The Departments of Labor, Health and Human Services and the Treasury have issued several updates that affect employer-sponsored group health plans.
Wellness Incentives, HRAs, Minimum Value and Affordability
The IRS has released proposed regulations that address how wellness incentives or penalties are applied to premium affordability (for purposes of the employer shared responsibility/play or pay requirements) and to minimum value.
The proposed regulations provide that when deciding if the employee's share of the premium is affordable (less than 9.5% of the employee's safe harbor income), the employer may not consider wellness incentives or surcharges except for a non-smoking incentive. In other words, the premium for non-smokers will be used to determine affordability (even for smokers). Any other type of wellness incentive must be disregarded, except for a special rule for 2014.
Example: Acme has a wellness program that reduces premiums by $300 for employees who do not use tobacco products or who complete a smoking cessation course. Premiums are reduced by $200 if an employee completes cholesterol screening during the plan year. The annual employee premium is $4,000. Employee B does not use tobacco and completed the cholesterol screen so the cost of his actual premiums is $3,500 [$4,000 - 300 - 200]. Employee C uses tobacco and does not do the cholesterol screen, so the cost of her actual premiums is $4,000. For purposes of affordability, Acme will use $3,700 as the cost of coverage for both Employee B and Employee C [$4,000 less the available $300 non-smoker discount].
For the 2014 plan year only, employers who had a wellness program in place on May 3, 2013 may also take the wellness incentives for targets other than non-use of tobacco into account when determining premium affordability. So, for 2014 only, using the example, Acme would use $3,500 as Employee B's and Employee C's cost of coverage (since the employer can assume all available incentives were earned).
If an employer makes HRA contributions that the employee may use to pay premiums, the employer may reduce the employee's cost of coverage by the HRA contribution for the current year when determining affordability.
When calculating minimum value, if incentives for nonuse of tobacco may be used to reduce cost-sharing (i.e., the deductible or out-of-pocket costs), those incentives may be taken into account when determining minimum value. (Other types of wellness incentives that affect cost-sharing may be considered for 2014 if the employer had a wellness program that provided cost-sharing incentives on May 3, 2013; they may not be considered after 2014.) Current year contributions to an integrated HRA that may only be used for cost sharing (and not to pay premiums) or to an HSA may be considered first dollar benefits when calculating minimum value.
The proposed regulation also includes three proposed "safe harbor" plan designs that would meet the 60% minimum value threshold. (The safe harbor designs could be used instead of testing the plan through the calculator supplied by HHS; the safe harbor is just a convenience and not a limit on permitted plan designs.) The IRS says that these designs meet minimum value:
- A plan with a $3,500 integrated medical and drug deductible, 80 percent cost-sharing, and a $5,000 maximum out-of-pocket limit;
- A plan with a $4,500 integrated medical and drug deductible, 70 percent cost sharing, a $6,400 maximum out-of-pocket limit, and a $500 employer contribution to an HSA; or
- A plan with a $3,500 medical deductible, $0 drug deductible, 60 percent medical cost sharing, a $10/$20/$50 copay tiered drug plan, and a 75 percent coinsurance for specialty drugs.
It is possible that more safe harbor designs will be provided later.
The proposed regulation is here: Minimum Value - Proposed Rule
Summary of Benefits and Coverage
The agencies have released an updated Summary of Benefits and Coverage (SBC) template that plans will need to use for 2014. The updated template has very few changes from the version used for 2013.
The primary change is that the 2014 SBC must state whether or not the plan provides "minimum essential" and "minimum value" coverage. The template is designed to include the minimum essential and minimum value information on page 4 of the SBC. If an employer or insurer has already begun preparing its 2014 SBC and including this information on page 4 would be difficult, the needed information can be included in an attachment or cover letter.
Beginning in 2014, plans may not have annual dollar limits on essential health benefits. Plans may address this change by either:
- Deleting the row that asks about annual limits; or
- Completing the question with "no" and stating in the "Why It Matters" column: "The chart starting on page 2 describes any limits on what the plan will pay for specific covered services, such as office visits."
There are no changes to the examples that must be completed in the SBC (including the stated cost of care), to the glossary that must accompany the SBC or to the SBC calculator.
Employers and carriers should continue to use the current version of the SBC template for any coverage that begins in 2013.
Commonwealth Benefits Group and UBA have updated the SBC Highlights and the SBC Frequently Asked Questions. We've also provided additional information on Minimum Essential and Minimum Value Coverage.
Links to the revised SBC template, sample completed template and FAQ that was issued with the updated template are here:
Frequently Asked Questions - The Affordable Care Act Implementation Part XIV
Annual Limit Waivers
The agencies have issued a FAQ that responds to questions about whether a change in plan or policy year would extend the waiver period for a plan that received a temporary waiver of the annual limit requirement. (The waiver primarily affects mini-med plans.) The FAQ states that the plan or policy year in effect when the waiver was issued determines the date the waiver will expire. The FAQ is here: Frequently Asked Questions - The Affordable Care Act Implementation Part XV
This information is general and is provided for educational purposes only. It reflects UBA's understanding of the key parts of available guidance as of the date shown and is subject to change. It is not intended to provide legal advice.