Compliance Newsletter

July 2017 Edition

The Patient Protection and Affordable Care Act (ACA) was signed into law on March 23, 2010, bringing many changes for employers and health plans. The law continues to evolve as regulations are released. This monthly alert brings you information on the major provisions and regulations coming from Washington, connects you to valuable tools in understanding and complying with the law, and keeps you informed of Michigan legislation enacted in response to ACA.

On Friday, January 20, 2017, President Trump signed his first Executive Order, titled "Minimizing the Economic Burden of the Patient Protection and Affordable Care Act Pending Repeal."

The Executive Order instructs the Secretary of the Department of Health and Human Services (HHS) and the heads of all other executive departments and agencies with authority, or responsibility, under the ACA to exercise all authority and discretion to waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the ACA that would impose a fiscal burden on any state, or cost a fee, tax, penalty, or regulatory burden on individuals, families, health care providers, health insurers, patients, recipients of health care services, purchasers of health insurance, or makers of medical devices, products, or medications.

44North recommends that employers wait for confirmation from various federal agencies that regulations they are in the process of complying with (notably, ACA-related reporting) are on hold for the time being. We are, unfortunately, in a "wait and see" period.

PPACA REMAINS

Repeal and Replace Fails

The Senate struck down its most recent attempt to repeal and replace the Affordable Care Act (ACA) by a 51 to 49 vote in the early morning hours of Friday, July 28th. A 44North summary of the Health Care Freedom Act may be found here. This means that employers will need to continue reporting, tracking, and filing as prescribed by the ACA.

Lawmakers will likely pursue targeted modifications to the ACA but the fate of any repeal and replace efforts are currently unknown. Past legislative proposals geared to ease the financial and administrative burdens posed on employers will likely be reintroduced to this Congress. Measures are most likely to address the following areas:

Cadillac Tax - Health plans providing benefits in excess of a certain threshold will be subject to a 40 percent excise tax.
Employer Mandate - Employers with 50 or more full-time and full-time equivalent employees must provide ACA-compliant health coverage or be subject to an employer shared responsibility penalty.
Definition of "Full-time" Employee - The ACA defines full-time employees entitled to receive health coverage from large employers as those who work at least 30 hours on average per week.
Definition of "Seasonal" Employee - Whether or not large employers must offer coverage to full-time but seasonal employees is based on two factors: how long the employees work for the employer and which tracking method the employer chooses.
Annual Information Reporting - Preparing and filing Form 1095-Cs involves tracking the hours worked by variable hour employees each month.
Cost-sharing Subsidies - The federal government pays cost sharing subsidies to health insurers for those who meet certain low income requirements. President Trump has threatened to also eliminate employer contributions provided to members of Congress and their staff.
Regulatory Reform - President Trump's Executive Order directing federal agencies to minimize the ACA's regulatory burden where possible.

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ERISA

"Church Plan" Exception

The Employee Retirement Income Security Act (ERISA) was signed in 1974. The U.S. Department of Labor (DOL) is the agency responsible for administering and enforcing this law. For many years, most of ERISA's requirements applied to pension plans. However, in recent years that has changed, and group plans (called "welfare benefit plans" by ERISA and the DOL) now must meet a number of requirements. Government and church plans do not need to comply with ERISA.

However, some employers are unsure if they meet ERISA's "church plan" exception. Entities associated with churches such as hospitals, schools, nursing homes, and charities are often unclear about whether they meet the exception. Under ERISA, a church plan is "any employee benefit plan established and maintained by a church or by a convention or association of churches that is exempt from tax under IRS Code Section 501 with respect to which no election has been made under IRS Code Section 410(d). The plan must be established and maintained primarily for benefit of the employees of a church or convention or association of churches. Substantially all the covered individuals under the plan must be employees of the church or the convention or association of churches.

Although this might seem straightforward at first glance, determining whether a church or convention or association of churches exists is dependent on the facts and circumstances of an organization. Organizations may request a DOL opinion letter, or an IRS private letter ruling (although the DOL reserves the right to review IRS determinations via private letter) to determine if they meet the definition. To add another layer of uncertainty, courts are not bound by either DOL or IRS determinations.

Under the ERISA definition, a plan established and maintained by a church includes a plan maintained by an organization whose principal purpose is administering a benefit plan for church employees, if the organization is controlled by or associated with a church (or convention or association of churches). There is no definition for "controlled by" but it is often considered to be corporate control. The term "associated with" means the organization "shares common religious bonds and convictions with the church or convention of associated churches," which is subject to various interpretations. There is a three-prong or three-factor test that employers can use to help determine if it meets this requirement, which is referred to as the "Lown Test."

Whether the religious institution plays any official role in the governance of the organization;
Whether the organization receives [financial] assistance from the religious institution; and
Whether a denominational requirement exists for any employee or patient/customer of the organization.

In 2017, the Supreme Court ruled that employee benefit plans established and maintained by church-affiliated organizations (such as church-affiliated hospitals) were church plans under the ERISA definition. However, the court did not address all of the questions regarding statutory language of the principal purpose of the affiliated organization, which could create further litigation or legislation.

Practically speaking, employers that believe they are affiliated with a church or religious organization should seek guidance from their legal counsel with respect to whether they meet the ERISA exemption. Entities that believe they meet the exemption should take care not to reference ERISA in documents relating the plan, as courts often determine that, upon reference, an organization makes itself subject to ERISA, regardless of its church status.

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PCORI FEE

44North hosted a webinar focused on the what and how of filing Form 720 on Tuesday, June 27th, at 11am. Click here to view the webinar.

The IRS revised Form 720 (Quarterly Federal Excise Tax Return) in 2013 to include the reporting and payment of patient-centered outcomes research institute (PCORI) fees. The Patient Protection and Affordable Care Act imposes the PCORI fee on certain health insurers and self-insured health plan sponsors for policy or plan years ending on or after October 1, 2012 and before October 1, 2019 to help fund clinical effectiveness research.

The insurer or plan sponsor filing Form 720 must report the average number of covered lives under health insurance policies and self-insured health plans subject to the PCORI fee. The instructions briefly explain the alternative methods for calculating the average number of covered lives, which include special transition rules. The average number of covered lives is then multiplied by the rate per covered life ($2.00 as adjusted per year) to determine the amount of the fee.

The deadline to file the form and pay the fee is today.

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COMPLIANCE RECAP

June 2017

June was an active month in the employee benefits world.

Senate Releases Proposed Healthcare Bill

On June 22, 2017, the United States Senate released a "Discussion Draft" of the "Better Care Reconciliation Act of 2017" (BCRA), which would substitute the House's House Resolution 1628, a reconciliation bill aimed at "repealing and replacing" the Patient Protection and Affordable Care Act (ACA). The House bill was titled the "American Health Care Act of 2017" (AHCA).

Employers with group health plans should continue to monitor the progress in Washington, D.C., and should not stop adhering to any provisions of the ACA in the interim, or begin planning to comply with provisions in either the BCRA or the AHCA.

IRS Releases 2018 Amounts for HSAs

On June 5, 2017, the U.S. Supreme Court decided court case Advocate Health Care Network v. Stapleton and held that employee benefit plans established by church-affiliated organizations are church plans for purposes of ERISA's church plan exemption.

Agencies Seek MHPAEA-Related Comments

In June 2017, the U.S. Department of Labor, U.S. Department Health and Human Services, and the U.S. Department of the Treasury (collectively, the Departments) provided an informational FAQ relating to the Mental Health Parity and Addiction Equity Act (MHPAEA) and the 21st Century Cures Act (Cures Act). The Departments confirm that benefits for eating disorders must comply with the MHPAEA. The Departments request comments on a draft model form for participants to use to request information regarding nonquantitative treatment limitations. The comment submission deadline is September 13, 2017 .

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HR CORNER

New Form I-9

On July 17, 2017, the U.S. Citizenship and Immigration Services (USCIS) published a new edition of the I-9, Employment Eligibility Verification Form. Employers may now use the revised version, dated 07/17/17 N, or continue using the Form I-9 with a revision date of 11/14/16 N through September 17, 2017. On September 18, 2017, the 07/17/17 N edition of the Form I-9 will become mandatory. Employers must also continue to follow existing storage and retention rules for any previously completed Forms I-9.

The revised Form I-9 instructions reflect the name change of the Office of Special Counsel for Immigration-Related Unfair Employment Practices to the Immigrant and Employee Rights Section. Revisions related to the List of Acceptable Documents in List C include adding the Consular Report of Birth Abroad, combining all the certifications of report of birth issued by the Department of State, and renumbering all List C documents except for the Social Security card.

USCIS has included these changes in the Handbook for Employers: Guidance for Completing Form I-9 (M-274) .

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The information in this newsletter is based on 44North's review of the national healthcare reform legislation and is not intended to impart legal advice. Interpretations of the reform legislation vary, and efforts will be made to present and update accurate information. This overview is intended as an educational tool only and does not replace a more rigorous review of the law's applicability to individual circumstances and attendant legal counsel and should not be relied upon as legal or compliance advice. Analysis is ongoing and additional guidance is also anticipated from the Department of Health and Human Services.

Questions or comments? Please email us at [email protected] .