Commentary: Is your employee health insurance plan in full compliance with federal regulations? Unfortunately, the answer is almost certainly “no.”
The ongoing escalation of complex regulations for health insurance plans has made it extremely difficult for just about every employer to comply. More than five years after passage of the Affordable Care Act, the compliance requirements not only continue to add up, but also to shift around. For starters, even while employers are trying to comply with new facets of the law that have gone live, such as the ACA information reporting requirements for 2015, they still face the burden of preparing for the launch of new parts of the law, such as the Cadillac tax (effective in 2018) and nondiscrimination testing requirements for fully insured health plans (expected by the end of 2016).
Adding to this regulatory burden, employers have to stay on top of recent court decisions and lawsuits that also change the rules for health plan compliance. These include the Supreme Court’s recent decision prohibiting state bans on same-sex marriage, and a recent lawsuit challenging an employer’s decision to reduce work hours on the basis that the employer did this to avoid ACA penalties.
Determining compliance begins with an assessment of the plan document. If that document is not consistent with how your organization actually provides benefits to employees, then you’re out of compliance. Often, a well-intentioned employer will give a specific employee the benefit of the doubt or try to provide a benefit that is not detailed in the plan document; that’s a problem. Additionally, summary plan descriptions, plan-related employment policies, and participant communications often contain language that is contrary to, or at odds with, the language in the plan document. These issues can lead to lawsuits, government audits and penalties.
When the Department of Labor, Internal Revenue Service or other federal agency investigates your health plan, this is where they look. Consequently, it’s imperative that your plan document matches the benefits you offer and the way you administer the plan.
Here are five significant challenges confronting just about every employer:
1. The rules about ACA information reporting keep changing. Just this year, the government clarified several rules on information reporting for employers, and in the process, changed reporting requirements that employers had previously expected to comply with. For example, rules pertaining to how to report COBRA coverage and HRA enrollment changed significantly with the release of the final reporting instructions in September of this year. If you’re not paying close attention, you could either be lost in confusion, or simply report your data incorrectly. Either of those can get expensive quickly. Employers who fail to complete information reporting are subject to a fine of $250 per return, up to a maximum liability of $3 million. To be fair, employers who make a good faith effort will not be assessed penalties in 2016, but the good faith exception does not apply to returns that are not filed timely.
2. The need to correctly provide all notices that are required. As with information reporting, the devil is in the details when it comes to delivering plan-related notices. Notices to plan participants are required to clearly explain relevant federal and state regulatory requirements. For example, wellness plans offered in combination with a group health plan that include medical examinations will require (as explained in recently-proposed rules) that such plans provide a notice explaining what medical information will be obtained, who receives the medical information, how it will be used, what restrictions are placed on the disclosure of the information and how the employer proposes to protect that information.
3. Ensuring that your plan complies with changes in cost-sharing. The ACA defines cost-sharing as any expenditure required by or on behalf of a covered person for their employee health benefits, including deductibles, coinsurance, copayments or similar charges. For 2016, the government set the maximum out-of-pocket expense (MOOP) for in-network coverage at $6,850 for self-only coverage and $13,700 for non-self-only coverage. If you still have language in your plan document with incorrect MOOP limits, the document needs to be updated.
4. Complying with the latest proposed changes to wellness rules. In April 2015, the Equal Employment Opportunity Commission proposed new rules that prohibit employers from having incentives or surcharges that exceed 30% of the total cost of employee premium. These rules apply to any wellness plan that has a medical examination or disability-related inquiry. If your organization had, for instance, a smoking cessation incentive that called for a 50% penalty on smokers, and that included a medical examination that tested the participants’ blood for nicotine, you’ll likely have to update your plan document and plan-related communications to reflect this new percentage, or consider changing the design of the program to eliminate the medical examination piece. More recently, in October of this year, in another set of proposed rules, the EEOC clarified the extent to which employers are allowed to offer employees inducements to get their spouses to provide their health information as part of a health risk assessment in a wellness plan.
5. Confronting the growing confusion over who exactly is an employee. Employee classifications have to be reviewed in light of recent rulings, including the California Labor Commission’s recent ruling that drivers working for Uber should be considered employees, rather than independent contractors. This decision points to the fact that, as the so-called gig economy takes hold, the definition of an employee is changing. If, as an employer, your organization exercises significant control over the timing of the work, as well as the manner in which it’s completed, then your organization’s independent contractors may in fact be employees. When it comes to your company’s plan document, the definition of employee needs to be consistent with the law and the document should make it clear who is and who is not eligible for healthcare benefits.
Now, it’s possible you looked at this list and breathed a big sigh of relief because none of these circumstances applies to you. However, in many ways, this is just the tip of the compliance iceberg. A full compliance assessment is needed by trained professionals who can alert you to possible errors that may expose your company to fines, penalties and lawsuits.
No employer should assume that it is in full compliance, especially with all of the twists and turns in today’s regulatory environment.
Dan Kuperstein, senior vice president of compliance for Corporate Synergies, is an ERISA attorney with experience in a broad array of employee benefits and labor and employment matters, including the Affordable Care Act, COBRA, HIPAA and GINA compliance.
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