If an individual is eligible for affordable coverage under an eligible employer-sponsored health coverage that provides minimum value, then he or she cannot, regardless of income, receive a premium tax credit toward individual coverage through an Exchange. Hence, if the employer can determine that its plan provides minimum value (and is affordable), then it can be assured that it will not be exposed to the Code section 4980H(b) penalty.

Generally speaking, an employer-sponsored health plan fails to provide minimum value if the plan’s share of the total allowed costs of benefits provided under the plan is less than 60 percent of the costs. The proposed Treasury regulations indicate that minimum value is determined based on anticipated spending for a standard population related to essential health benefits (EHB), taking into account the employer’s choices regarding cost-sharing required of participants (deductibles, co-pays, co-insurance, etc.).To provide minimum value, a plan must have a minimum value percentage (MV Percentage) of at least 60 percent. The MV Percentage is calculated by dividing the plan’s anticipated covered EHB medical spending for a standard population by the total anticipated allowed charges for coverage of EHB provided to that population.

There are several available methods for an employer-sponsored health plan to determine whether it provides minimum value:

• Use the Minimum Value Calculator made available by HHS and IRS, which can be found here.
• Use one of several design-based safe harbors.
• If the plan has nonstandard features that are not compatible with the Minimum Value Calculator, obtain an actuarial certification of minimum value.

If the employer’s plan is offered together with a health savings account (HSA), the employer can include as part of the plan’s MV Percentage the value of the employer’s contributions (if any) to the HSA for the then-current plan year. Similarly, if the employer makes contributions to a health reimbursement account that is integrated with its health plan, the employer generally can include such contributions for the current year as part of the plan’s MV Percentage.

A plan’s share of costs for minimum value purposes is determined without taking into account reduced cost-sharing that is potentially available under a nondiscriminatory wellness program, except for wellness programs addressing tobacco use. For such wellness programs, minimum value may be calculated by assuming that an eligible individual satisfies and earns the cost-sharing reduction awarded for prevention/reduction of tobacco use.

As the federal health care reform effort gained steam, Ballard Spahr attorneys established the Health Care Reform Initiative to monitor and analyze legislative developments. With federal health care reform now a reality, our attorneys are assisting health care entities and employers in understanding the relevant changes and planning for the future. They also have launched the Health Care Reform Dashboard, an online resource center for news and analysis on developments under the Affordable Care Act.

If you have questions about the minimum value requirements, contact Brian M. Pinheiro at 215.864.8511 or pinheiro@ballardspahr.com, or Kurt R. Anderson at 215.864.8432 or andersonk@ballardspahr.com.

Under the Affordable Care Act, employers offering health coverage must notify employees about the exchanges and whether employees are eligible for tax credits if they purchase coverage from the exchanges. Employers also must warn employees that they will not receive an employer contribution toward health coverage purchased through an exchange. Whether an employee is eligible for tax credits depends on whether the employer-sponsored plan provides “minimum value.” Employers can modify the model notice form to meet their needs.

Similarly, employers who do not offer health coverage must notify employees about the exchanges and their eligibility for a tax credit for insurance purchased through an exchange.

The notice requirement applies to employers subject to the Fair Labor Standards Act. The notices must be provided to all current employees no later than October 1, 2013, as well as to new hires beginning on that date. The notices may be delivered electronically in accordance with the DOL safe harbor. 

Lastly, the DOL updated its model COBRA notice to include information on the exchanges. Beneficiaries who will lose coverage in a group health plan as a result of a qualifying event—such as termination of employment, reduction in hours, or divorce—can elect COBRA continuation coverage. The COBRA notice informs qualified beneficiaries of their rights to continuation coverage and how to make an election. The updated model notice also informs beneficiaries they can alternately purchase coverage on the exchanges.

As the federal health care reform effort gained steam, Ballard Spahr attorneys established the Health Care Reform Initiative to monitor and analyze legislative developments. With federal health care reform now a reality, our attorneys are assisting health care entities and employers in understanding the relevant changes and planning for the future. They also have launched the Health Care Reform Dashboard, an online resource center for news and analysis on developments under the Affordable Care Act.

If you have questions about employer notice requirements or other elements of exchanges, contact Jean C. Hemphill at 215.864.8539 or hemphill@ballardspahr.com, or Robert S. Kaplan at 215.864.8417 or kaplanrs@ballardspahr.com.

The new template includes two new entries that address whether the plan provides minimum essential coverage and meets the minimum value standard. Employers whose SBC preparation makes it too difficult to add new questions to the 2014 SBC at this time may address the issues in a cover letter.

The FAQs provide specific instruction regarding the entry on overall annual limits. Because annual limits will no longer be permitted for coverage beginning on January 1, 2014, the question on whether a plan contains such limits must be answered “no.” Alternatively, this entry may be deleted from the SBC entirely.

Otherwise, the guidance makes few changes. Most significantly, no new example is required to be included, and the FAQs extend various policies regarding relief from enforcement related to the SBCs.

As the federal health care reform effort gained steam, Ballard Spahr attorneys established the Health Care Reform Initiative to monitor and analyze legislative developments. With federal health care reform now a reality, our attorneys are assisting health care entities and employers in understanding the relevant changes and planning for the future. They also have launched the Health Care Reform Dashboard, an online resource center for news and analysis on developments under the Affordable Care Act.

If you have questions about the latest SBC guidance, contact Edward I. Leeds at 215.864.8419 or leeds@ballardspahr.com, or Robert S. Kaplan at 215.864.8417 or kaplanrs@ballardspahr.com.

Under the proposed regulations, a waiting period is defined as the period that must pass before coverage for an employee or dependent who is otherwise eligible under the terms of the group health plan can become effective. While plan sponsors can impose substantive eligibility requirements for coverage (e.g., full-time employment) without restriction under the proposed regulations, waiting periods based solely on the passage of time cannot exceed 90 days. Coverage for otherwise eligible employees and dependents must become effective on the 91st day. If the commencement of coverage is tied to the first day of the month, no extension is permitted. Thus, in that case, the waiting period cannot be extended to the first day of the month following the completion of a 90-day wait.

In the event that a plan requires a certain number of hours of service in a period as an eligibility requirement (e.g., 30 hours per week), the proposed regulations provide some flexibility for new employees who are hired in variable hour provisions. In these circumstances, the plan sponsor may apply a measurement period of up to 12 months to determine whether the new variable hour employee satisfies the eligibility conditions. If the variable hour employee is eligible, the plan will not violate the 90-day waiting period requirement if coverage is effective no later than 13 months from the employee’s start date plus, if the employee’s start date is not the first day of the month, the time remaining until the first day of the following month.

Finally, plans may require the completion of a specified number of hours to become eligible for health coverage. The proposed regulations indicate that the specified number of hours cannot exceed 1,200, and can only be imposed on a one-time (as opposed to an annual) basis.

As the federal health care reform effort gained steam, Ballard Spahr attorneys established the Health Care Reform Initiative to monitor and analyze legislative developments. With federal health care reform now a reality, our attorneys are assisting health care entities and employers in understanding the relevant changes and planning for the future. They also have launched the Health Care Reform Dashboard, an online resource center for news and analysis on developments under the Affordable Care Act.

If you have questions about the waiting period regulations or any other aspect of the Affordable Care Act, contact Brian M. Pinheiro at 215.864.8511 or pinheiro@ballardspahr.com or Edward I. Leeds at 215.864.8419 or leeds@ballardspahr.com.

Beginning in 2014 (and continuing for 2015 and 2016), employers and other sponsors of self-funded health plans, as well as insurance companies offering insured health plan products, are subject to the Affordable Care Act’s transitional reinsurance fee. This fee is designed to fund reinsurance payments to health insurance issuers that cover high-risk individuals in the individual market. The transitional reinsurance payments are intended to stabilize insurance premiums in the individual market during 2014, 2015, and 2016 as consumers and insurers become more comfortable with the state health insurance exchanges.

The final HHS regulations clarify several items regarding the calculation and payment of transitional reinsurance fees, including the following:

• The amount of the transitional reinsurance fee for 2014 will be $63 (or $5.25 per month) per covered life, confirming the amount that was set forth in the proposed regulations(even as those regulations raised the possibility that it might be lowered slightly). Because the fee applies per covered life—and not per employee or subscriber—covered spouses and dependents, as well as covered employees, will generate fees.
• Although the fee aims to stabilize the health insurance market at a time when additional unknown risks are entering that market, the fee is payable by sponsors of self-funded health plans as well as health insurers. A plan sponsor may contract with a third-party administrator to calculate and pay the fee.
• The fee does not apply to Medicare Part C and Part D programs.
• The fee applies only to plans providing major medical coverage, which is defined as health coverage for a broad range of services and treatments, including diagnostic and preventive services, as well as medical and surgical conditions in inpatient, outpatient, and emergency room settings. The following types of coverage are excluded from the transitional reinsurance fee:
  • Prescription drug coverage
  • Health reimbursement accounts (HRAs) integrated with other coverage (although the other coverage, such as a high deductible health plan, may constitute major medical coverage)
  • Health flexible spending accounts (Health FSAs)
  • Health savings accounts (HSAs)
  • Employee assistance plans (EAPs)
  • Coverage that is secondary to Medicare
  • Excepted benefits, such as stand-alone vision and dental plans
  • Long-term care coverage
• The fee applies to retiree health coverage (unless it is secondary to Medicare or qualifies for another exception) and grandfathered health plans.
• Plan sponsors have several alternatives for counting the number of covered lives for purposes of the fee, including:
  • The actual count method, which focuses on the actual number of covered lives over the first three quarters of the year
  • The snapshot count method, which allows the plan sponsor to select representative dates in each of the first three quarters for counting covered lives
  • Methods based on Form 5500 participant counts, extrapolated to capture all covered lives
• Qualified beneficiaries receiving COBRA continuation coverage are counted for purposes of determining the transitional reinsurance fee.
• The transitional reinsurance fee is tax deductible as an ordinary and necessary business expense (unlike the Patient-Centered Outcomes Research Institute (PCORI) fee, which is an excise tax and is not tax deductible).
• To the extent that a self-funded health plan is funded (through a voluntary employees’ beneficiary association (VEBA) trust or otherwise), the transitional reinsurance fee may be paid from plan assets under the Employee Retirement Income Security Act (ERISA) rules.
• A plan sponsor that offers multiple plans may aggregate plans to avoid double counting covered lives.
• Plan sponsors and insurers are required to report their enrollment counts by November 15 of each year (2014, 2015, and 2016). HHS then will provide a notice of fee liability by December 15, and the plan sponsor or insurer will have 30 days to remit the transitional reinsurance fee to HHS.

As the federal health care reform effort gained steam, Ballard Spahr attorneys established the Health Care Reform Initiative to monitor and analyze legislative developments. With federal health care reform now a reality, our attorneys are assisting health care entities and employers in understanding the relevant changes and planning for the future. They also have launched the Health Care Reform Dashboard, an online resource center for news and analysis on developments under the Affordable Care Act.

If you have questions about the transitional reinsurance fee, contact Brian M. Pinheiro at 215.864.8511 or pinheiro@ballardspahr.com.

The burden is to be allocated among insurers based on the premiums they collect for their U.S. health insurance risks. The government will calculate the amount each insurer must pay based on reports the insurers file by May 1 of each year. Payment will be due no later than September 30 of each year, beginning in 2014.

The regulations detail various exceptions to the new fee requirements. Exceptions apply based on:

• The type of insurance. Accident, disability, long-term care, group specified disease, and Medicare supplemental insurance will be exempt from the fee, but the fee will apply to certain benefits that are often excepted from ACA requirements, such as dental, vision, and retiree health insurance.
• The type of entity providing the insurance. For example, governmental entities and certain nonprofit corporations that are largely funded by government programs targeting low-income, elderly, or disabled populations are exempt from the fee. Self-funded plans are generally exempt, but most multiple employer welfare arrangements (MEWAs) will need to pay the fee to the extent they are self-funded.
• The amount of premiums. The first $25 million in premium and half of the premium between $25 and $50 million will not be taken into account in determining the fee.

Sponsors of insured health plans may see increases in their premiums that result from these fees. Some insurers have already announced that they will pass the fees (along with fees for the Patient Centered Outcomes Research Institute and Transitional Reinsurance Program fees) on to their customers.

As the federal health care reform effort gained steam, Ballard Spahr attorneys established the Health Care Reform Initiative to monitor and analyze legislative developments. With federal health care reform now a reality, our attorneys are assisting health care entities and employers in understanding the relevant changes and planning for the future. They also have launched the Health Care Reform Dashboard, an online resource center for news and analysis on developments under the Affordable Care Act.

If you have questions about the annual fee for insurers or any other aspects of the ACA, contact Edward I. Leeds at 215.864.8419 or leeds@ballardspahr.com.

On February 22, 2013, OSHA issued an interim final rule addressing whistleblower complaints filed under Section 1558 of the ACA. Section 1558 protects employees against retaliation by their employers for: (1) reporting a violation of Title I of the ACA; (2) refusing to participate in an activity the employee reasonably believes to be a violation of Title I; (3) assisting or participating in a whistleblower proceeding under Section 1558; or (4) receiving a tax credit or cost-sharing reduction as a result of participation in a Health Insurance Exchange or Marketplace. Title I of the ACA relates to consumer protections, such as prohibitions on lifetime coverage limits, and preexisting conditions exclusions, requirements to cover preventive services without cost sharing, and prohibitions on using certain factors to set premium rates. 

In 2014, the anti-retaliation provisions of Section 1558 will be expanded to apply to group health plans and health insurance issuers offering group or individual health insurance coverage. That is, employees will be protected from retaliation by their employers and by the insurance carrier that provides the health coverage. For example, employees will be protected from acts such as issuers limiting or canceling their health insurance coverage.

An employee who believes he or she has been the victim of retaliation in violation of the ACA may file a complaint with OSHA within 180 days of the claimed retaliation. OSHA will review the employee’s evidence and may choose to conduct an investigation. Under the final interim rule, OSHA has the power to negotiate settlements or enter an order awarding damages and other remedies, including reinstatement. 

Parties who disagree with an order may appeal to an administrative law judge through the U.S. Department of Labor’s Administrative Review Board and finally to the appropriate circuit court. Although an appeal will stay the entry of most relief contained in OSHA’s order, it will not stay an order of reinstatement. Thus, an employer may be required to re-employ an alleged whistleblower during the pendency of an appeal.

Similar to the process for EEOC charges, an employee may withdraw his or her claim from OSHA and sue in federal court if the agency does not act on the complaint within 210 days of its filing. Additionally, if OSHA does not enter an order on its findings within 90 days (presumably because the agency is attempting to resolve the case through conciliation efforts), the employee may choose not to wait and may bring suit in federal court within 90 days of receipt of OSHA’s decision.

Finally, the interim rule sets out an “employee friendly” burden of proof. A complaining employee must demonstrate, by a preponderance of the evidence, direct or circumstantial, that the protected activity was a motivating factor (not the motivating factor) in the alleged retaliatory action. The employer then has the burden to show, by clear and convincing evidence (a higher standard than a preponderance of the evidence), that the business would have taken the same action in the absence of the protected activity. This standard adopts the “mixed-motive” analysis of Title VII jurisprudence, but, under Title VII, the standard is reserved for cases where an employee makes an initially stronger showing of illegal employer action―where there is direct evidence of discrimination. 

Thus, under this rule, if it does become final, employers will find it more difficult to defend ACA retaliation claims than the typical employment discrimination case. 

OSHA has published a fact sheet providing an overview of the final interim rule. OSHA is accepting comments on the interim final rule for 60 days, through April 28, 2013. The interim rule is effective in the meantime.

Members of Ballard Spahr’s Labor and Employment Group are available to assist you in navigating whistleblower retaliation claims brought under the Affordable Care Act and other statutes. Additionally, members of our Health Care Reform Initiative have launched the Health Care Reform Dashboard, an online resource center for news and analysis on developments under the Affordable Care Act.

If you have questions on the ACA’s whistleblower provisions or any other implications of the law, contact Denise M. Keyser at keyserd@ballardspahr.com or 856.761.3442, Amy L. Bashore at bashorea@ballardspahr.com or 856.761.3402, or the member of the Health Care Reform Initiative with whom you work.

• Standards for determining the actuarial value of coverage for plans seeking to qualify as Exchange plans
• Other Exchange accreditation requirements
• The availability of the minimum value calculator and safe harbor checklists for public use (as well as comment)

The calculator and checklists are designed to allow plan sponsors to determine whether their plans provide adequate coverage under the pay-or-play rules. The final rules provide that these calculations may, with certain adjustments, take into account an employer’s contributions to a Health Savings Account or Health Reimbursement Account that are limited to the payment of cost-sharing obligations.

The explanation accompanying the final rules previews certain distinctions that more formal guidance will likely address regarding cost-sharing limits. These comments clarify that the deductible limits of $2,000 (single) and $4,000 (family) apply only to small group market plans and not plans in the large insurance market or self-funded plans. By contrast, the annual out-of-pocket maximum (set at the applicable high deductible plan limit) applies to all group health plans, other than grandfathered plans. To ease implementation, the FAQs provide a transitional rule for the out-of-pocket requirement that will apply only to the first plan year beginning on or after January 1, 2014. 

As the federal health care reform effort gained steam, Ballard Spahr attorneys established the Health Care Reform Initiative to monitor and analyze legislative developments. With federal health care reform now a reality, our attorneys are assisting health care entities and employers in understanding the relevant changes and planning for the future. They also have launched the Health Care Reform Dashboard, an online resource center for news and analysis on developments under the Affordable Care Act.

If you have questions about the Affordable Care Act’s impact on individual and small group markets or any other implications of the law, contact Jean C. Hemphill at 215.864.8539 or hemphill@ballardspahr.com.

The new FAQs address a range of specific issues relating to the requirement that health plans (other than grandfathered plans) make coverage for preventive care available without cost-sharing. Guidance offered by the FAQs includes the following:

• To the extent services are not available in-network, out-of-network services must be made available without cost-sharing.
• Over-the-counter medications such as aspirin must be covered without cost-sharing where “recommended” by the designated agencyand prescribed by a physician.
• Guidance on when immunizations and a number of other specific items and services must be covered without cost-sharing.
• Information regarding a number of women’s preventive health care matters, including the scope of items and services that need to be provided without cost-sharing in connection with well-woman visits, contraception, and breastfeeding.

The new FAQs also address a few issues relating to cost-sharing limits supplementing provisions in the recently issued final regulations on essential health benefits.

As the federal health care reform effort gained steam, Ballard Spahr attorneys established the Health Care Reform Initiative to monitor and analyze legislative developments. With federal health care reform now a reality, our attorneys are assisting health care entities and employers in understanding the relevant changes and planning for the future. They also have launched the Health Care Reform Dashboard, an online resource center for news and analysis on developments under the Affordable Care Act.

If you have questions about the preventive care requirements or any other aspects of the Affordable Care Act, contact Edward I. Leeds at 215.864.8419 or leeds@ballardspahr.com.

The Sunshine Act requires applicable manufacturers of drugs, devices, biologics, or medical supplies covered by specified federal health care payors to report annually to CMS payments and other transfers of value made to physicians and teaching hospitals (covered recipients). The Sunshine Act also requires applicable manufacturers and GPOs (covered entities) to disclose ownership or investment interests held by physicians or their immediate family members in the covered entity. 

The following is a summary of some of the principal provisions of the final rule.

Covered Entities 

Applicable manufacturers are entities operating in the United States and that are either:

• An entity engaged in the production, preparation, propagation, compounding or conversion of a covered drug, device, biological, or medical supply (covered product), other than those used solely within the entity itself or by the entity’s own patients (does not include distributors or wholesalers that do not hold title to the covered product)
• An entity under common ownership with an entity described above that provides assistance or support with respect to activities related to the covered product

The term “common ownership” has a very low ownership requirement of 5 percent. An applicable manufacturer whose covered products comprise less than 10 percent of its gross revenue will only be required to report payments made in relation to those specific covered products. An applicable GPO is an entity operating in the United States that purchases, arranges for, or negotiates the purchase of a covered product. The final rule provides guidance on a variety of matters related to these definitions, including what “operating” in the United States means, and which third parties may be considered “applicable manufacturers.” 

Covered Drug, Device, Biological, or Medical Supply 

Covered products include any drug, device, biological, or medical supply for which payment is available under specified federal healthcare programs (Medicare, Medicaid, and CHIP). 

Covered Recipients

The term “physician” does not include resident physicians or physicians employed by an applicable manufacturer. It does, however, include other categories of physicians for whom exemptions were sought. CMS will publish a list of teaching hospitals on an annual basis at least 90 days before the beginning of the reporting year.

Payments and Transfer of Value

The final rule provides extensive guidance on what payments or other transfers of value (including assistance with valuation of any such transfers) must be reported, including guidance on payments or other transfers of value made by a third party on behalf of the covered entity and/or at the request of the covered recipient. 

Reporting Periods and Deadlines

The final rule is expected to become effective on April 9, 2013, 60 days after it is published in the Federal Register. For this year, covered entities are required to collect data from August 1 to December 31, 2013. The first report will be due to CMS by March 31, 2014. In subsequent years, reports will be due within 90 days after the end of the calendar year. After the review period described below, CMS will make the disclosures available to the public by September 30 of each year, beginning in 2014. 

Reporting Process 

Each annual report must contain the required information for each payment or transfer of value. Information includes, but is not limited to:

• The name, address, and identifier (such as a National Provider Number or state license number) of the covered recipient
• The date, amount, and form of the payment
• The nature of the payment
• The covered products

The nature of the payment must be categorized under one of the 16 categories outlined in the final rule. Some of the payment categories are consulting fees, honoraria, gifts, food, entertainment, travel, and charitable contributions. Special rules apply to reporting food and beverages, payments related to research (including delayed reporting), and payments related to continuing medical education. Ownership interests in an applicable manufacturer or GPO by a physician or an immediate family member of a physician also must be reported. The final rule contains guidance on these categories and reporting requirements. 

Certain payments are excluded from the reporting requirements. For example, for 2013, payments less than $10 are excluded unless the aggregate amount paid to, requested by, or designated on behalf of a covered recipient exceeds $100 in the calendar year. The exempted amount will change in subsequent years based on a consumer price index calculation. Other exclusions include product samples, coupons and vouchers used by patients to obtain samples, educational materials for patients, items donated for charity care, and short-term loans of covered devices or provision of a limited amount of medical supplies.

Each annual report must be certified for timeliness, accuracy, and completeness by an officer of the applicable manufacturer or GPO. Once an annual report is submitted to CMS, the agency will make such report available to covered recipients for review. The review period is 45 days. During that period, the covered recipient may challenge any information in the report. The final rule provides a short (15-day) dispute and resolution process in such instances. 

Penalties

The final rule establishes penalties for failure to report on a timely or accurate basis, or for failure to report all required transactions. Additional penalties may apply if mistakes or omissions are found during the review process. 

Preemption of State Laws

The final rule preempts similar state laws. Information required by a federal, state, or local governmental agency for public health or regulatory oversight purposes, however, must still be reported, even if the same information is required under the Sunshine Act.  

As the federal health care reform effort gained steam, Ballard Spahr attorneys established the Health Care Reform Initiative to monitor and analyze legislative developments. With federal health care reform now a reality, our attorneys are assisting health care entities and employers in understanding the relevant changes and planning for the future. We also have launched the Health Care Reform Dashboard, an online resource center for news and analysis on developments under the Affordable Care Act.

If you have questions about the Sunshine Act of the ACA or any other implications of the law, contact Jean C. Hemphill at 215.864.8539 or hemphill@ballardspahr.com, Mary J. Mullany at 215.864.8631 or mullany@ballardspahr.com, or Beth Moskow-Schnoll at 302.252.4447 or moskowb@ballardspahr.com.