Healthcare Reform
2019 Archive

December 10, 2019

IRS Extends ACA Reporting Deadlines and Offers Penalty Relief

Expand/collapse »

On December 2, 2019, the IRS released IRS Notice 2019-63, extending the deadlines for distributing ACA reporting forms to individuals. The IRS also provided relief from penalties for good faith effort and from the requirement to distribute the Form 1095-B to individuals. As background, the ACA imposes two reporting requirements under Sections 6055 and 6056. Section 6055 requires entities that provide minimum essential coverage to report to the IRS and to covered individuals the months in which the individuals were covered. Section 6056 requires applicable large employers (under the employer mandate) to report to the IRS and full-time employees whether they offered minimum essential coverage that was affordable and minimum value.

As the IRS has done for the last four reporting years, they have extended the date by which employers must distribute Forms 1095-B or 1095-C to individuals. Those forms must now be distributed by March 2, 2020 (instead of January 31, 2020). However, as in previous years, this notice does not extend the date by which employers must file Forms 1094-B/C and 1095-B/C with the IRS. So reporting entities must still file Forms 1094-B/C and 1095-B/C with the IRS by February 28, 2020, if filing by paper and March 31, 2020, if filing electronically.

If an employer doesn’t comply with the deadlines, the employer can be subjected to penalties. The IRS also indicates that employers can no longer request an automatic extension of the due date by which they must distribute the forms to individuals, as the extension they’ve provided is just as generous. In fact, the IRS will not respond to any such extension. Employers may still request an automatic extension to file the Forms 1094-B/C and 1095-B/C with the IRS, as long as they submit a Form 8809 on or before the due date of those filings.

The IRS is also reinstating relief recognizing good faith effort made by employers that file the 2019 forms. Specifically, employers that timely file and distribute their required Forms 1094-B/C and 1095-B/C will not be subject to penalties if the information is incorrect or incomplete. In determining what constitutes a good faith effort, the IRS will take into account whether an employer or other coverage provider made reasonable efforts to prepare for reporting, such as gathering and transmitting the necessary data to a reporting service provider or testing its ability to use the ACA Information Return Program electronic submission process. This relief doesn’t apply to a failure to timely furnish or file a statement or return, and it doesn’t extend to employer mandate penalties (for large employers that didn’t offer affordable, minimum value coverage to full-time employees pursuant to the ACA’s employer mandate).

Notably, this notice also provides penalty relief for employers, which will allow them to forego distributing the Form 1095-B to individuals. This comes after the IRS accepted comments on the necessity of the Form 1095-B now that the individual mandate penalty has been zeroed out. As long as employers post a notice on their website that the document is available upon request, and then fulfill any such request within 30 days, they don’t have to distribute the Forms 1095-B to covered individuals.

This relief is not available for Form 1095-C, but can be applied to employees who are not full-time and only receive a Form 1095-C to meet the Form 1095-B reporting requirement. In other words, those employees who are only receiving a Form 1095-C because the employer uses Part III to comply with Section 6055 no longer have to be provided a Form 1095-C. Also keep in mind that employers that must provide and file Form 1095-C to full-time employees must still complete Part III of the Form, indicating the covered spouses and dependents of the full-time employees.

Employers should keep this guidance in mind as they are preparing their filings and distributions. NFP’s Benefits Compliance Team will continue to monitor any developments that might impact employer reporting obligations in future years.

IRS Notice 2019-63 »

IRS Releases 2019 Draft Forms 1095-B and 1095-C

Expand/collapse »

The IRS recently released the 2019 draft versions of the Forms 1095-B and 1095-C. As background, the ACA imposes two reporting requirements under Sections 6055 and 6056. Section 6055 requires entities to report on Forms 1094-B and 1095-B that they provided minimum essential coverage to covered individuals during the year. Section 6056 requires applicable large employers (under the employer mandate) to report on Forms 1094-C and 1095-C that they provided affordable and minimum value coverage to full-time employees.

On December 4, 2019, the IRS released the 2019 draft of Form 1095-C. On December 5, 2019, the IRS released the 2019 draft of Form 1095-B. The forms are basically unchanged from their 2018 versions, with the exception being that the Form 1095-B reflects the fact that the individual mandate penalty has been zeroed out.

The forms must be filed with the IRS by February 28, 2020, if filing by paper and March 31, 2020, if filing electronically. The Forms 1095-B and 1095-C must be distributed to applicable employees by March 2, 2020. The penalties for failure to file and report are $270 per failure. This means that an employer who fails both to file a completed form with the IRS and to distribute a form to an employee/individual would be at risk for a $540 penalty. Keep in mind, though, that the IRS has provided relief that would allow reporting entities not to distribute the Form 1095-B if certain conditions are met.

We’ll keep you updated of any developments, including release of the finalized forms and instructions.

Draft Form 1095-B »
Draft Form 1095-C »


November 26, 2019

IRS Releases Draft Instructions for 2019 ACA Reporting Forms

Expand/collapse »

On November 13, 2019, the IRS published a draft version of the instructions for 2019 reporting forms 1094-B and 1095-B, which are used by insurers and small self-insured employers to report that they offered MEC. The IRS also published a draft version of the instructions for 2019 reporting Forms 1094-C and 1095-C, which are used by applicable large employers to comply with Section 6056 reporting under the ACA. These drafts are for informational purposes only but employers should familiarize themselves with the forms in preparation for 2019 plan year filings.

This year’s forms feature a few new changes. They show that while the penalty for the failure to file a correct information return remains $270 for each incorrect return, the penalty cap is raised to a total of $3.339 million for a calendar year, up from a cap of $3,275,500 in 2018. In addition, the updated draft 1095-C form shows that the affordability safe harbor percentage threshold is 9.86% in 2019, up from the 9.56% threshold in 2018.

Although many anticipated that instructions pertaining to the individual mandate would be removed since the mandate was eliminated effective 2019, those instructions remain. They can be found in Section III of the drafts for both Forms 1095-B and 1095-C.

As a reminder, the forms must be filed with the IRS by February 29, 2020, if filing by paper and March 31, 2020, if filing electronically. The Forms 1095-B and 1095-C must be distributed to applicable employees by January 31, 2020. As noted above, the penalty for failure to comply is $270 per failure. This means that an employer who fails to file a completed form with the IRS and distribute a form to an employee/individual would be at risk for a $540 penalty.

Draft Instructions for Forms 1094-B and 1095-B »
Draft Instructions for Forms 1094-C and 1095-C »

IRS Reminder: Health Insurance Tax Returns for 2020

Expand/collapse »

On November 15, 2019, the IRS revised its webpage related to the Health Insurance Providers Fee with a reminder that the fee was suspended in 2019, but will be in effect for 2020. The Health Insurance Providers Fee is commonly referred to as the Health Insurance Tax (HIT). It applies to insured medical, dental, and vision policies. It does not apply to self-insured plans.

The fee is paid by the insurer, but may be passed on to the employer as the policyholder in the premiums charged. Employers may then pass along the fee to participating employees by considering it in their employee premium calculation. The amount of the fee varies based on the insurer’s ratio of net premiums compared to net premiums for all US health insurance policies. The amount passed along to group policyholders is generally considered to be 3% to 5% of the policy’s premium.

There is no action required from employers. It is just a reminder that the fee will be back in effect in 2020, so employers may notice a line item on their premium invoice detailing the fee if the insurer chooses to itemize. Otherwise, the insurer may simply add the fee to the premium without itemizing on the invoice.

IRS Reminder »


November 12, 2019

CMS Provides 2021 SBC Materials and Supporting Documents

Expand/collapse »

On November 8, 2019, CMS provided the 2021 Summary of Benefits and Coverage (SBC), instructions, SBC Calculator Guide, and Narratives. As background, the ACA requires group health plans and insurers to provide an SBC to applicants and enrollees whenever they are deciding whether to enroll in health plan coverage.

The updated SBC will be used for plan years beginning on or after January 1, 2021. Although insurers will complete this form for insured clients, employer plan sponsors should familiarize themselves with the updated forms.

Updated SBC Materials »

IRS Releases Updated Publication 5165 for Electronically Filing ACA Information Returns

Expand/collapse »

On November 4, 2019, the IRS released a revised version of Publication 5165, entitled “Guide for Electronically Filing Affordable Care Act (ACA) Information Returns for Software Developers and Transmitters,” for tax year 2019 (processing year 2020). This publication outlines the communication procedures, transmission formats, business rules, and validation procedures for returns transmitted electronically through the Affordable Care Act Information Return System (AIR). The filing is quite technical. The forms must be filed using the Extensible Markup Language (XML) schemas outlined in the publication.

Employers who plan to electronically file Forms 1094-B, 1095-B, 1094-C, or 1095-C should review the latest guidance and make any necessary adjustments to their filing process. Because of the complexity, most employers partner with a payroll or software vendor to assist them with the electronic filing. Those employers still have a responsibility to review the forms for accuracy before submission to the IRS and distribute to employees. Employers filing fewer than 250 forms may file by paper with the IRS.

At this time, no extensions have been announced related to the due dates. Thus, the Forms 1095-C and 1095-B would need to be distributed to employees by January 31, 2020, and those forms along with the Forms 1095-B and 1094-B would need to be filed with the IRS by March 31, 2020, if filing electronically and by February 28, 2020, if filing by paper.

Publication 5165 »


October 1, 2019

IRS Releases Publication 5164, Test Package for 2019 Electronic ACA Filers

Expand/collapse »

The IRS recently released an updated version of Publication 5164, entitled “Test Package for Electronic Filers of Affordable Care Act (ACA) Information Returns (AIR),” for tax year 2019 (processing year 2020). The publication describes the testing procedures that must be completed by those filing electronic ACA returns with the IRS, specifically Forms 1094-B, 1095-B, 1094-C, and 1095-C. As a reminder, those who are filing 250 or more forms are required to file electronically with the IRS.

Importantly, the testing procedures apply to the entity that will be transmitting the electronic files to the IRS. Thus, only employers who are filing electronically with the IRS on their own would need to complete the testing. If an employer has contracted with a software vendor who’s filing on behalf of the employer, then the testing and this publication would not apply to the employer, but would apply to the software vendor instead.

Similar to prior years, the IRS provides two options (see pages 12-13) for submitting test scenarios for reporting year 2019: predefined scenarios and criteria-based scenarios. Predefined scenarios provide specific test data within the submission narrative for each form line that needs to be completed. Criteria-based scenarios give more flexibility to test and create data that may be unique to their organization when completing the necessary test scenarios. Correction scenarios are also provided (see page 17), but those are not required in order to pass testing.

As a reminder, electronic filing of 2019 returns will be due March 31, 2020. Most large employers that are required to file the forms work with third-party vendors in performing electronic filing, so the testing outlined in Publication 5164 wouldn’t apply to the employer. But if the employer is filing on their own, they’ll want to review the updated testing requirements in Publication 5164. Large employers that are required to file electronically, and would like information on third-party vendors who can assist, can contact their advisor for more information.

IRS Publication 5164 »
AIR Program »


September 4, 2019

Plans May Exclude Drug Coupons from ACA Annual Cost Sharing Limits

Expand/collapse »

On August 26, 2019, the DOL, HHS, and Treasury (the “agencies”) jointly issued an FAQ to address group health plan concerns regarding the application of drug coupons towards annual cost-sharing limits under the ACA. The FAQ recognized potential conflicts in prior agency guidance and provided temporary enforcement relief to plans and issuers pending further clarifying regulations.

Under the ACA, cost sharing by enrollees in non-grandfathered group health plans cannot exceed specified annual limits. The agencies have reached different conclusions as to whether coupons issued by drug manufacturers to offset the cost of patient prescriptions can be applied towards the applicable annual limits.

The HHS final Notice of Benefit and Payment Parameters for 2020 (2020 NBPP Final Rule) states that plans can exclude the value of manufacturer’s drug coupons from satisfaction of the cost sharing limits, provided that a generic equivalent is available for the prescribed drug. This rule was intended to encourage the use of generic drugs and promote cost savings. However, plans were left unclear as to whether drug coupons should be counted towards the annual limits if the prescribed drug did not have a generic equivalent. The 2020 NBPP Final Rule also appeared to conflict with previous IRS guidance regarding the application of drug coupons by high deductible health plans (HDHPs) designed for compatibility with health savings accounts (HSAs). HDHPs must meet specific federal requirements with respect to annual deductibles and out of pocket expenses. With the exception of preventive care, HDHPs generally cannot provide coverage below the annual deductible amount. In Notice 2004-50, the IRS specified that an HDHP must disregard drug discounts and only apply the amount actually paid by the employee in determining if the annual deductible has been satisfied. So, although the 2020 NBPP Final Rule could be interpreted to allow the coupon amount to be applied towards the deductible when a generic equivalent is not available, the IRS notice requires the exclusion of the amount in order for an individual to maintain HSA eligibility.

The agencies plan to address these inconsistencies in upcoming regulations in 2021. In the interim, the agencies will not take any enforcement actions against plans or insurers for excluding the drug coupon amounts from the cost sharing limits.

For group health plan sponsors, the FAQ is an acknowledgement of the ambiguous and potentially conflicting agency guidance previously provided. Until the 2021 regulations are released, group health plans can continue to exclude drug coupon amounts from the annual cost-sharing limits, regardless of whether a generic equivalent is available. Once the new guidance is issued, employers and issuers will need to review their plan designs and policies with respect to drug coupons and make any necessary updates.

FAQs About Affordable Care Act Implementation Part 40 »


August 20, 2019

IRS Affirms Employer Mandate Enforcement Efforts

Expand/collapse »

On June 28, 2019, the IRS sent a letter (number 2019-0008) to Senator Susan Collins, reaffirming that they will continue enforcing the employer mandate. Senator Collins, on behalf of several of her constituents, had written to the IRS asking whether the IRS might waive or reduce employer mandate penalties based on hardship or other factors. Senator Collins had also asked whether the IRS might be willing to extend transition relief for employers with fewer than 100 employees.

In the letter, the IRS, via Associate Chief Counsel Victoria Judson, responded by saying that the employer mandate does not provide for a waiver of penalties. The IRS also stated in the letter that no transition relief is available for 2017 and future years.

The letter also addresses a January 20, 2017 White House executive order directing federal agencies to exercise authority and discretion permitted to them to waive, defer, grant exemptions from, or delay regulatory burden imposed by the ACA. The IRS states that the legislative provisions of the ACA are still in force until Congress changes them, and therefore taxpayers (employers, when it comes to the ACA’s employer mandate) must follow the law and pay what they may owe.

The letter contains no new employer obligations, but does serve as a reminder that the IRS continues to enforce the ACA’s employer mandate. Recently, employers have been receiving letters from the IRS for failure to comply with the employer mandate and for late-filing the related forms (Forms 1094/95-C). Employers should continue to diligently comply with the employer mandate and reporting.

IRS Letter 2019-0008 »


July 23, 2019

IRS Publishes the ACA’s Affordability Percentage and Individual’s Premium Tax Credit Table for 2020

Expand/collapse »

On July 23, 2019, the IRS published Rev. Proc. 2019-29, which provides the 2020 premium tax credit (PTC) table and the employer contribution percentage requirements applicable for plan years beginning after December 31, 2019.

As background, the ACA's employer-shared responsibility rules (also known as the "employer mandate") require an employer to provide affordable, minimum value coverage to its full-time employees. The IRS's required contribution percentage is used to determine whether an employer-sponsored health plan offers an individual "affordable" coverage, and the affordability percentage is adjusted for inflation each year. In addition, the ACA also provides a refundable PTC, based on household income, to help individuals and families afford health insurance through affordable insurance exchanges. The IRS provides the PTC percentage table for individuals to calculate their PTC.

For 2020, the ACA's affordability percentage will decrease to 9.78% (down from 9.86% in 2019). For the employer mandate and affordability, this means that an employee's required premium contribution toward single-only coverage under an employer-sponsored group health plan can be no more than 9.78% of the federal poverty line or of an employee's W2 income or rate of pay (depending on which of the three affordability safe harbors the employer is relying upon).

The 2020 PTC table used to determine an individual's eligibility for PTCs is provided below:

 Household Income Percentage of Federal Poverty Line   Initial Percentage   Final Percentage 
 Less than 133%  2.06%  2.06%
 At least 133%, but less than 150%  3.09%  4.12%
 At least 150%, but less than 200%  4.12%  6.49%
 At least 200%, but less than 250%  6.49%  8.29%
 At least 250%, but less than 300%  8.29%  9.78%
 At least 300%, but not more than 400%  9.78%  9.78%

The revenue procedure is effective for plan years beginning on and after December 31, 2019.

Employers should be mindful of the upcoming 2020 affordability percentages and make sure that the premium offerings for 2020 continue to be affordable for full-time employees, so as to avoid any employer-shared responsibility penalties. The penalties related to employer shared responsibility remain the law (despite the fact that the ACA's individual mandate was repealed in 2019).

Rev. Proc. 2019-29 »

House Votes to Repeal Cadillac Tax

Expand/collapse »

On July 17, 2019, the US House of Representatives passed H.R. 748, which would repeal the 40% excise tax on employer-sponsored coverage that exceeds a certain threshold (also known as the Cadillac tax). As background, the Cadillac tax was introduced by the ACA, but has since been delayed through subsequent legislation.

The effort to repeal the law has clear bipartisan support, which was evidenced by the margin of the House vote; the measure passed on a 419-6 basis. The repeal is now expected to go on to the Senate, where there seems to be support for bypassing the committee process in favor of sending the repeal straight to a vote. This momentum may mean that the Cadillac tax repeal could be signed into law in the coming weeks.

The repeal of the Cadillac tax would be welcome relief for employers, considering the effect these taxes would have ultimately had on their plans. Bipartisan efforts for a full repeal of the Cadillac tax are likely to continue until the repeal is signed by the president. We will continue to monitor these developments and report on them here.

H.R. 748 »

Third Circuit Affirms Injunction of Contraceptive Mandate Exemptions

Expand/collapse »

On July 12, 2019, the US Court of Appeals for the Third Circuit affirmed a district court decision that enjoined the 2017 HHS final rules providing exemptions for the ACA’s contraceptive mandate. As background, the ACA requires most employers to provide certain preventive services, including contraceptive services and items, without cost-sharing. Under the ACA, certain qualifying religious employers were already exempt from the contraceptive coverage requirement, and other employers that held religious objections could also request an exemption via an accommodation process.

However, in October 2017, HHS published two interim final rules that significantly expanded the religious exemption (as outlined in our October 17, 2017, article here) by allowing any employer (including non-closely held companies and publicly traded companies) to claim a religious or moral objection to offering certain contraceptive items and services. The government went on to issue final versions of the rules (as outlined in our November 13, 2018, article here).

Following the publication of the interim final rules, a number of states filed lawsuits challenging the new exemptions. They argued that the DOL had failed to follow the Administrative Procedures Act (APA) and that the new exemptions would harm their state residents and run afoul of the ACA. Federal district courts in Pennsylvania and California both issued injunctions blocking enforcement of the interim and final rules.

The Third Circuit took up the case that came out of the Pennsylvania District Court on appeal, and they agreed with the lower court that the states included in the suit against the federal government had standing to sue. They also agreed that the states are entitled to an injunction of the law because they are likely to succeed in showing that the adoption of the final rules violated the APA.

Additionally, they argued that a nationwide injunction was necessary to avoid harm to individuals throughout the country. Specifically, they reasoned that employees working for employers in the states that filed the lawsuit might actually live in other states and that students covered by these plans might also go to school out of state.

We expect the government to continue to appeal this decision. We’ve also seen a conflicting opinion come out of the federal district court in the northern district of Texas (which invalidated the entire contraceptive mandate for certain employers).

Ultimately this means that the future of these exemptions remains uncertain. For employers, neither the court decisions nor the final rules settle the issue. As such, employers wishing to claim any expanded religious exemptions to the ACA’s contraceptive mandate should work with outside counsel to better understand the risks inherent in going forward with doing so.

Commonwealth of PA v. President U.S. of America, 888 F.3d 52 (3rd Cir. 2018)  »

HHS Updates Federal External Review Process

Expand/collapse »

On July 12, 2019, the HHS issued an update to Technical Guidance-01-2018 for self-insured, non-federal governmental health plans (and insurance carriers in the group and individual markets) that rely upon the HHS-administered federal external review process. As background, non-grandfathered group health plans and health insurance issuers offering non-grandfathered group or individual coverage must comply with the applicable external review process in their state if that process meets the standard established by the National Association of Insurance Commissioners (NAIC). If the state external review process does not meet this standard, or if the plan or issuer is not subject to state insurance regulation, then those group health plans and health insurance issuers must still implement an effective external review process meeting those same standards. The Code of Federal Regulations establishes the federal external review process for this purpose.

The guidance notes that MAXIMUS, a federal contractor, has started accepting online requests for external review through their online portal. As a result, there are now three options for employees (policyholders) and beneficiaries to request an external review (the other options being via mail or fax). Plans that use the HHS-administered external review process must now update the applicable notices to properly describe these available options.

This technical release also replaces technical guidance issued September 11, 2018 by providing a revised website address where a claimant can make an online request for external review.

The federal external review process requires an adverse benefit determination or a final internal adverse benefit determination to contain a notice to the claimant that the claimant can request an external review of the adverse benefit determination or final internal adverse benefit determination. A claimant can now submit such a request online to externalappeal.cms.gov under the “Request a Review Online” heading, in writing by faxing their request to 1.888.866.6190, or by sending it by mail to: MAXIMUS Federal Services, 3750 Monroe Avenue, Suite 705, Pittsford, NY 14534.

Self-insured employers that rely upon the HHS-administered federal external review process should update the notice to properly inform claimants of their three options for requesting an external review (via email, mail, fax, or through the online portal).

Update to Technical Guidance-01-2018 »


June 11, 2019

HHS Proposes Revisions to ACA Section 1557

Expand/collapse »

On May 24, 2019, HHS released proposed regulations, substantially revising ACA Section 1557. As background, Section 1557 took effect in 2016 and prohibits health care discrimination on the basis of race, color, national origin, sex, age, or disability. Specifically, the law mandated that individuals cannot be denied access to health care or coverage, or otherwise discriminated against, based on one of those factors. Notably, the law protects transgender individuals under the auspices of discrimination based on sex.

After various court cases challenged the law (including a partial injunction in 2016 on the Section 1557 provisions relating to gender identity and termination of pregnancy), HHS is proposing to revise the law by mainly repealing the definition of discrimination on the basis of sex to exclude gender identity and pregnancy termination. The proposed rule also eliminates the requirement to include nondiscrimination notices in at least 15 languages.

Importantly, the proposed regulations also vastly limit the application of Section 1557 to only entities that are engaged in health care activities that are funded by HHS, whereas Section 1557 originally applied to all operations of an entity, even if it was not principally engaged in health care. This distinction will mean that most group health plan insurers and self-insured health plans will not have to comply with Section 1557.

As we have seen with many other proposed changes to ACA provisions, there have already been legal challenges to this new proposed rule. So, any employer that wants to change health coverage under their plan in a way that is consistent with the finalized version of this rule will need to consult with legal counsel before doing so. We will continue to follow any developments on this issue and report them in Compliance Corner.

Proposed Rule »

HHS News Release »

HHS Fact Sheet »


March 19, 2019

IRS Updates Q&As on Sections 6055 and 6056 Reporting

Expand/collapse »

On March 2, 2019, the IRS updated their questions and answers (Q&As) providing additional guidance on employer compliance with PPACA reporting requirements under IRC Sections 6055 and 6056. The only updates to the Q&As appear to be updated links to the required forms to route the user to the 2018 versions (instead of the 2017 versions).

As background, Section 6055 requires every provider of minimum essential coverage to report coverage information by filing an information return with the IRS and furnishing a statement to individuals. Section 6056 is meant to allow employers to report on their compliance with the employer mandate. Those reports also allow the government to determine whether a specific individual was offered minimum value, affordable employer-sponsored coverage for each month, which affects that individual’s ability to qualify for an premium tax credit.

The Section 6055 Q&As address the basics of employer reporting, including which entities are required to report, what information must be reported and how and when reporting entities must report required information, as follows:

  • Basics of Provider Reporting: Questions 1-3
  • Who is Required to Report: Questions 4-14
  • What Information Must Providers Report: Questions 15-18
  • How and When to Report the Required Information: Questions 19-28
  • Extended Due Dates and Transition Relief: Questions 19-35

The Section 6056 Q&As cover the same topics and also address questions related to the methods of reporting, as follows:

  • Basics of Employer Reporting: Questions 1-3
  • Who is Required to Report: Questions 4-11
  • Methods of Reporting: Questions 12-16
  • How and When to Report the Required Information: Questions 17-24
  • Designated Government Entity: Questions 25-28
  • Other Third Party Service Providers: Questions 29
  • Extended Due Dates and Transition Relief for 2015 and 2016 Reporting: Questions 30-34
  • Additional Information

Overall, the Sections 6055 and 6056 Q&As appear to have remained the same and haven’t been revised. Still, employers should ensure that they have followed this guidance in preparing their 2018 forms. NFP has resources to assist. Ask your advisor for more information.

Q&As on Section 6055 Reporting »

IRS Q&As on Section 6056 Reporting »


March 5, 2019

Agencies Request Public Comment on Grandfathered Status

Expand/collapse »

On Feb. 25, 2019, the DOL, IRS and HHS (the “agencies”) jointly issued a request for information regarding grandfathered health plans. As background, grandfathered plans are group health plans or health insurance coverage that have continuously provided coverage and have not made certain prohibited design changes since March 23, 2010. Grandfathered plans are exempt from some requirements under the ACA, including coverage of preventive services with no cost-sharing and the expanded appeals process and external review, but are still subject to other ACA provisions. Grandfathered status can be maintained indefinitely as long as the plan continues to cover at least one person, no prohibited plan design changes are made, and the required disclosure and recordkeeping obligations are met.

Consistent with Pres. Trump’s Executive Order issued on Jan. 20, 2017, the purpose of this request is to better understand challenges that group health plans and issuers face in avoiding loss of grandfathered status. The agencies aim to determine how they can help to preserve grandfathered status in ways that benefit employers, employee organizations, plan participants and other stakeholders. The agencies also seek to understand why plans have chosen to maintain grandfathered status (including costs, benefits and other factors) and why participants continue to enroll in grandfathered coverage. Finally, the agencies ask how many plan sponsors and carriers anticipate changes that would cause a loss of grandfathered status.

The request explains that the number of grandfathered plans has decreased each year since the ACA was enacted. However, despite those declining numbers, the agencies note that some employers, insurers and participants continue to find value in keeping grandfathered status. Importantly, no changes to the grandfathered rules have been made as of yet, but our team will continue to stay abreast of any modifications. Comments are due by March 27, 2019.

Proposed Rule »


January 23, 2019

Federal District Courts Enjoin Final Rules on Contraceptive Mandate Exemptions

Expand/collapse »

Two federal district courts recently issued injunctions on the final rules providing exemptions from the ACA’s contraceptive mandate. As background, the ACA requires most employers to provide certain preventive services, including contraceptive services and items, without cost-sharing. Under the ACA, certain qualifying religious employers were already exempt from the contraceptive coverage requirement, and other employers that held religious objections could also request an exemption via an accommodation process.

However, in October 2017, HHS published two interim final rules that significantly expanded the religious exemption (as outlined in our Oct. 17, 2017, article here) by allowing any employer (including non-closely held companies and publicly traded companies) to claim a religious or moral objection to offering certain contraceptive items and services. The government went on to issue final versions of the rules (as outlined in our Nov. 13, 2018, article here).

Following the publication of the interim final rules, a number of states filed lawsuits, challenging the new exemptions. They argued that the DOL had failed to follow the Administrative Procedures Act (APA) and that the new exemptions would harm their state residents and run afoul of the ACA. The federal district courts in Pennsylvania and California initially issued injunctions blocking enforcement of the interim final rules.

After government appeals, the courts again chose to enjoin the enforcement of the final rules. Specifically, on Jan. 13, 2019, the U.S. District Court for the Northern District of California enjoined the implementation of the final rules in the states of California, Connecticut, Delaware, Hawaii, Illinois, Maryland, Minnesota, New York, North Carolina, Rhode Island, Vermont, Virginia, and Washington and the District of Columbia. In its decision, the court agreed that the states could succeed on their claims that the final rules violated the ACA and APA.

On Jan. 14, 2019, the U.S. District Court for the Eastern District of Pennsylvania issued an injunction that blocks implementation of the final rules nationwide. The Pennsylvania court also found that the states that filed (Pennsylvania and New Jersey) are likely to prevail on their claim that the final rules violate the APA.

We expect the government to continue to appeal these decisions, and it is also likely that the filing states will do the same should an appeals court rule in the government’s favor. Ultimately this means that the future of these exemptions remains uncertain. For employers, neither the court decisions nor the final rules settle the issue. As such, employers wishing to claim any expanded religious exemptions to the ACA’s contraceptive mandate should work with outside counsel to better understand the risks inherent in going forward with doing so.

California v. HHS »
Pennsylvania v. Trump »

2019 Federal Poverty Levels Announced

Expand/collapse »

Earlier this month, HHS announced the 2019 federal poverty levels (FPL). The guidelines for the 48 contiguous states is $12,490 for a single person household and $25,750 for a four person household. The guidelines are different for Alaska ($15,600 and $32,190, respectively) and Hawaii ($14,380 and $29,620, respectively).

The FPL plays an important role under the ACA. Individuals who purchase coverage through the exchange may qualify for a premium tax credit if their household earnings are within 100 percent to 400 percent of the FPL. Employers wishing to avoid a penalty under the employer mandate may use the FPL affordability safe harbor, which means the cost of an employee's required contribution for employer sponsored coverage does not exceed 9.86 percent (for 2019), up from 9.56 percent (for 2018), of the single person FPL. This means that the FPL affordability safe harbor threshold in the 48 contiguous states for 2019 would be $102.62 per month, which is $12,490 divided by twelve and times 9.86 percent. As a reminder, the FPL safe harbor is only one of the affordability safe harbors; the other two are the rate of pay and Form W-2 safe harbors.

Employers should consider this adjustment to the FPL when determining whether their coverage is affordable, especially if they're using the FPL affordability safe harbor. The 2019 FPL is applicable beginning Jan. 11, 2019.

FPL Announcement »


January 8, 2019

Federal District Court Invalidates the ACA

Expand/collapse »

On Dec. 14, 2018, a federal judge in the U.S. District Court for the Northern District of Texas held, in Texas v. U.S., that the ACA’s individual mandate is unconstitutional and therefore the entire ACA is invalid. The ruling is a result of a challenge to the ACA brought by a coalition of Republican-led states, including Texas. Because the current administration refused to defend the ACA, several Democratic-led states intervened to defend the law. The challenge is focused on the ACA’s individual mandate — the requirement for all US citizens to purchase health insurance or pay a penalty tax.

As background, in 2012, the U.S. Supreme Court held the individual mandate (and thereby the ACA) constitutional, stating that the individual mandate was actually a tax, and that imposing a tax is a valid exercise of Congress’s authority. The coalition of states in Texas v. U.S. argued that Congress erased that constitutional basis for the individual mandate when it reduced the tax penalty to $0 under the Tax Cuts and Jobs Act of 2017. The district court agreed, stating that because the penalty tax is now gone, there’s no constitutional justification for the individual mandate; and because the individual mandate is “essential to” and “inseverable from” the other provisions of the ACA, the entire ACA falls.

On Dec. 30, 2018, Judge O’Connor granted the intervenor states’ request for final judgement based on the Dec. 14 decision and a stay of that judgement. This means that the coalition of intervening states can now appeal the law. An appeal would likely go to the U.S. Court of Appeals for the Fifth Circuit. Many legal experts believe the case is headed to the U.S. Supreme Court, meaning the ACA’s future could once again be in the hands of the highest court in the land. There is also a chance Congress could revisit health care as an issue in 2019, although with Democrats taking control of the House, any legislative changes would require bipartisan support.

If the district court’s ruling is ultimately upheld, the ACA would be deemed invalid. That would have far-reaching consequences, as the ACA goes beyond just the exchanges, premium tax credits and employer obligations most people are familiar with. For employers, though, while the employer mandate, reporting and other obligations would disappear, so would some of the more popular provisions. For example, plans could once again exclude adult children, impose cost-sharing for preventive services and annual exams, and exclude or impose surcharges for individuals with pre-existing conditions. While there does appear to be bipartisan congressional support for those more popular provisions of the ACA, it remains to be seen whether Congress would enact new legislation that would maintain those protections.

As for impact on employers, because the ACA remains the law for now, employer-related requirements remain in place. This includes the employer mandate, employer reporting (Forms 1094/95-C), Summary of Benefits and Coverage, W-2 reporting of employer-sponsored coverage, and all insurance mandates: coverage of dependents up to age 26, coverage of preventive services without cost-sharing, and the prohibitions on annual limits for essential health benefits and pre-existing condition exclusions. In addition, the exchanges remain open for business for individuals; people who enrolled by the Dec. 15, 2018, deadline received coverage effective Jan. 1, 2019. Employers should continue to monitor their compliance obligations.

As always, NFP’s Benefits Compliance team will continue to track and report on future developments on this issue.

Texas v. U.S. »
Partial Final Judgement »
Order Granting Stay »

Ninth Circuit Narrows Application of Injunction on Contraceptive Mandate Exemptions

Expand/collapse »

On Dec. 13, 2018, the U.S. Court of Appeals for the Ninth Circuit issued a preliminary opinion in the case of California v. Azar. This case, which was brought by the states of California, Delaware, Virginia, Maryland and New York, challenges the Trump administration’s exemptions for the ACA’s contraceptive mandate. As background, the ACA requires most employers to provide certain preventive services, including contraceptive services and items, without cost-sharing. Under the ACA, certain qualifying religious employers were already exempt from the contraceptive coverage requirement, and other employers that held religious objections could also request an exemption via an accommodation process.

However, in October 2017, HHS published two interim final rules that significantly expanded the religious exemption (as outlined in our Oct. 17, 2017, article here) by allowing any employer (including non-closely held companies and publicly traded companies) to claim a religious or moral objection to offering certain contraceptive items and services. The interim final rules also provided an exemption for insurers with sincerely held moral objections to contraceptive coverage.

The states filed this lawsuit in early 2018, challenging the new exemptions. They argued that the DOL had failed to follow the Administrative Procedures Act (APA) and that the new exemptions would harm their state residents. The federal district court in which the case was filed agreed and imposed a nationwide preliminary injunction on the interim final rules. A federal court in Pennsylvania did the same.

The government appealed this case, arguing (among other things) that the states didn’t have standing to sue. The Ninth Circuit disagreed with that argument, holding that the states do have standing to sue on this issue and that the government likely violated the APA’s requirements. However, the court found the district court’s nationwide injunction to be overbroad and so they limited the injunction to the states of California, Delaware, Virginia, Maryland, and New York (which are the states that filed the lawsuit).

Ultimately, the future of these exemptions remains uncertain. As we recently discussed in Compliance Corner (see our Nov. 13, 2018, article here), the government released the final versions of these exemptions. They are scheduled to become effective later this month. Additionally, the nationwide injunction imposed by the federal district court in Pennsylvania is still intact.

For employers, neither the court decisions nor the final rules settle the issue. As such, employers wishing to rely upon any expanded religious exemptions to the ACA’s contraceptive mandate should work with outside counsel to better understand the risks inherent in going forward with claiming an exemption.

California v. Azar »