Compliance and Regulatory
February 27, 2024
On January 17, 2024, HHS released its Annual Update of the HHS Poverty Guidelines for 2024. The notice provides an annual update on poverty guidelines based on the prior calendar year’s increase in prices as measured by the Consumer Price Index. These guidelines are used, in part, to help determine eligibility for federal programs such as Medicaid and to determine eligibility for subsidies in the individual marketplace. Further, these guidelines impact employers who use the Federal Poverty Line (FPL) safe harbor to determine affordability under the ACA’s employer mandate.
The FPL safe harbor uses the federal poverty line for a one-person household (for its respective geographic location) multiplied by the affordability threshold for the respective year; that total is then divided by 12 to derive the maximum self-only cost-share per month. For plan years beginning between January and June of a calendar year, plan sponsors can rely on the prior calendar year’s federal poverty line for the FPL safe harbor calculation since the annual update generally occurs after the plan year has already begun.
The 2024 federal poverty line for a one-person household in the 48 contiguous states and the District of Columbia is $15,060; the poverty guideline increases by $5,380 for each additional household member. In Alaska, the poverty guideline is $18,810 for a one-person household and increases by $6,730 for each additional household member. In Hawaii, the poverty guideline is $17,310 for a one-person household and increases by $6,190 for each additional household member.
For example, using the federal poverty line for the 48 contiguous states, the maximum self-only monthly cost-share should not exceed $105.29 for employers using the FPL safe harbor.
Employers who use the FPL safe harbor should be mindful of the 2024 update, although they can continue to rely on 2023 guidelines through June 2024 if desired. For further information regarding affordability and the ACA’s employer mandate, employers should contact their NFP consultant for a copy of our ACA Resources toolkit.
On February 12, 2024, the IRS released Revenue Procedure 2024-14, which in part provides indexing adjustments for penalties under the ACA employer mandate. As a reminder, the ACA requires applicable large employers (ALEs), those with 50 or more full-time employees (FTEs) and full-time equivalent employees, to offer affordable minimum value (MV) coverage to all FTEs and their dependents or risk a penalty.
Notably, the employer mandate penalty amounts for 2025 are reduced from the 2024 penalty amounts. For plan years beginning on or after January 1, 2025, the annual penalties are calculated as follows:
Both penalties, although commonly expressed as annual amounts, are assessed monthly.
ALEs should regularly verify that employees who generally work at least 30 hours per week are offered affordable MV coverage to avoid ACA employer mandate penalties. The IRS uses Letter 226-J to inform employers of their potential liability for such penalties. Employers should promptly review and respond to any IRS Letter-226-J they receive and consult with counsel as necessary.
For further information regarding the ACA employer mandate and penalties, please ask your broker or consultant for a copy of the following NFP publication ACA: Employer Mandate Penalties and Affordability.
On February 9, 2024, the IRS updated its frequently asked questions (FAQs) for the premium tax credit. These FAQs superseded earlier FAQs that were posted on February 24, 2022. Nine existing FAQs were updated, and four new FAQs were added. Among other items, the FAQs explain the basics of the premium tax credit, the eligibility requirements, and how the affordability of employer coverage affects eligibility.
The updates include the addition of a new section, “Affordability of employer coverage for employees and for family members of employees,” with new FAQs 12, 13, 14 and 22. FAQs 12, 13 and 14 document that coverage is affordable to an individual (making the individual not eligible for the credit) if they are offered coverage under more than one employer’s plan and either of those plans are affordable to the individual as an employee or family member. FAQ 13 sums up the changes:
“Q13. What if I receive an offer of coverage from multiple employers?
A13. If you receive offers of coverage from multiple employers, whether the coverage is offered by your employer or someone else’s employer, you are generally considered to have an offer of affordable coverage if at least one of the offers of coverage is affordable for you.”
New FAQ 22 clarified the treatment of Individual Coverage Health Reimbursement Arrangements (ICHRAs). The response explains that if an employer offers an ICHRA, the employee is not allowed a premium tax credit for marketplace coverage unless 1) the ICHRA is considered unaffordable and 2) the employee opts out of receiving reimbursements under the ICHRA. As referenced in the response, the IRS has issued specific rules for determining when an ICHRA is considered affordable.
The IRS notes that guidance, including FAQs, that is not reported in an Internal Revenue Bulletin will not be relied on, used, or cited as precedents by service personnel in the disposition of cases. But taxpayers “who show that they relied in good faith on an FAQ and that their reliance was reasonable based on all the facts and circumstances will not be subject to a penalty that provides a reasonable cause standard for relief, including a negligence penalty or other accuracy-related penalty, to the extent that reliance results in an underpayment of tax.”
Employers that sponsor group health plans and are subject to the employer mandate should be aware of these FAQ updates.
January 30, 2024
On January 22, 2024, the DOL, HHS, and IRS (the departments) issued FAQ guidance addressing required coverage of contraceptive drugs under the ACA in response to reports of “unreasonable medical management techniques and other problematic practices” imposing barriers to contraceptive coverage without cost-sharing.
The ACA requires non-grandfathered group health plans and insurers to cover without any cost-sharing at least one form of contraception in each of 17 FDA-identified contraceptive categories, as well as any newer contraceptive service or FDA-approved, -cleared, or -granted contraceptive products that an individual and their medical provider have determined to be medically appropriate for an individual, regardless of whether those products have been specifically categorized.
With respect to those newer contraceptive products and services, the departments have allowed plans and insurers to use reasonable medical management techniques to determine which specific products or services to cover without cost-sharing so long as at least one of multiple, substantially similar products or services have been made available, and provided that it is medically appropriate for the individual.
The FAQs state that despite past attempts by the departments to clarify medical management techniques they have considered reasonable, provided there is an “easily accessible, transparent, and sufficiently expedient” exceptions process available, potentially unreasonable techniques and other problematic practices have nevertheless proliferated, including:
In response, the FAQs provide for an alternative “therapeutic equivalence approach” to compliance for contraceptive drugs and drug-led devices. Under this approach, a medical management technique will be deemed reasonable if all FDA-approved contraceptive drugs and drug-led devices in a category are covered without cost-sharing, not including any for which there is at least one therapeutic equivalent drug or drug-led device that the plan or insurer covers without cost-sharing. Additionally, there must be an exceptions process available to individuals that allows them to access a specific therapeutic equivalent determined to be medically necessary by their attending provider.
Coverage of contraceptive products and services has been and will likely remain a subject of primary concern for the departments. Plans and insurers should review these FAQs carefully as well as any contraceptive coverage requirements imposed by various states to whose laws they may be subject.
FAQS about Affordable Care Act Implementation Part 64 (dol.gov) »