Stay Informed

The Health Care Reform landscape is constantly changing. Keenan’s Health Care Reform Insights will keep you up to date on the latest developments. We will post news items and articles you will find of interest. Check back often for updates.

Health Care Reform Insights

12/13/2017 - When Repeal Fails, Try Delay, Delay, Delay

Republicans in the U.S. House of Representatives recently introduced a package of five bills to delay several Affordable Care Act taxes.

  • H.R. 4616 would delay the Cadillac Tax for one year and suspend penalties under the Employer Mandate from January 1, 2015 through December 31, 2018.
  • H.R. 4617 would delay the medical device tax for five years.
  • H.R. 4618 would remove the restrictions limiting reimbursements of over-the-counter medications without a prescription from consumer-directed accounts, such as flexible spending accounts, for two years.
  • H.R. 4619 and H.R. 4620 would delay the health insurance providers fee for two years.

There is speculation these bills could be included as part of the end-of-year spending bill but it remains to be seen whether they will move forward.

12/7/2017 - Grandfathered or Grandmothered? What’s the Difference?

The terms “grandfathered plan” and “grandmothered plan” are now a common part of Affordable Care Act (ACA) terminology but do they mean the same thing?  The answer is no.  There are noteworthy differences between a “grandfathered plan” and a “grandmothered plan.”

A “grandfathered plan” is one that existed before the ACA was signed into law on March 23, 2010.  These plans are exempt from many, but not all, of the ACA’s coverage requirements.  Certain mandates, such as coverage of dependents up to age 26 and no dollar limits on essential health benefits, apply to both “grandfathered” and “non-grandfathered plans.”

A plan may lose its “grandfathered” status if significant changes are made that reduce benefits or increase costs.  If any of the following changes are made, then the plan will lose “grandfathered” status:

  • Elimination of all or substantially all benefits to diagnose or treat a particular condition.
  • Increasing the percentage cost-sharing requirement (e.g., raising an individual’s coinsurance requirement from 20 to 25 percent).
  • Increasing the deductible or out-of-pocket maximum by an amount that exceeds medical inflation plus 15 percentage points.
  • Increasing the copayments by an amount that exceeds medical inflation plus 15 percentage points (or, if greater, $5 plus medical inflation).
  • Decreasing the employer’s contribution rate by more than five percentage points.
  • Decreasing annual dollar limits that were in effect on March 23, 2010 or introducing an annual limit that is less than the lifetime limit in effect on March 23, 2010.

A “grandmothered plan” is different.  The term refers to a plan or policy in the individual and small group market that is subject to a specific transition policy available through the Department of Health and Human Services (HHS).  Under the ACA, insurers are required to stop offering plans or policies in the individual and small group markets that do not comply with certain requirements, such as covering essential health benefits or using community rating.  The HHS transition policy, which has been extended several times, allows non-compliant plans and policies to be renewed for a limited time.

Under the policy, states may allow insurers that have continually renewed their “grandmothered plans” since January 1, 2014 to continue renewing the coverage for plan or policy years beginning on or before October 1, 2018; however, the coverage cannot extend beyond December 31, 2018.  While some states allow these plans or policies to renew through the end of 2018, other states, such as California, do not.  In fact, California stopped allowing renewal of non-compliant plans and policies in the individual market in 2014 and in 2016 for the small group market.

11/22/2017 - IRS Begins Sending Out Penalty Notices

Earlier this month, the Internal Revenue Service (IRS) quietly updated its “Frequently Asked Questions”  to announce it would begin sending out notices to inform employers about potential Employer Mandate liability for the 2015 calendar year.  The IRS will send Letter 226J if it determines that, for at least one month in the year, one or more of the employer’s full-time employees was enrolled in Exchange coverage, the employee claimed a premium tax credit and the employer did not qualify for an affordability safe harbor or other relief.  Shortly after the update, and just as quietly, the IRS officially began sending out notices.

With the Employer Mandate enforcement process now off and running, employers need to be ready to respond.  Advise mailroom staff to keep an eye out for these notices to ensure they get to the right person in a timely manner.   Remember, a response is due to the IRS by the date indicated on the notice, which will generally be 30 days from the date of the notice.  Employers using third-party vendors for tracking and reporting should work with their vendor to: (1) ensure the records for 2015 are readily accessible, including information about eligibility, offers of coverage, and affordability, and (2) to determine what services, if any, the vendor will provide to assist in responding to the IRS.  Finally, employers should consult with their legal counsel and tax advisor for guidance.

More information about the notice, how to respond and links to additional resources are available at Understanding your Letter 226-J.

11/16/2017 - PCORI Fee Increasing for 2018

The Affordable Care Act created a private, nonprofit corporation known as the Patient-Centered Outcomes Research Institute (PCORI).  PCORI is designed to be an information resource that patients, clinicians, purchasers and policy-makers can use to make informed decisions about healthcare.  To achieve this goal, PCORI manages a variety of effectiveness studies regarding the delivery of healthcare and the money to pay for these studies is raised by a PCORI fee.

The PCORI fee has been imposed for each plan year ending on or after October 1, 2012 but is scheduled to end for plan years ending on or after October 1, 2019.  For fully-insured plans, the issuer calculates and pays the fee.  Plan sponsors of self-insured plans are responsible for paying the PCORI fee.

The Internal Revenue Service (IRS) announced the fee amount for plan years ending on or after October 1, 2017 and before October 1, 2018 will be $2.39 per covered life.  The fee must be reported using IRS Form 720 and paid no later than July 31st of the calendar year following the end of the plan year.

11/7/2017 - Employer Mandate Penalty Notices

Under the Affordable Care Act (ACA), an Applicable Large Employer (ALE) may be subject to a penalty if it fails to offer its ACA defined full-time employees, and their dependents, minimum essential coverage that is affordable and provides minimum value.  Although the Employer Mandate went into effect on January 1, 2015, the Internal Revenue Service (IRS) has not sent out penalty notices.  New “Frequently Asked Questions” on the IRS website indicate they will start issuing notices in “late 2017” that will inform ALEs about potential liability for the 2015 calendar year.  We have issued a Briefing that includes an overview of the notice, the process for responding to the IRS and steps employers should take to prepare.