Health & Welfare 19-2

Health & Welfare Notes

Vol. 19, Issue 2      May/June 2014

PCORI Fee Due by July 31, 2014. The Patient‑Centered Outcomes Research Trust Fund fee is a fee on issuers of health insurance policies and plan sponsors of applicable self‑insured health plans that helps to fund the Patient‑Centered Outcomes Research Institute (PCORI). The PCORI fee is applicable to plan years ending on or after October 1, 2012, and extends through plan years ending before October 1, 2019. The fee must be paid no later than July 31 of the calendar year immediately following the last day of such plan year. Therefore, plan sponsors of self-insured calendar year plans paid the first round of PCORI fees for the 2012 plan year by July 31, 2013 and must now pay the second round for the 2013 plan year by July 31, 2014. Plan sponsors of self-insured health plans whose 2012 plan year ended after December 31, 2012 will be paying their first round of PCORI fees for the 2012 plan year by July 31, 2014.

The PCORI fee for the first year is equal to $1.00 multiplied by the average number of covered lives in the group health plan. The PCORI fee for the second year is $2.00 times the average number of covered lives in the group health plan and the fee will be indexed for increases in national health expenditures for the following years. “Covered lives” include all covered participants and dependents, including retirees and those on COBRA. The IRS allows several different methods for determining the average number of covered lives. You can read more about this and the health plans that are required to pay the PCORI fee at http://www.irs.gov/irb/2012‑52_IRB/ar11.html.

Form 720 (with a revision date of April 2014), along with related payment voucher Form 720‑V, should be used to report and remit the PCORI fee to the IRS (see Part II, lines marked “IRS No. 133″ on the second page of the Form). Although the Form 720 is designed for quarterly payments of certain excise taxes, the PCORI fee is paid only annually. The instructions also note that deposits are not required for PCORI fees (that is, the fees are paid when the Form 720 is filed), so plan sponsors are not required to use the IRS’s electronic tax payment service to pay these fees. Self-insured multiemployer plans may pay the PCORI fee from plan assets.

DOL Updates Model COBRA Notices. On May 2, 2014, the Obama administration announced updates to model notices informing workers of their eligibility to continue health‑care coverage through the Consolidated Omnibus Budget Reconciliation Act. The model notice updates make it clear to workers that if they are eligible for COBRA when they experience a qualifying event, they may choose to instead purchase coverage through the Health Insurance Marketplace. On May 7, 2014, the DOL issued proposed rules regarding this issue.

Phyllis C. Borzi, the Assistant Secretary of Labor for Employee Benefits Security, stated, “In many cases, workers eligible for COBRA continuation coverage can save significant sums of money by instead purchasing health insurance through the Marketplace. COBRA continues to play an important role in helping workers and families maintain coverage after a job loss, and it is important that workers know in some cases there is a Marketplace option as well.”

For eligible COBRA individuals, the model COBRA continuation coverage election notice makes it very clear for individuals to check on the following issues: service or coverage areas; premiums; other cost sharing; provider networks; drug formularies; and severance payments.

The updated model COBRA notices are posted on the Department of Labor website at http://www.dol.gov/ebsa/modelgeneralnotice.doc and http://www.dol.gov/ebsa/modelelectionnotice.doc.

Self‑Insured Multiemployer Health Plans Could Be Exempt From ACA Reinsurance Fee in 2015 and 2016. On March 5, 2014, the Department of Health and Human Services issued a final rule on the reinsurance fee imposed under the Affordable Care Act on group health plans. If the plan is insured, the insurer pays the fee, and if the plan is self‑insured, the plan itself pays the fee. The reinsurance fee applies in 2014, 2015 and 2016. It equals the “yearly rate” times the number of individuals covered by the plan. The “yearly rate” is $63 for 2014, $44 for 2015, and “to be announced” for 2016.

Multiemployer health plans are subject to the reinsurance fee. The final rule does not provide any relief for these plans for 2014. However, for 2015 and 2016, the final rule exempts from the fee any multiemployer plan which is both self‑funded and self‑administered. It is easy to determine whether the plan is self‑funded. The key question is whether the plan is self‑administered. The final rule says the following on whether the plan is self‑administered:

  • To be self‑administered, the plan must retain responsibility for claims payment, claims adjudication (including internal appeals), and enrollment (such functions being the “core functions”). Therefore, if the plan uses a third party for these functions, it would not be treated as self‑administered for these purposes.
  • As exceptions, the plan does not fail to be treated as self‑administered merely because it:

(1) outsources core functions to an unrelated third party, provided that the underlying benefits are pharmacy benefits or ACA‑excepted benefits;

(2) outsources a de minimis amount of its activity, even if core functions, for non‑pharmacy or non‑ACA‑excepted benefits to a third-party administrator (a “de minimis amount” means up to 5 percent, as measured generally by the number or cost of enrollment or claims processing transactions for non‑pharmacy and non‑ACA‑excepted benefits which are outsourced);

(3) “leases” a network from an unrelated third party and also obtains provider network development, claims repricing, and similar services; or

(4) it uses a service provider that is affiliated with the plan, other than with an employer that contributes to the plan (admittedly this exception (4) is less than clear).
(From ERISA Lawyer Blog, by Stanley D. Baum, Cary Kane LLP, March 11, 2014 posting)

The Deadline for Amending Business Associate Agreements is Approaching. Among the many changes to HIPAA made under 2013’s HITECH “Omnibus” Rule were modifications to the provisions that need to be addressed in Business Associate Agreements (“BAAs”) . The deadline for compliance with the Omnibus Rule, including the substance of the new provisions that need to be spelled out in BAAs, was September 23, 2013. However, the regulations included a transition period for amending existing BAAs to include the new obligations. Specifically, BAAs that met existing HIPAA requirements and were in effect on January 25, 2013 did not need to be amended right away, so long as the BAA was not modified after March 26, 2013. The deadline for these grandfathered BAAs, the date by which they need to be amended to reflect the new requirements, is September 22, 2014.

Under the Omnibus Rule, BAAs, at a minimum, need to explicitly address four specific obligations from the Omnibus Rule that may not have been addressed in agreements entered into before January 25, 2013. Specifically, the BAA must provide that the Business Associate (“BA”) will: (1) Comply with the HIPAA Security Rule; (2) Ensure that any subcontractors that create, receive, maintain, or transmit electronic PHI on behalf of the BA agree to comply with the same restrictions required of the BA itself; (3) Report any breaches of unsecured PHI to the Covered Entity; and (4) If the BA carries out a Covered Entity’s obligations under the Privacy Rule, making sure that the BA complies with the Privacy Rule’s requirements.
(Excerpts from Legal Insights, Gray Plant Mooty, by Jesse Berg, June 23, 2014)

(Disclaimer – This newsletter’s purpose is to inform our clients and colleagues of recent legislative health care-related developments. It is not intended, nor should it be used, as a substitute for specific legal advice.

Health and Welfare Notes is prepared four to six times annually and will accompany Retirement News. If there are questions concerning the information discussed, call richard Gabriel associates and ask for Gabe Zinni, Karen Irwin, Cindy Swartz or Nancy Cunningham.

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