The last several weeks of 2014 brought with them a flurry of guidance from the Departments of Health and Human Services (“HHS”), Labor (“DOL”) and Treasury (collectively, the “Departments”) regarding group-health plan employee benefits issues, including issues under the Affordable Care Act (“ACA”), the Employee Retirement Income Security Act (“ERISA”) and the Mental Health Parity and Addiction Equity Act (“MHPAEA”). As we start into 2015, care should be taken not to overlook these important pieces of guidance that came in at years’ end:

1. No More “Skinny Plans”

On November 4, the Internal Revenue Service (“IRS”), in collaboration with HHS, issued guidance (Notice 2014-69) aimed at shutting the door on the use of so-called “skinny plans,” i.e., plans that provide “minimum value” within the meaning of the ACA, and which cover preventive services, but which exclude substantial hospitalization and/or physician services. (Some consultants have argued that such plans technically satisfied the ACA’s “minimum value” standard). The intent of such “skinny plans” is usually not to provide group health coverage, but to allow employers to partially or fully avoid application of any penalties under the ACA’s “pay or play” provisions (and a consequence of such actions is that employees covered under such “skinny plans” are generally ineligible for premium tax credits on ACA exchanges).

The IRS Notice unequivocally states that “plans that fail to provide substantial coverage for in-patient hospitalization services or physician services (or for both) . . . do not provide minimum value.” The Notice goes on to state that HHS and Treasury will amend the applicable regulations to incorporate this reading. The Notice gives limited grandfathering relief, protecting “skinny plans” adopted (through a binding written commitment) before November 4, 2014, but only as to plan years beginning on or before March 1, 2015 (regardless of such grandfathered coverage, employees offered affordable coverage under one of these plans can turn down such coverage and still be eligible for a premium tax credit on the exchanges). However, employers offering a “skinny plan” under this grandfathering provision must not state or imply that the plan precludes the employee from receiving a premium tax credit, and they must timely correct any disclosures to that effect that have previously been made.

2. Premium Reimbursement Plans

On November 6, the Departments issued additional FAQs (Part XXII) on ACA Implementation, specifically addressing premium reimbursement arrangements. The Departments clarified that an employer may not offer employees cash to reimburse the purchase of an individual market health policy, regardless of whether the cash is paid as taxable compensation or not. Any such reimbursement plan or arrangement would be considered by the Departments to be a “group health plan” within the meaning of ERISA and the Public Health Service Act (“PHSA”), and hence would be subject to the market reform provisions of the ACA. In keeping with prior guidance on integration of employer health care arrangements with individual coverage, the Departments stated that such a premium reimbursement plan fails to comply with the ACA’s market reforms because it could not be integrated with an individual market policy (and the reimbursement plan could not, on its own, satisfy the market reforms).


Continue Reading HHS, Labor, and Treasury Issue Flurry of Rulemakings and Guidance on Employee Benefits to Close 2014 with a Bang

On June 25, the Internal Revenue Service, Centers for Medicare & Medicaid Services, and Employee Benefits Security Administration, published final regulations clarifying the maximum allowed length of a reasonable and bona fide employment-based orientation period. Specifically, the regulations permit employers to impose a one-month orientation period on employees’ enrollment in their group health plans in addition to the 90-day waiting period.

The new regulations provide relief from the Affordable Care Act’s (ACA) prohibition on employers imposing a waiting period longer than 90 days for all individuals that are eligible to participate in the plan, for all plan years beginning on or after January 1, 2014. The ACA’s waiting period requirement states that coverage must be available to otherwise eligible employees by the 91st calendar day (including weekends and holidays) following plan eligibility. A “waiting period” is defined as the period that must pass before coverage for an otherwise eligible employee or dependent is able to enroll in the employer’s group health plan. And, an employee or dependent is “otherwise eligible” for plan participation if they have met all the employer’s eligibility conditions.

The 30-day orientation period allows employers to define their plan entry date for new employees as the first day of the month following 90 days of employment, so long as their administrative waiting period is not over 30 days, giving employers 90 days to enroll employees plus up to 30 days for orientation purposes.


Continue Reading 90-Day Waiting Period for Employee Enrollment in Group Health Plans: One-Month Orientation Period Permitted

CMS issued an FAQ on coverage of same-sex spouses under PHSA section 2702, which requires health insurance issuers offering non-grandfathered health insurance coverage in the group or individual markets to guarantee the availability of coverage with certain exceptions. The FAQ clarifies that a health insurance issuer in the group or individual market that offers coverage