at least annually.
• In order to ensure that hospitals comply with the requirements, the final rule provides CMS with new enforcement tools including monitoring, auditing, corrective action plans, and the ability to impose civil monetary penalties of $300 per day.  In response to public comments, CMS is finalizing that the effective date of the final rule will be January 1, 2021 to ensure that hospitals have the time to be compliant with these policies. 

According to Kaiser Health News (Julie Appleby, November 15, 2019), this rule is controversial and likely to face court challenges.  Four major hospital organizations said they would challenge it in court shortly after the rule was proposed in July.

Insurers also pushed back.  “The rules the administration released…will not help consumers better understand what health services will cost them and may not advance the broader goal of lowering health costs,” said Scott Serota, president and CEO of Blue Cross Blue Shield Association, in a statement.  Requiring disclosure of negotiated rates, he said, could lead to price increases “as clinicians and medical facilities could see in the negotiated payments a roadmap to bidding up prices rather than lowering rates.”  The rule, he added, could confuse consumers. 

The author of the KHS article states “Although consumer advocates say price information can help patients shop for lower-cost services, they also note that few consumers do, even when provided such information.

KHN states that nonetheless, HHS Secretary Alex Azar said the administration is confident. “We may face litigation, but we feel we are on sound legal footing for what we are asking.  We hope hospitals respect patients’ right to know the prices of services and we’d hate to see them take a page out of Big Pharma’s playbook and oppose transparency.” 

According to the Self-Insurance Institute of America (SIIA), a self-insured plan must create its own on-line tool that is made available to participants to request the cost-sharing information” that is required.  This could effectively cause substantial burdens for self-funded plans and their network/RBP or TPA partners.  ##

Footnotes: 1) Note that California is somewhat mirroring the federal penalty for all residents beginning 2020; that will be a state mandate, not a federal mandate. 

The post Federal Legislative/Regulatory Updates: IRS Extends Deadline for Certain ACA Filings for 2019 (Including 1095-C for Employees); Trump Administration Releases Transparency in Coverage Rules appeared first on Advanced Benefit Consulting.

There have been several OCR enforcement activities since the last issue of the COIN., and some helpful information was released from the Fall, 2019 Cybersecurity Newsletter that are helpful that I will share. 

Enforcement Activities

On the enforcement side, the first settlement was regarding a failure to encrypt mobile devices, which led to a $3 Million HIPAA settlement.  

1) Reported on November 5, 2019, The University of Rochester Medical Center (URMC) has agreed to pay $3 million to the Office for Civil Rights (OCR) at the U.S. Department of Health and Human Services (HHS), and take substantial corrective action to settle potential violations of the Health Insurance Portability and Accountability Act (HIPAA) Privacy and Security Rules. URMC includes healthcare components such as the School of Medicine and Dentistry and Strong Memorial Hospital. URMC is one of the largest health systems in New York State with over 26,000 employees.

URMC filed breach reports with OCR in 2013 and 2017 following its discovery that protected health information (PHI) had been impermissibly disclosed through the loss of an unencrypted flash drive and theft of an unencrypted laptop, respectively. OCR’s investigation revealed that URMC failed to conduct an enterprise-wide risk analysis; implement security measures sufficient to reduce risks and vulnerabilities to a reasonable and appropriate level; utilize device and media controls; and employ a mechanism to encrypt and decrypt electronic protected health information (ePHI) when it was reasonable and appropriate to do so. Of note, in 2010, OCR investigated URMC concerning a similar breach involving a lost unencrypted flash drive and provided technical assistance to URMC. Despite the previous OCR investigation, and URMC’s own identification of a lack of encryption as a high risk to ePHI, URMC permitted the continued use of unencrypted mobile devices.

“Because theft and loss are constant threats, failing to encrypt mobile devices needlessly puts patient health information at risk,” said Roger Severino, OCR Director. “When covered entities are warned of their deficiencies, but fail to fix the problem, they will be held fully responsible for their neglect.”

In addition to the monetary settlement, URMC will undertake a corrective action plan that includes two years of monitoring their compliance with the HIPAA Rules.

2) On November 7, 2019, OCR reported that The Office for Civil Rights (OCR) at the U.S. Department of Health and Human Services (HHS) has imposed a $1,600,000 civil money penalty against the Texas Health and Human Services Commission (TX HHSC), for violations of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) Privacy and Security Rules between 2013 and 2017. TX HHSC is part of the Texas HHS system, which operates state supported living centers; provides mental health and substance use services; regulates child care and nursing facilities; and administers hundreds of programs for people who need assistance, including supplemental nutrition benefits and Medicaid. The Department of Aging and Disability Services (DADS), a state agency that administered long-term care services for people who are aging, and for people with intellectual and physical disabilities, was reorganized into TX HHSC in September 2017.

On June 11, 2015, DADS filed a breach report with OCR stating that the electronic protected health information (ePHI) of 6,617 individuals was viewable over the internet, including names, addresses, social security numbers, and treatment information. The breach occurred when an internal application was moved from a private, secure server to a public server and a flaw in the software code allowed access to ePHI without access credentials. OCR’s investigation determined that, in addition to the impermissible disclosure, DADS failed to conduct an enterprise-wide risk analysis, and implement access and audit controls on its information systems and applications as required by the HIPAA Security Rule. Because of inadequate audit controls, DADS was unable to determine how many unauthorized persons accessed individuals’ ePHI.

3)On November 27, 2019, the Office for Civil Rights (OCR) at the U.S Department of Health and Human Services (HHS), reported that they and Sentara Hospitals (Sentara) have agreed to take corrective actions and pay $2.175 million to settle potential violations of the Health Insurance Portability and Accountability Act (HIPAA) Breach Notification and Privacy Rules.  Sentara is comprised of 12 acute care hospitals with more than 300 sites of care throughout Virginia and North Carolina.

In April of 2017, HHS received a complaint alleging that Sentara had sent a bill to an individual containing another patient’s protected health information (PHI). OCR’s investigation determined that Sentara mailed 577 patients’ PHI to wrong addresses that included patient names, account numbers, and dates of services.  Sentara reported this incident as a breach affecting 8 individuals, because Sentara concluded, incorrectly, that unless the disclosure included patient diagnosis, treatment information or other medical information, no reportable breach of PHI had occurred.  Sentara persisted in its refusal to properly report the breach even after being explicitly advised of their duty to do so by OCR. OCR also determined that Sentara failed to have a business associate agreement in place with Sentara Healthcare, an entity that performed business associate services for Sentara.

“HIPAA compliance depends on accurate and timely self-reporting of breaches because patients and the public have a right to know when sensitive information has been exposed.” said Roger Severino, OCR Director.  “When health care providers blatantly fail to report breaches as required by law, they should expect vigorous enforcement action by OCR.”

In addition to the monetary settlement, Sentara will undertake a corrective action plan that includes two years of monitoring.

 Cybersecurity Update

On December 2, 2019, OCR released it’s Cybersecurity Newsletter, which is designed to help prevent, mitigate and recover from ransomware attacks by providing insight into new developments and trends and how organizations can improve their security posture in response to this threat.  I will summarize some of the information provided:

Ransomware attacks have involved mass, indiscriminate infection of as many devices across as many systems as possible.  They often spread automatically through dedicated connections between networks and spam phishing emails. 

The FBI reports that ransomware infects more than 100,000 computers a day around the world and ransomware payments approach $1 Billion annually, and those numbers are expected to rise.  The ransom payments, however, do not account for all of the costs associated with a ransomware attack.  Unrecoverable data, lost productivity, damage to reputation, damaged equipment, forensic investigations, remediation expenses, and legal bills are some of the additional costs that can be expected when responding to a ransomware attack.

In response to this new cyberthreat, organizations and governments began adapting.  Anti-malware vendors updated their products to help customers identify, prevent and contain infections.  Cybersecurity researchers and scientists studied ransomware code and, in some cases, were able to reverse-engineer decryption keys to help ransomware victims recover data without paying the ransom.  Organizations prioritized incident response and data backups in order to mitigate the damage caused.  However, as organizations adapt, so do ransomware developers… Stay tuned for more HIPAA Privacy & Security updates in the next issue of the COIN!  ## 

The post HIPAA Privacy & Security Updates – January 2020 appeared first on Advanced Benefit Consulting.

By:  Dorothy M. Cociu, RHU, REBC, GBA, RPA,

President, Advanced Benefit Consulting & Insurance Services, Inc.

Printed in The County of Orange Insurance News (The COIN), January-February, 2020

IRS Extends Deadlines for Certain ACA Reporting

On December 2, 2019, the IRS issued Notice 2019-63, which provides transition relief for 2019 ACA reporting for applicable large employers. 

The transitional relief provides an extension for the due date for furnishing forms under Sections 6055 and 6056 for 2019 from January 31, 2020, to March 2, 2020.  It also extends good-faith transition relief from penalties related to 2019 information reporting under Sections 6055 and 6056, and provides an additional penalty relief related to furnishing 2019 forms to individuals under Section 6055. 

It’s important to note that the due date for filing forms with the IRS for 2019 is unchanged; February 28, 2020 for paper forms, or March 31, 2020 if filing electronically.

Notice 2019-63 provides an additional 31 days for furnishing the 2019 (individual) Form 1095-B and Forms 1095-C, extending this deadline from January 31, 2020 to March 2, 2020.  The IRS will not grant additional extensions of time up to 30 days to furnish Forms 1095-B and 1095-C because this extended deadline applies automatically to all reporting entities.  As a result, the IRS will not formally respond to any requests that have already been submitted for 30-day extensions of time for statements for 2019. 

Despite the extension, the IRS is encouraging employers and other coverage providers to furnish 2019 statements to individuals as soon as they are able. 

Notice 2019-63 also extends transition relief from penalties for providing incorrect or incomplete information to reporting entities that can show that they have made good-faith efforts to comply with Sections 6055 and 6056 reporting requirements for 2019; this includes furnishing forms to individuals as well as filing with the IRS.  Basically, the relief applies to forms that have missing or inaccurate taxpayer ID numbers and dates of birth, as well as other information required on the return or statement.  No relief is provided for reporting entities that do not make a good-faith effort to comply or fail to file an information return or furnish a statement by the due dates (as extended). 

In determining good faith, the IRS takes into account whether a reporting entity made reasonable efforts to prepare for reporting the required information to the IRS and furnishing information to individuals.  The IRS also takes into account the extent to which the reporting entity made reasonable efforts to prepare for this reporting requirement. 

As I’m sure you’re aware, the individual mandate penalty has been reduced to zero beginning 2019¹.  Because of this, the IRS is studying whether and how Section 6055 reporting requirements will change, if at all, in future reporting years.   Because there is no penalty, the individual does not need the information on the Form 1095-B for his or her individual tax return.  However, reporting entities must continue to provide the Form 1095-B to

individuals.

Notice 2019-63 provides relief from the penalty for failing to furnish a statement to individuals as required under Section 6055 in certain cases for 2019.  The IRS will not impose a penalty under Section 6722 against reporting entities for failing to furnish a Form 1095-B to responsible individuals in cases where two conditions are met: 

•  The reporting entity prominently posts a notice on its website stating that responsible individuals may receive a copy of the 2019 Form 1095-B upon request, accompanied by an email address and a physical address to which a request may be sent, as well as a telephone number that responsible individuals can use to contact the reporting entity with any questions, and
• The reporting entity furnishes a 2019 Form 1095-B to any responsible individual upon request within 30 days of the date the request is received.

Special Considerations for Self-Funded Health Plans

Self-funded employers are generally required to use Form 1095-C, Part III to meet the reporting requirements, instead of Form 1095-B.  However, according to the notice, because of the combined reporting under sections 6056 and 6055 on the Form 1095-C for full-time employees of ALE members enrolled in a self-funded plan, the 2019 section 6055 furnishing relief does not extend to the requirement to furnish Forms 1095-C to full-time employees.  Accordingly, per the Notice, for full-time employees enrolled in self-funded health plans, penalties will continue to be assessed consistent with prior enforcement policies for any failure by ALE members to furnish Form 1095-C, including Part III, according to the instructions.  However, the 2019 section 6055 furnishing relief does extend to penalty assessments in connection with the requirement to furnish the Form 1095-C to any employee enrolled in an ALE member’s self-funded health plan who is not a full-time employee for any month in 2019.

Because these situations vary and can be complicated, we always recommend that you and/or your employer clients seek the advice of legal and/or tax professionals to see how these extensions apply to them. 

Trump Administration Releases Transparency in Coverage Proposed Rule (CMS-9915-P)

On November 15, 2019, the Transparency in Coverage Proposed Rule was released by the Departments of Health & Human Services, Department of Labor, and Department of the Treasury, in response to President Trump’s executive order on Improving Price and Quality Transparency. 

Two rules were issued to take steps toward price transparency.  The first is the Calendar Year 2020 Outpatient Prospective Payment System (OPPS) & Ambulatory Surgical Center (ASC) Price Transparency Requirements for Hospitals to Make Standard Charges Public (final rule).  The second rule is the Transparency in Coverage Proposed Rule, that requires that pricing information be made publicly available. 

As Marilyn Monahan (Monahan Law Office) stated in her January-February, 2020 Legal Brief in The COIN, these rules are highly controversial and there has already been a lawsuit filed to stop the final rule.

In general, seven main cost-sharing information disclosure requirements are outlined, which must be made available to participants through and online, self-service tool. 

According to HHS Secretary Alex Azar, “President Trump has promised American patients ‘A+’ healthcare transparency, but right now our system probably deserves an ‘F’ on transparency.  President Trump is going to change that, with what will be revolutionary changes for our healthcare system.  Today’s transparency announcement may be a more significant change to American healthcare markets than any other single thing we’ve done, by shining light on the costs of our shadowy system and finally putting the American patient in control.” 

According to HHS, the Trump Administration is taking action toward making sure that insured and uninsured Americans alike have the information necessary to get an accurate estimate of cost of the healthcare services they are seeking before they receive care.

In response to the Executive Order, HHS, DOL and Department of Treasury (collectively, the Departments) are issuing a proposed rule, “Transparency in Coverage” that would require most employer-based group health plans and health insurance issuers offering group and individual coverage to disclose price and cost-sharing information to plan participants, beneficiaries, and enrollees up fron.  With this information, according to HHS, patients will have accurate estimates of any out-of-pocket costs they must pay to meet their plan’s deductible, co-pay, or co-insurance requirements.  This will make previously unavailable price information accessible to patients and other stakeholders in a standardized way, allowing for easy comparisons. 

The seven main disclosures are:

· Estimated cost-sharing liability

· Accumulated amounts of responsibility, including deductible or OOP limits

· Negotiated rate, in dollars, for an in-network provider for a requested covered item or service

· Out-of-Network allowed amount for a requested item or service

· Itemized list of covered items and services for which  cost-sharing information is disclosed

· Notice of prerequisites to coverage

· Disclosure notice including various costs, balance bills, actual charges, and cost-sharing liability

 If finalized, the proposed Transparency in Coverage rule would require health plans to:

· Give consumers real-time, personalized access to cost-sharing information, including an estimate of their cost-sharing liability for all covered healthcare items and services, through an online tool that most group health plans and health insurance issuers would be required to make available to all of their members, an in paper form, at the consumer’s request.  This requirement would empower consumers, according to HHS, to compare costs between specific providers before receiving care.

· Disclose on a public website their negotiated rates for in-network providers and allowed amounts paid for out-of-network providers.  This is intended to promote competition in pricing, as well as assist the consumer.

The rule (being finalized) will require hospitals to provide patients with clear, accessible information about their “standard charge” for the items and services they provide, including through the use of standardized data elements, making it easier to shop and compare across hospitals, as well as mitigate surprises.  The final rule will require hospitals to make their standard charges public in two ways beginning in 2021:

· Comprehensive Machine-Readable File:  Hospitals will be required to make public all hospital standard charges (including the gross charges, payer-specific negotiated charges, the amount the hospital is willing to accept in cash from a patient, and the minimum and maximum negotiated charges) for all items and services on the Internet in a single data file that can be read by other computer systems.  The file must include additional information such as common billing or accounting codes used by the hospital and a description of the item or service to provide common elements for consumers to compare standard charges from hospital to hospital.

· Display of Shoppable Services in a Consumer-Friendly Manner:  Hospitals will be required to make public payer-specific negotiated charges, the amount the hospital is willing to accept in cash from a patient for an item or service, and the minimum and maximum negotiated charges for 300 common shoppable services in a manner than is consumer-friendly and update the information at least annually.

· In order to ensure that hospitals comply with the requirements, the final rule provides CMS with new enforcement tools including monitoring, auditing, corrective action plans, and the ability to impose civil monetary penalties of $300 per day.  In response to public comments, CMS is finalizing that the effective date of the final rule will be January 1, 2021 to ensure that hospitals have the time to be compliant with these policies. 

According to Kaiser Health News (Julie Appleby, November 15, 2019), this rule is controversial and likely to face court challenges.  Four major hospital organizations said they would challenge it in court shortly after the rule was proposed in July.

Insurers also pushed back.  “The rules the administration released…will not help consumers better understand what health services will cost them and may not advance the broader goal of lowering health costs,” said Scott Serota, president and CEO of Blue Cross Blue Shield Association, in a statement.  Requiring disclosure of negotiated rates, he said, could lead to price increases “as clinicians and medical facilities could see in the negotiated payments a roadmap to bidding up prices rather than lowering rates.”  The rule, he added, could confuse consumers. 

The author of the KHS article states “Although consumer advocates say price information can help patients shop for lower-cost services, they also note that few consumers do, even when provided such information.

KHN states that nonetheless, HHS Secretary Alex Azar said the administration is confident. “We may face litigation, but we feel we are on sound legal footing for what we are asking.  We hope hospitals respect patients’ right to know the prices of services and we’d hate to see them take a page out of Big Pharma’s playbook and oppose transparency.” 

According to the Self-Insurance Institute of America (SIIA), a self-insured plan must create its own on-line tool that is made available to participants to request the cost-sharing information” that is required.  This could effectively cause substantial burdens for self-funded plans and their network/RBP or TPA partners.  I will be working with our attorney on this as well as our TPAs to gather more information on this as more information becomes available. 

Footnotes: 1) Note that California is somewhat mirroring the federal penalty for all residents beginning 2020; that will be a state mandate, not a federal mandate. 

##

Disclaimer:

The information contained should not be construed as legal or tax advice.  You should seek advice from your attorney or tax preparer as situations vary.

The post Federal Legislative/Regulatory Updates December 2019 appeared first on Advanced Benefit Consulting.

Note:  Shorter version, edited for space, printed in the County of Orange Insurance News (The COIN), November-December, 2019

By:  Dorothy M. Cociu, RHU, REBC, GBA, RPA
President, Advanced Benefit Consulting & Insurance Services, Inc.

We’ve been talking about the Dynamex ruling (April 30, 2018; Dynamex Operations West vs Superior Court of Los Angeles), which adopted the “ABC Test” for worker classifications, followed by the signing of Assembly Bill 5, for nearly two years, and it just keeps getting worse for certain California businesses. 

The Dynamex case started with the presumption that a worker who performs services for the hiring entity is an employee for the purposes of claims for wages and benefits.  In this supreme court case, the ABC test was adopted to distinguish between an independent contractor and an employee.

Assembly Bill 5 (AB-5) was signed into law by California Governor Gavin Newsome on September 18, 2019.  The purpose of AB-5 was to codify the Dynamex decision and to clarify the decision’s application to state law.  Basically, under AB-5, the burden of proof that someone is an independent contractor falls onto the hiring employer entity… Otherwise, the person doing the work will be an employee.  To prove the independent contractor status, the employer must apply the ABC Test. 

According to Marilyn Monahan, attorney at Monahan Law Office, “Dynamex changed the test that employers must apply to distinguish between common law employees and independent contractors for wage order purposes.  The Court referred to the new 3-factor test as the ABC test.  Prior to Dynamex, California had relied on an 11-factor test outlined in the case of S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal. 3d 341 (1989).”  These tests are not at all easy to understand or to apply for many California employers faced with this new challenge.

I asked Marilyn if/how Dynamex caused controversy.  “[Yes], Dynamex generated controversy.  The legislature responded by introducing several bills to address the application (or not) of the ABC test, including AB-5.  AB-5 also generated controversy, but it was passed by the legislature and signed by the governor this summer.  AB-5 codifies Dynamex (in Labor Code section  2750.3).  The bill also expands the scope of Dynamex (because the new standard applies to more than wage orders), but at the same time it includes a number of exceptions (because lobbyists took an active interest in the bill).”

AB-5 has far-reaching applications.  According to Marilyn Monahan, it “applies to work performed on or after January 1, 2020.  However, the bill also states that it is declaratory of existing law, which means that the Dynamex test is currently in effect with regard to wage orders.”

I’m sure most of you have been hearing about the ABC test, and many affected by this ruling have been seeking assistance from their law firms for months or years.  For those that may not be as familiar, let’s break down the ABC test…

“Under the ABC test,” stated Marilyn Monahan, “a person providing labor or services for remuneration shall be considered an employee rather than an independent contractor unless the hiring entity demonstrates that all of the following conditions are satisfied:

(A) The person is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact.

(B) The person performs work that is outside the usual course of the hiring entity’s business.

(C) The person is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

It is anticipated that this test will result in more individuals being classified as employees than was the case under the Borello test.” 

If any exceptions apply during the ABC test (and often many will, as it’s almost impossible to pass the B test), then we move to the Borello test.  (S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 1989, 48 Cal. 3d 341). 

The most important factor is whether the person to whom service is rendered (employer), has control or the right to control the worker.  This could apply to both the control the work performed and the manner and means in which the work is performed. 

It is under the Borello Test that professional services, such as insurance agents, were exempted from Dynamex. 

“AB-5 includes a number of exceptions,” stated Marilyn Monahan.  “One of those exceptions applies to insurance licensees.  The bill states that the Borello test, rather than the Dynamex standard, applies to a ‘person or organization who is licensed by the Department of Insurance pursuant to Chapter 5 (commencing with Section 1621), Chapter 6 (commencing with Section 1760), or Chapter 8 (commencing with Section 1831) of Part 2 of Division 1 of the Insurance Code.’” 

AB-5 author Assembly Member Lorena Gonzalez has stated “the exceptions we have included will ensure that independent contractors in professions where people have the ability to negotiate for themselves, such as doctors, lawyers, insurance agents, real estate agents, accountants, hairstylists and freelance journalists – are protected.” 

Borello has 11 additional factors to be considered.  Although the 11-factor Borello test is complicated, I will try to highlight some of the provisions.  Again, as stated above, the most significant factor to be considered is whether the employer or principal has control or the right to control the worker both as to the work done and the manner and means in which it is performed.

Additional factors include whether the person performing the services is engaged in an occupation or business distinct from that of the principal/employer; whether or not it’s part of the regular business of the alleged employer; whether the employer or worker supplies the tools and instruments  used; the alleged employee’s investment in the equipment or materials used; whether the services require a special skill; the kind of occupation in the locality, and whether the work is usually done under the direct supervision of the employer or done without supervision; the alleged employee’s opportunity for profit or loss depending on his or her skills; the length of time for which services will be performed; the degree of permanence of the relationship; the method of payment (by time or by job), and whether or not the parties believe they are creating an employer-employee relationship.    

What a lot of employers want to know is, why isn’t their industry considered an exception, when so many others are?  In particular, the trucking industry seems to be among the hardest hit, and they have the most to lose. 

I sat down with one of my long-term friends and business associates, Kathryn Kingston, who works as the Controller for a trucking organization in Chino, to ask her about how this new law affects them. 

“Kathryn,” I asked, “for years, many employers like yourselves have hired independent contractors for many positions, and now you’re faced with many of these independent contractors becoming employees.  Can you tell us the financial impact, in general, that this will have on your firm?”  Kathryn replied: “The financial impact is huge when you consider the workers compensation costs, health insurance and employer taxes, just for starters.”

In our conversation, I asked her about the time and money they spent on specialists, like law firms and consultants, to work with her firm on this.  How time consuming was/is this, I asked her, and did this time take away from your primary business operations?  “This is a big distraction to executives.  The trucking industry has spent millions of dollars over the last couple of years fighting for the rights of the independent contractor.  All the time spent attending meetings and weekly phone conferences is time that is taken away from growing our business.”

Overnight, her trucking firm will go from a small to a mid-size employer, which brings on many more complexities with benefits, the ACA, and more.  I asked her what her biggest fears/concerns were with these issues?  “Compliance,” Kathryn stated, matter-of-factly.  “As a small employer, we have not had to learn or comply with various laws.  Now we have to learn a whole new set of complex laws and try to be compliant.  Since California does their own thing, it is often hard to keep track of whose law to be compliant with, Federal or State.” 

Kathryn’s firm did not have to worry about ACA applicable large employer (ALE) compliance until now.  Her firm was under 50 full-time employees, with over 100 independent contractor truck drivers.  With AB-5, she will need to hire them as employees, some of whom that their organization values they may lose to another trucking firm, since many work for more than one.  Then, of course, she will need to track them due to the ALE requirements for employer reporting under the ACA.  This means much more time and expense to them, reliance on either their payroll company or other vendor to provide variable hour employee hours tracking, or determine them all designated full-time employees, which could be even more expensive to them.  They will then, of course, have to offer them benefits under the ACA, which means that significant plan changes will occur, and a lot of additional compliance concerns. 

I asked Marilyn Monahan to help me break down the law’s particulars for industries like trucking industries. 

“In general,” Marilyn stated, “whether someone qualifies as an employee under the ACA depends on the federal common law definition, rather than the California standard.  However, it may be administratively difficult (if not almost impossible) to effectively distinguish between individuals who are employees for one purpose and independent contractors for another.  Therefore, reclassification could have a significant impact on employee benefit plans.  For example, reclassification could turn a small employer into an ALE, could impact eligibility for small group coverage, and could expand the number of employees who are entitled to an offer of coverage to avoid a 4980H penalty.  Employers should seek the advice of legal counsel as to the impact of reclassification on workers.”

Of course, there is more to it than that.  This law has far-reaching effects, and employers affected have to look across the board for changes and additional compliance requirements.   

“In all events,” Marilyn stated, “employers should also review the language of their employee benefit plan documents to ensure that eligibility terms accurately reflect the employer’s intent, as well as any applicable legal mandates or standards.”  So plan documents, SPDs, even employee manuals, policies and procedures related to their ACA decisions, etc. are all components of the law.  Meaning that the formerly small employer takes on the role of the large employer, without the benefit of years to adjust and prepare. 

The state legislature seems to think that all independent contractors will love this law and applaud it’s existence.  So, as an employer being affected with this, I asked Kathryn Kingston how she thinks the independent contractors feel about this law?  Do they want to be employees or do they prefer to be independent?   “Many contractors don’t want to lose their rights to set their own schedules and to be able to pick and choose which loads they want,” Kathryn stated.  “California law is taking those rights away by making them employees.”

Of course, many employers are feeling these things.  I asked Kathryn if she could tell our state legislators in a few sentences what she thinks of this law, what would she tell them?  “Stop taking away the rights of the independent contractor.  Stop targeting the trucking industry,”, she said emphatically.   “Why does this law have carve-outs for industries like Doctors, Architects, Financial Advisors but they refused to carve out trucking? This is a discriminatory law in that it doesn’t apply to everyone, only who California government chooses.”

It’s not just the trucking industry, of course.  As you may have heard, UBER and Lyft have put together $70 million to fight this law, because their drivers want to be independent, and their prices would of course skyrocket if they had to hire all drivers as employees.  In addition, many drivers drive for both UBER and Lyft.  They are taking this to the ballot in 2020, so stay tuned!  ##

Editor and Author’s Note:  The views contained herein are the views of
the author, and not those of OCAHU, CAHU or NAHU.  The author always recommends the use of qualified legal counsel for legal recommendations.  She is not an attorney and does NOT provide any legal advice, and this should not be construed as such.

The post AB-5 Dynamex: Does it Help or Hurt California Employers? appeared first on Advanced Benefit Consulting.

How to Help An Employer Client Select a Qualified Claims Administrator

By: Dorothy M. Cociu, RHU, REBC, GBA, RPA
President, Advanced Benefit Consulting & Insurance Services, Inc., OCAHU V.P. Communications & Public Affairs
The County of Orange Insurance News (The COIN), May, 2019

Since the OCAHU Business Development Summit in February, 2019, when I did a CE class for agents on Self-Funding, I have been asked by numerous brokers about claims administrators and how they should evaluate them.  Because the number of questions on this topic was memorable, I decided to write this feature article on this, to give agents some helpful hints on evaluating administrators. 

Whether you need to find an administrator to do just COBRA administration, or just Cafeteria Plan administration, or just a self-funded dental or vision plan, or other stand-alone ancillary product, to bill for multiple products, or whether you need an administrator to do all claims processing and other administrative functions for your client, employers are relying on their brokers/agents to assist them in making these decisions.  They want information to make comparisons… They want a starting point, a mid-point to evaluate, and finally, a recommendation.  So how, exactly, do you do that?

I’ve had a few brokers tell me that they are doing or are thinking of doing a lot of the administrative functions, such as billings and eligibility, for the employer.  I want to caution you… California requires an administrative license before you can perform certain administrative functions.  You do not want to be in a position of acting as an administrator without a license.  And even if you had such license, you are also required to carry errors & omissions coverage for those administrative functions… and to get it, you need experience.  So, I advise you to consult with your legal counsel before trying to take on those functions that could get you into trouble.  (Incidentally, Marilyn Monahan, who does the Legal Briefs each issue for the COIN in the Compliance Corner, could certainly assist you if you don’t have a qualified attorney to assist you – but of course I am not endorsing anything on behalf of OCAHU… I’m just pointing out that she is one of many qualified attorneys in this field).

As a former executive in a third-party administration operation, and as a broker specializing in self-funding ever since, I wanted to share some insights about how to start, how to evaluate, and of course, how to make recommendations.  The decision, of course, is ultimately the employer’s, but it’s our responsibility and obligation to help them get to the point where they can.

First off, it’s important that you look at more than one option.  Employers want choices, and recommendations as to why one may be better suited for them than the next. 

Next, you need to compile a list of prospective administrators.  This can include ASO providers/carriers, if the employer wants to see those as well.  However, keep in mind, they generally are less flexible and tie networks, UR/Case Management and perhaps even stop loss to their own carrier, which in my opinion, can sometimes be construed as a conflict of interest.  Again, that is my personal opinion, and not that of OCAHU.  But if they want to see that option, you are obligated to show it.

To help compile the list of prospective administrators, you can use the resources of organizations such as the Phia Group, the Self-Insurance Institute of America, the Health Care Administrator’s Association, or even the California Department of Insurance.  They often have lists of administrators on their websites.  You can also ask experts in the field for recommendations.  That is usually the best way, I’ve found, to find a good administrator.

Next, you want to narrow down the search to a manageable number of entities to request information from.  But what do you ask for?  How do you compare them?  That is quite a process in itself, and usually takes a few months if you haven’t done it previously. 

There are basic questions you need to ask and gather information on… Like ownership, locations, types of staff, expertise in-house (such as a nurse or medical professional to help with chronic claims and assist in stop loss placement and negotiations at renewal following a large claim in a self-funded group), affiliations, whether they were recently acquired or are currently involved in a merger (claims system merges are the worst), how often they’ve had claims system upgrades and when was the last one completed, name changes or DBAs (you want to know all names so you can do searches to see if perhaps they changed a name due to a lawsuit or related situation), whether they sell direct, work exclusively with brokers, or a combination of both, how many clients they have, how long they’ve been in business, what type of software they use… is it leased or purchased?  Do they have the ability to program for custom reports, or is it a long and expensive process if your client wants something special?  You want to know about their data recovery plan in the event of a natural disaster or other situation that could wipe out their data…  You want to know if they’re HIPAA compliant, and just how secure they really are.  You should check with HHS/OCR to see if they’ve had a HIPAA Privacy or Security Breach.

Honestly, I could write pages on what to look for and ask, and it’s all important, but I don’t have the space in this article.  I will suggest, if you’re looking for an administrator, the Self-Insurance Institute of America has the best TPA questionnaire that I’ve seen.  And it’s become standardized, so most TPAs already have it completed, and just update it annually or when changes occur.  That makes it easier to get the data from them quickly and easily.  But then the process begins… The hard part… Comparing the administrators.  You may not have the expertise to do so, so I’d recommend you start with a spread sheet on the basic differences, then bring in a qualified expert to help you create a workable comparison for your client and you to evaluate. 

I asked MaryAnn Wessel, Vice President, New Business Development, from EBA&M, a third-party administrator in Irvine, CA, what she felt the most important things a broker should be asking and looking for…  “Two of the most important questions to ask is how experienced is the TPA’s staff in all areas – not just Account Management, and how many layers does one have to go through to get resolution if there are issues, or if assistance is needed for special requests. ” 

The “layers” she is referring to are the situations where TPAs that are often owned by large insurance companies or large national TPAs and the multiple layers of management one may have to get through to get a resolution.  Sometimes this can substantially add to the time it takes to get answers or get a problem resolved. 

Sometimes smaller can be better.  You can get directly to the decision-makers easier.  When working with a 900-pound gorilla, such as a large national carrier or administrator, you may never actually see face-to-face the powers that be.  Personally, I prefer being able to walk in, talk to who I want to talk to; the person or persons I need to and get a quick resolution.  I also always insist on taking a tour and meeting the folks that would be working directly with your client.  I also, personally, avoid companies that have a customer service que.  I don’t like the “next available representative” thing when it comes to complicated claims situations.  I like personal service and assigned reps.

Most importantly, do your homework, and listen to what your client wants and needs.  ##

Editor and Author’s Note:  The views contained herein are the views of the author, and not those of OCAHU, CAHU or NAHU.  The author always recommends the use of qualified legal counsel for legal recommendations.  She is not an attorney and does NOT provide any legal advice, and this should not be construed as such. 

The post How to Help An Employer Client Select a Qualified Claims Administrator appeared first on Advanced Benefit Consulting.

By:  Dorothy Cociu, RHU, REBC, GBA, RPA, OCAHU V.P. of Communications & Public Affairs, President, Advanced Benefit Consulting & Insurance Services, Inc.

The County of Orange News (The COIN), May, 2019

In place of the single payer update this issue, and to prepare any members who will be joining us at Capitol Summit in Sacramento May 20-22, I thought a legislative report overall on CAHU activity would be helpful.  So please forgive me for not including the Single Payer Update in this issue.  I promise it will return, as soon as there is news to report to you. 

The CAHU Legislative Chairs and interested other CAHU and local chapter board members attended a Bill Review session this spring to discuss the priority bills that CAHU will be focusing in the coming months.  The complete status report provided by CAHU is 11 pages in length, so I can’t cover all of the bills in the limited space available in the COIN.  Instead, we will focus on the top priority bills as of now, due to limited space (and because our brains generally can’t handle too many bill details at once… at least mine can’t!).

First is AB 5 – (Gonzalez D) Worker Status: Independent Contractors.  This bill is a high priority due to the Dynamex case (see page 9).  This bill would state the intent of the Legislature to codify the decision in the Dynamex case and clarify its application. The bill would provide that the factors of the “ABC” test be applied in order to determine the status of a worker as an employee or independent contractor for all provisions of the Labor Code, unless another definition or specification of employee” is provided. The bill would, according to CAHU, codify existing exemptions for specified professions that are not subject to wage orders of the Industrial Welfare Commission or the ruling in the Dynamex case. The bill would state that its provisions do not constitute a change in, but are declaratory of, existing law.

CAHU is in support of AB 5. 

CAHU is in SUPPORT of AB 5, which clarifies that a recent California Supreme Court ruling, Dynamex Operations West Inc. v. Superior Court (Dynamex), does not alter an insurance agent or broker’s ability to be an independent contractor. Without this clarification, many agents could be forced to become W-2 employees. This would have negatively impacted agents and brokers by restricting commissions and the ability to work independently while impacting existing tax reporting and deductions.

Next is AB 651 – (Grayson D) Air Ambulance Services. This bill would require a health care service plan contract or a health insurance policy issued, amended, or renewed on or after January 1, 2020, to provide that if an enrollee, insured, or subscriber (individual) receives covered services from a noncontracting air ambulance provider, the individual shall pay no more than the same cost sharing that the individual would pay for the same covered services received from a contracting air ambulance provider, referred to as the in-network cost-sharing amount.

The bill would provide that an individual would not owe the noncontracting provider more than the in-network cost-sharing amount for services.

CAHU is in support of AB 651. 

CAHU SUPPORTS AB 651 CAHU because our members provide ongoing service and support for clients to effectively adjust and utilize their healthcare coverage as medical necessity and coverage options change. Through these efforts, we see firsthand the importance for our clients to have clear coverage options, without the confusion and financial instability that balance billing creates, especially when it comes to exorbitant out-of-pocket costs for life saving treatment.

The third bill to discuss is AB 1309- (Bauer-Kahan D)- Health care coverage:  enrollment periods.  This bill would require a health care service plan and a health insurer, for policy years beginning on or after January 1, 2020, to provide a special enrollment period to allow individuals to enroll in individual health benefit plans through the Exchange from December 16 of the preceding calendar year, to January 31 of the benefit year, inclusive.

CAHU is in support of this bill. 

CAHU SUPPORTS AB 1309, which helps agents by extending enrollment periods for 2020 under which people may purchase health insurance through Covered California and the individual insurance market.

Next is AB 1611 – Emergency hospital services:  Costs.   We also refer to this as the surprise bills or balance billing bill. This bill would require a health care service plan contract or insurance policy issued, amended, or renewed on or after January 1, 2020, to provide that if an enrollee or insured receives covered services from a noncontracting hospital, the enrollee or insured is prohibited from paying more than the same cost sharing that the enrollee or insured would pay for the same covered services received from a contracting hospital. The bill would require a health care service plan or insurer to pay a noncontracting hospital for emergency services rendered to an enrollee or insured pursuant to a specified formula, would require a noncontracting hospital to bill, collect, and make refunds in a specified manner, and would provide a dispute resolution procedure if any party is dissatisfied with payment.

CAHU supports this bill.

CAHU is in SUPPORT of AB 1611, which bans hospitals from sending surprise bills to patients for emergency room care beyond their regular co-payment or deductible. It also closes the loophole that leaves workers with self-insured or federally-regulated coverage through their job exposed to surprise bills.

This issue is also a popular topic on the hill in Washington, DC. 

Next is SB 260 – (Hurtado D) – Automatic Health Care Coverage Enrollment.  This bill would require the Exchange, beginning no later than July 1, 2020, to enroll an individual in the lowest cost silver plan or another plan, as specified, upon receiving the individual’s electronic account from a county, or upon receiving information from the State Department of Health Care Services regarding an individual terminated from department-administered health coverage. The bill would require enrollment to occur before Medi-Cal coverage or coverage administered by the State Department of Health Care Services is terminated, and would prohibit the premium due date from being sooner than the last day of the first month of enrollment.

CAHU’s official position on this bill is to WATCH. 

CAHU is WATCHING SB 260, which requires Covered California to enroll an individual or individuals who are determined ineligible for Medi-Cal in the lowest cost silver plan upon receipt of information from a county unless Covered California has information that another plan is more appropriate. The bill also requires a health plan or insurer to annually notify an enrollee, subscriber, policy holder, or certificate holder when they cease to be enrolled in coverage, their contact information will be provided to Covered California to assist them in obtaining other coverage, or that they may opt out of this transfer of information.

There are issues with the agent of origin on this bill. CAHU will ask members who are visiting the author if they intend to recognize the original enrollment entity?

I will be discussing one or two other bills that are on the top priorities list of CAHU in the HIPAA Privacy & Security Updates found on page 12. 

In addition, I suggest that you visit the CAHU website and print the CAHU Top Priority Bill Status Report, which is updated frequently.  ##

The post CAHU Top Priority Bills Preparing for Capitol Summit, 2019 appeared first on Advanced Benefit Consulting.

 We’re well into 2019 now, with a new California Governor, a new Insurance commissioner (both democrats supporting Single Payer), a blue wave (or tsunami!) in Sacramento, and now, in the House in Washington, DC. We’re pretty much used to the Blue in Sacramento, but the Congressional elections were a shock to most, with Republicans losing the House Majority and sending shock waves through our industry.  

On the federal side, we have Medicare For All heating up.  We all know that the Democrats picked up a lot of Congressional seats in the house this past November.  Even my own Congressional District, formerly a republican strong-hold until the retirement of Ed Royce, resulted in a very close race, with Democrat Gil Cisneros beating  out Republican Young Kim; the result was a lot of newly elected democrats into the House of Representatives, and Nancy Pelosi taking over as Speaker of the House.  The Senate, however, maintained its Republican majority. 

NAHU and CAHU refuse to let this discourage them, however, and instead want to focus on the opportunities this brings…  Opportunities to become important educators to the new Congressional members, and to catch them while they are new, to encourage them to learn more about the role of the Agent, and how we are advocates to our clients, who are individuals, small and large groups, and Medicare enrollees. (see Capitol Conference article, page 13). 

Key issues from the November elections in Congress showed that healthcare was the #1 cited issue among voters, beating the economy for the first time.  A clear majority of voters perceived Democrats as stronger on pre-existing conditions and voted accordingly, according to Janet Trautwein, CEO of NAHU. 

We all know Medicare for All is heating up in Washington.  The good news is, despite the media narrative on Medicare-For-All, voters signaled they wanted pragmatic, bipartisan solutions to the challenges in the healthcare system. 

According to NAHU’s recent webinar on the election recap (Live From NAHU, featuring Janet Trautwein, CEO), among competitive elections, 71% of Democrats who won (32 of 45) did not support Medicare For All.  Among Democrat pickups from Republicans, 86% of Democrats (30 out o f 35) did  not run on Medicare for All.  Only 2 of 967 ads run by Democrats in competitive House races since Labor Day mentioned Medicare-For -All.  So that’s something to build on. 

Medicare for All is a looming threat, but according to Janet Trautwein and NAHU, is largely undefined. 

A recent NAHU Operation Shout asked for NAHU members to participate in communicating with your legislators about Medicare-for-All.  According to this operation shout (see below), proponents of government-run healthcare, including single-payer and Medicare-for-All, will be on Capitol Hill advocating for programs that could threaten the private health insurance system. NAHU stated that it strongly opposes these efforts and is working with the Partnership for America’s Health Care Future to promote employer-sponsored health coverage and preserving Medicare, Medicaid, and other existing health programs. We are calling on all NAHU members to join us in our efforts to urge Congress to oppose any efforts to implement government-run healthcare.

NAHU’s message is that we, as an association, are committed to ensuring that every American has access to affordable, quality health coverage. We believe that the free market and public programs can bring down the cost of care and expand access to high-quality care for every American. But a one-size-fits-all healthcare system would lead to less choice and control over doctors, treatments, and coverage, and result in higher taxes for families, longer wait times, and lower quality of care for patients. We believe that instead of considering single-payer healthcare proposals, Congress should focus on bringing costs down for everyone, no matter where they get their insurance.

As Congress heard from advocates during the Medicare for All Week of Action from February 9-13, NAHU wanted to ensure they also hear from voices throughout the country who support access to affordable private health insurance choices.

NAHU asked that we all Contact our Senators and Representatives by sending an Operation Shout, urging lawmakers to oppose efforts to implement a single-payer healthcare system.  Hopefully, you all did that.  On Feb. 25-27, several of us were in Washington, DC sharing this message.  (See Capitol Conference coverage, page 13). 

So that is the federal side.  On the state side, our new Governor started his new role fast and furiously after he was inaugurated.  One of his first actions was of course signing a letter asking the federal government’s permission to mingle federal dollars and state funds into a single payer system.  According to CAHU’s President, Dave Fear, Jr., “This was a ceremonial request.  We know the Trump administration is not going to approve this request.” 

With a Democratic Super Majority in Sacramento, and every state-wide office filled by Democrats, a lot can happen in a short time.  Therefore, we have to remain vigilant, and be ready to act quickly when NAHU or CAHU asks us to.

With the governor’s top priorities announced immediately, California could be the first state to expand ACA’s financial assistance to middle-income families, and our state could create state buying power to purchase prescription drugs in a collaboration with the pharmaceuticals industry.  Of course, what is on the mind of all agents in California is  that Governor Newsom’s highest priority long-term is some sort of Medicare-for-All, Universal  Coverage or a public-private partnership for health care. 

AB 2472 in 2018 created an independent body charged with developing a plan by October 1, 2021, including options for advancing single payer in California. 

While we don’t expect specific legislation to be introduced in 2019, it’s definitely on the horizon… estimated time of arrival unknown at this time….

At every OCAHU meeting, I get the same questions… Do we need to worry about single payer now?  When?  What can we do to stop it or change it?  What is CAHU doing to protect our industry?

CAHU remains a active part of a coalition to fight the single payer fight. We urge members to sign up for the latest developments at https://protectcahealthcare.org/coalition-sign-up/.

What should members do?  According to Dave Fear, Jr, CAHU President, members should “support efforts that move towards universal coverage, not single payer.”  We should actively “support legislation that improves access for ALL Californians and continue efforts to improve transparency and reduce costs.” 

“The best thing that all of us can do is to become a member, and if one already, be sure to renew your membership, start or increase contributions to CAHU PAC, and sign up for and participate in CAHU voter-voice efforts and Adopt-A-Leg programs,” said Dave Fear, Jr. 

Overall, the main thing is that we believe “Our industry is alive and well,” said Dave Fear, Jr.  “Medicare-For-All is a more realistic approach, but it is still a ways off in the future, if at all, and a more favored approach than true single-payer models like SB 562, both in the state and nationally.  If Medicare-for-All does become a reality, agents have been a huge part of a robust Medicare market and would be essentially applying the model more broadly.”

Another thing you can all do, which is something that is inexpensive and fun, is to join us on Thursday, March 14th at JT Schmids in Anaheim, starting at 5 pm, for the OCAHU March Sports Trifecta, which is a fund-raiser for CAHU PAC, to help us raise money to fight single payer and other negative legislation in California!  See the ad for this on page 6, and register now!  ##

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Does the Recent Court Case in Texas Mean the End of the ACA? 
What Do We Tell Our Clients?

By:  Dorothy M. Cociu, RHU, REBC, GBA, RPA
OCAHU V.P. Communications & Public Affairs

On December 14, 2018, a Federal District Judge, Judge Reed O’Connor, in Texas, struck down the ACA as unconstitutional.  The judge ruled in favor of the plaintiffs by determining that the “individual mandate” is no longer a tax, and is therefore an unconstitutional exercise of congressional authority. This was somewhat expected.  The judge also found that the individual mandate was inseverable from the remaining parts of the ACA, which makes the entire ACA, not just the guaranteed issue and community rating provisions, unconstitutional.  According to Judge O’Connor, “The requirement is an essential part of this larger regulation of economic activity, and the absence of the requirement would undercut Federal regulation of the health insurance market,” and he based this on Congress’ own words about the individual mandate.  He also reminded us that each of the nine Supreme Court justices in the 2012 case (see below) had agreed that the individual mandate was inseverable from at least some other ACA provisions (for example, the prohibition against pre-existing conditions.)1

The lawsuit of Texas v. United States related to the enforcement of the ACA, and according to several news sources, was filed on February 26, 2018 by Republican state attorneys general and governors from 20 states and 2 individuals, claiming that the individual mandate, as amended by the ACA, is unconstitutional, and is therefore not severable from the ACA. The Trump Administration reportedly declined to defend the case, but attorneys general reportedly from 16 states and the District of Columbia stepped in to defend the ACA.

You may recall that the individual mandate penalty was reduced to zero as part of the 2017 Tax Cuts and Jobs Act. 

The ACA had originally been upheld in 2012 by the US Supreme Court in National Federation of Independent Businesses (NFIB) v. Sebelius, on the grounds that the individual mandate was a legitimate exercise of the congressional taxing power.  The plaintiffs argued in the 2018 case that now that the penalty is $0 and no longer raises revenue for the government, the individual mandate is no longer a tax, and is therefore unconstitutional. The plaintiffs further argued that the entirety of the ACA relies on the continued existence of the individual mandate, making the individual mandate inseverable from the rest of the ACA. Thus, the plaintiffs allege, the individual mandate being unconstitutional makes the entire ACA unconstitutional.2

In response to the ruling on December 14, 2018, President Trump tweeted:  “As predicted all along, Obamacare has been struck down as an UNCONSTITUTIONAL disaster!  Now Congress must pass a STRONG Law that provides GREAT healthcare and protects pre-existing conditions.” 

A stay was issued almost immediately, on December 30, 2018, pending appeal.  If the ruling stands, which is questionable given that the appeal has been filed in the 5^th Circuit, there could be some significant consequences. 

According to John Hickman, Esq, and Ashley Gillihan, Esq, in a post-decision webinar for the Self-Insurance Institute of America in early 2019, the ruling will likely be heard sometime in late 2019.  If the 5^th Circuit affirms the decision, it will head to the Supreme Court, with a decision sometime in late 2020.  If the 5^th Circuit reverses the decision, the ACA will likely continue as it is currently.

But what do we tell our clients?  I know mine have been asking me since December what this all means?  What do we do?  Can we stop tracking and reporting?  Can we stop offering affordable coverage to our employees?  What will change?  If you’re getting these same questions, I’d like to address some of their questions, and assist you in some simple answers. 

First, it’s good to let your clients know that even if the decision is upheld, and the entire ACA is declared unconstitutional, no changes in health plans are likely to happen before 2021, at the earliest.  Therefore, life as we know it (and report on it) shall continue, as status quo, for the time being.   So the simple answers are yes, you have to keep tracking and reporting if you’re a large employer, and no, you can’t stop offering affordable coverage to your employees (unless you want to pay penalties of course).  

But what if the decision is upheld, meaning the end of the ACA?  All we can do is speculate for now, but there is some simple logic that we can apply to all of this.

Changes could and will likely occur to post-ACA plans, that will in essence make them look like pre-ACA plans.  Remember, annual and lifetime limits were removed due the ACA… If that goes away, we could see plans put these limits back in.  Annual out-of-pocket maximums would likely also increase, because they were tied to metallic plans in the ACA.  You may see some increased premiums, and employee contributions may likely increase, as the affordability provisions of the ACA would go away, and the government would no longer be defining the affordability of a plan.  This could also mean the elimination of the 90 day maximum for waiting periods, and plans could go back to the first of the month following 90 days, or longer, if they so choose.  Some of the burdensome requirements of plans would likely also be eliminated, including SBCs, and the employer reporting from Section 6055 and 6056 employer shared responsibility (ESR) and their related penalties. 

However, there are some very popular things that came out of the ACA that may be less impacted by the elimination of the ACA.  Keep in mind… It’s difficult to take things away once they’ve been given… 

Items that could continue that were part of the ACA due to popularity include: 100% preventive care (you could likely see some variations, but plans may want  to continue to offer 100% preventive care); no pre-existing conditions; dependent child coverage to age 26 (although it’s likely that we could see modifications, such as marriage and/or “other coverage” exclusions and related; and quite possibly we may continue to see some form of Minimum Value Coverage). 

Things we’re not as sure about include the terms of the Employer Shared Responsibility provisions of the ACA.  Again, it’s hard to take away what employees were previously given.  We can venture to assume that there could be pre-ACA definitions of a full-time employee (i.e. 40 hours rather than 30 hours), and possibly some reinstatements of previously traditional exclusions included, such as seasonal and temporary employees. 

Some have mentioned the resurgence of things like HRAs, because the integration rules would go away, which could possibly lead to more stand-alone HRAs for groups that were offered coverage solely because of the ESR rules.  Smaller employers, some guess, may use HRAs to pay premiums for individual coverage without the limitations otherwise imposed on permissible premium reimbursement by the recent proposed rules.

So, what do we tell our clients that they should be doing in the meantime, until the case goes through the appeals process and possible supreme court?    In short, nothing for the time being….  Continue to do what you’re doing, and wait and see. 

Marilyn Monahan, attorney from Monahan Law Office, added some additional suggestions on this topic.  “Employers and producers should keep an eye on state developments.  First, we should remember that the California legislature has already codified many of the ACA’s provisions into California law.  These provisions will not automatically go away if the ACA is found to be unconstitutional.  Second, state politicians are looking at additional changes they can make into state law to address changes to the ACA being made at the federal level, and these discussions are likely to continue as we head into the 2020 election year.  These factors are further reasons why employers should stay informed, but continue on the same course they are currently on.”

It’s also important,  I think, to address what we know, rather than focusing on what we don’t know.  For example, many regulatory and legal issues will continue indefinitely, because they are not part of the ACA.  This includes the ERISA requirements, including 5500 reporting, Plan  Document and SPD rules, Section 125 Pre-tax requirements, HIPAA Privacy & Security Rules, HITECH Rules, etc.

##

Reference Sources:

1) The National Law Review:  “Ho! Ho!Ho! Where Did It Go?” Texas Court ACA Ruled Unconstitutional, By Monique Warren, December 16, 2018

2) Texas v. United States – Texas Federal Court “Strikes Down” the ACA’; By Jordan Grushkin, Matthew Goldman & Melissa Gertler, December 19. 2019, Posted Affordable Care Act (ACA) Healthcare Reform

3) Alston & Bird, Texas v. U.S.:  The End of the ACA?  Webinar, Self-Insurance Institute of America

Other Reference Sources:  Eversheds Sutherland, Legal Alerts. LEGAL ALERT:  TEXAS V. UNITED STATES DECISION COULD IMPACT EMPLOYER-SPONSORED HEALTH PLANS, January 4, 2019 (online reference)

Author’s Note: I’d like to thank Marilyn Monahan for her assistance with this article (see Compliance Corner, Legal Briefs, each COIN issue!), as well as the Self-Insurance Institute of America and their attorney webinar hosts, John Hickman, Esq., and Ashley Gillihan, Esq., Alston & Bird, LLP.

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