BHCG Monitor: Focus on Health Care Benefits

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BHCG Monitor: Focus on Health Care Benefits - Health Insurance Exchanges


Health Care Reform – Notable News

Supreme Court Upholds ACA Subsidy Provision – What’s Next?

On June 25 the United States Supreme Court upheld a major Affordable Care Act (ACA) provision, namely, the tax credits (subsidies) that enable millions of Americans to afford health insurance through a federally-run health care exchange. The ruling marked the end of “what if” speculation on the part of employers, leaving them to focus on moving forward with ACA compliance.

In King v. Burwell, Chief Justice Roberts wrote for the 6-3 majority, maintaining that middle- and low-income individuals who purchase health insurance through a federally facilitated health care exchange are entitled to the same tax credits that are available to those that purchase insurance through state-run health care exchanges.

Wisconsin is one of 34 states that have opted for a federally-run exchange versus a state-run exchange. It is estimated that if the Supreme Court had ruled against the Obama administration in the case, 184,000 people in Wisconsin and 6 million people across the country now receiving subsidies would have been in danger of losing coverage.

The Court’s ruling means business as usual for employers. The legal path is now clear for employers to complete strategies for impending compliance initiatives like the ACA reporting requirements for next year (see below) and the looming 40 percent nondeductible excise tax (Cadillac tax) on high cost health plans set to be implemented in 2018.

Even though it is inevitable that there will be many more lawsuits, most legal experts concur that the Court’s decision represents the last major hurdle the ACA faces from court challenges. The majority believe the future of the ACA is effectively on hold until the 2016 elections, with lawmakers indicating they will begin working on changes to controversial provisions in the law like the impending Cadillac tax.

Says Bob Seng, partner at the international law firm Dorsey & Whitney, “It would be difficult if not impossible to repeal Obamacare in a few years, but it’s very possible to continue to use it as a political football.”

Employers Urged to Begin ACA Reporting Process

The ACA’s employer mandate reporting requirements’ first deadlines arrive in early 2016.  However, recent surveys have shown the vast majority of employers are not yet prepared to meet the mandate’s complex reporting obligations, which were recently clarified by the IRS. Compliance is mandatory and failure to file the required information can result in significant penalties, prompting employer advisers to encourage employers to begin immediately to prepare to meet the requirements, if they have not already done so.

To enforce the employer mandate, the IRS requires information for each full-time employee regarding coverage (if any) offered to the employee, the price of coverage and whether the employee was enrolled, as well as which employees, full-time or not, had coverage under an employer-based plan.

A somewhat daunting task, employers need to collect and organize a vast amount of information – both from their benefits administration and payroll systems – and report it (to employees and the IRS) on up to four separate forms. Most advisors agree that reporting compliance won’t be easy and developing and implementing the necessary processes will be time-consuming.

Suggested action steps for employers include:

  • Review Forms 1094-C, 1095-C (applicable large employers) and the instructions or Forms 1094-B, 1095-B (smaller employers that sponsor self-funded health plans) and the instructions, to identify the required information for the new reporting [Note: BHCG members can view and download sample letters to accompany 1095-C forms sent to employees on the BHCG website > Web2Print > Idea Library > General Benefits Information/Education]
  • Ensure present systems capture the necessary information (e.g., number of hours worked, cost of coverage, etc.)
  • Determine if a third-party vendor is needed to complete the reporting requirements
  • Establish procedures with payroll/tax department personnel and/or vendors for distributing copies of the forms to employees and filing the forms with the IRS

New Guidance May Require Out-of-Pocket Maximum Change

New guidance recently issued by the Departments of Labor, Health and Human Services and Treasury establishes that an individual’s cost (in a non-grandfathered self-funded or fully insured plan) for in-network benefits must never exceed the ACA’s annual individual or self-only limit on cost-sharing – whether the individual has single or family coverage – a new rule which will affect many high deductible health plans (HDHP).

The ACA’s out-of-pocket maximums for 2016 are $6,850* for self-only coverage and $13,700 for other than self-only coverage. Even though a family unit as a whole may be subject to the higher overall maximum, the new clarification for 2016 means that no individual can be required to pay more in annual cost-sharing than $6,850 – even if they are enrolled in family coverage.

Based on this guidance, a non-grandfathered group health plan with a single overall family deductible above $6,850 and without an embedded self-only deductible (this would pertain to many HDHPs) will need to change their plan design.

For example, in the case of an HDHP deductible of $10,000 for family coverage, one person in enrolled in family coverage could incur out-of-pocket costs up to $10,000 before meeting the family deductible, which counts toward the plan’s out-of-pocket maximum. This typical plan design will no longer be permitted – the family deductible of $10,000 (which exceeds $6,850) would need an embedded self-only deductible of no more than $6,850 (and not less than the ACA minimum family deductible of $2,600) for HSA-compatible HDHPs.

*HSA-compatible HDHP out-of pocket maximums are lower than ACA out-of-pocket maximums. For example, in 2016, the HSA-compatible HDHP out-of-pocket maximum is $6,550 for self-only coverage and $13,100 for family coverage. Employers offering HDHP/HSA plans must ensure that they satisfy the lower HDHP out-of-pocket maximums.



Atkinson, William. King v. Burwell: Now the Work Must Continue. June 26, 2015.
Barnes, Robert. What you need to know about the Supreme Court's Obamacare decision. June 25, 2015.

Fensholt, Ed. Health reform and employer reporting: Another mountain to clim. June 24, 2105.

"IRS Releases Additional Guidance on ACA Reporting, Including Electronic Filing." Xerox/Buck Consultants. June 17, 2015.

Jost, Timothy. Implementing Health Reform: The Supreme Court Upholds Tax Credits In the Federal Exchange. June 25, 2015.

Otto, Nick. Employers will maintain 'business as usual' post SCOTUS decision. June 25, 2015.

Prepare Now or Be Sorry Later! The 2016 Affordable Care Act Reporting Requirements. June 8, 2015.

Sarah Fowles, Amy Ciepluch. Health Plans May Need to Change Out-of-Pocket Maximums to Comply with New Guidance. June 2, 2015.

"Self-Funded and Large Group Plans May Need "Embedded" Cost-Sharing Limits in 2016." Xerox/Buck Consultants. June 4, 2015.

Supreme Court Rejects Latest Challenge to Affordable Care Act: What Are Employers Obligations Going Forward. June 26, 2015.

Supreme Court Upholds Obamacare. July 1, 2015.


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BHCG Monitor: Focus on Health Care Benefits - April 2012