euclid managers legislative review

VOL. XXIV, ISSUE 1 – JANUARY 2019

Compliance and Legislative Grag Bag

The holiday “grab bag” is a time-honored tradition in many families. And, grab bag gifts can be welcome or quickly relegated to the dust bin. This issue of Legislative Review offers some compliance and legislative grab bag items for brokers and their clients. Some may be more welcome than others.

Federal Election Results — Split Government

Whether there was a “blue wave” in the House of Representatives is still something that pundits are arguing about. But, Democrats did gain sufficient seats to take the House with votes to spare. Republicans, on the other hand, were able to add to their majority in the Senate.  The results mean that cooperation will be required to get anything done as the new Congress convenes in 2019.

Many Democrats included calls for Medicare-for-All during their campaigns. With a Republican Senate it is unlikely that a Medicare-for-All bill will land on President Trump’s desk where he would be expected to veto it. Any progress on Medicare-for-All would be far more likely to occur at the state level.

Illinois Becomes More Blue

The election of JB Pritzker may herald changes for the Illinois insurance market. The Governor-elect ran on a platform of expanding access to health care through a public option. To that end, he has convened a 36-member committee to consider a plan that would allow Illinois residents to buy into Medicaid, among other social service initiatives.

Democrats picked up more seats in the Illinois House and Senate. These strengthened numbers may give the new Governor an easier time getting his proposals enacted into law.

The legislature overrode Governor Rauner’s veto of Senate bill 1737 on November 29, 2018. The bill, now Public Act 100-1118, addressed the availability of short-term limited duration insurance (STLDI). The law requires that STLDI policies must have an “expiration date that is less than 181 days after the effective date.” This provision of the law was effective upon the bill becoming law.

Increase in Penalties

HHS recently announced cost-of-living increases in civil monetary penalty amounts related to benefits. The penalties under HIPAA vary based on the nature of the
violation. This chart provides the new penalties to be assessed on or after October 11, 2018 compared to the prior year.

HIPAA Penalties Based on Violation Type

Medicare Secondary Payer penalties will also increase. The indexed amounts for violations applicable to employer-sponsored health plans are:
• The penalty for an employer that offers incentives to Medicare-eligible individuals not to enroll in a plan that would otherwise be primary is
$9,239 (up from $9,054).
• The penalty for willful or repeated failure to provide requested information regarding group health plan coverage is $1,504 (up from $1,474).
• The penalty for responsible reporting entities that fail to provide information identifying situations where group health plan is primary is
$1,181 (up from $1,157).

The penalty for a willful failure to provide a Summary of Benefits and Coverage will increased to $1,128 per failure an increase from $1,105.

Individual Mandate

The penalty for not having coverage – the “individual mandate” ends as of January 1, 2019. It is expected that some individuals will no longer purchase coverage if
there is no penalty for not doing so.

While there is no direct impact on employers with this change, some employees who had previously declined an employer’s plan may return to the employer plan.

If individuals don’t enroll in employer or individual coverage they may still have medical issues that arise during the year. Employers should be vigilant regarding
questionable workers’ compensation medical claims which could result.

IRS on Employer Reporting

When it comes to grab bags, IRS Notice 2018-94 is the gift that everyone was hoping for. The notice extended the due dates for employers to issue 1095-C forms to employees from January 31, 2019, to March 4, 2019.  This extension is all the sweeter as the IRS had previously cautioned that an extension would not occur.  And, a further gift in this notice is the extension of “good faith” transition relief from employer penalties for failing to file timely information returns.

IRS on HRAs and Individual Coverage for ALEs

The IRS published Notice 2018-88 as a follow up to recent proposed rules that would allow Health Reimbursement Arrangements (HRAs) to be used to fund individual health insurance. The new notice provides additional guidance on how these HRAs can be used by employers who are ALEs.

ALEs are subject to penalties if the employer does not offer a qualifying health plan to at least 95% of its full-time employees when at least one employee qualifies for a premium tax credit in the exchange. Notice 2018-88 would allow an ALE to include individual coverage HRAs in calculating the 95% eligibility.

The notice also considers whether an employer offering an individual coverage HRA would be subject to the B penalty. The B penalty applies if an employee receives a premium tax credit because the employer-based plan did not meet minimum value and affordability requirements. The regulations that had been previously issued would not permit an employer to offer an individual coverage HRA and a traditional group health plan to the same individuals. Therefore, assessing affordability to avoid the B penalty becomes an issue.

Notice 2018-88 proposes that a plan would be affordable for a month if “the required HRA contribution does not exceed 1/12 of the product of the employee’s household income and the required contribution percentage.”

The notice also asks for reactions to proposed safe harbors to determine affordability. The proposed regulations require that an employer assess affordability on an employee-by-employee basis. This occurs since premiums would vary based on an employee’s age and residence locale. The concern is that employers would not want this administrative burden.

A proposed alternative would allow for a “location safe harbor.” The employer would determine affordability based on the employee’s worksite rather than residence. This would ease the burden of an employer tracking whether an employee had moved their home.

The IRS is seeking comments on other safe harbors, especially as they would simplify addressing employee age.

New Maximums for 2019

The dollar limit on salary reduction contributions to health flexible spending accounts (FSAs) will increase from $2,650 to $2,700.

Changes for HSA compatible high-deductible health plans were announced in IRS Revenue Procedure 2018-30:

• Annual limit on deductions for self-only coverage is $3,500
• Annual limit on deductions for family coverage is $7,000
• Minimum annual deductible for self-only coverage is $1,350
• Minimum annual deductible for family coverage is $2,700
• Annual out-of-pocket limit for self-only coverage is $6,750
• Annual out-of-pocket limit for family coverage is $13,500.

Letter from Karen Knippen

Divided government on the federal level may stall efforts to change the ACA or move ahead with more ambitious health coverage proposals. With Illinois’ turn to darker blue, we may see more proposals that make their way to the new Governor’s desk.

The individual HRA proposed rules issued earlier in the fall and the new proposals will make their way through the comment and issuance process. Since the proposed rule called for 2020 as an effective date, we should see action in the early part of the year.

Sincerely yours,
Karen Knippen Signature
Karen Knippen, RHU, REBC Senior Vice President

EUCLID MANAGERS has been serving the independent agent since 1976 with a portfolio of group health, life, disability, dental and individual health. We proudly represent UnitedHealthcare of Illinois, Delta Dental of Illinois, MetLife and UnitedHealthOne Individual. We encourage your feedback and suggestions. Please call your EUCLID MANAGERS Marketing Representative or Marcy Graefen at (630) 238-2915 for more information.

The information contained in this publication is intended for the general information of our clients. It should not be construed as legal advice or legal opinion regarding any specific or factual situation.