By Jenny Ivy

February 1, 2012

S. 2068 is a bipartisan measure crafted to correct the unintended economic impact the Patient Protection and Affordable Care Act’s (PPACA) medical loss ratio (MLR) requirements have had on the agent and broker community nationwide. The bill will ensure that individual and small group health insurance consumers continue to have access to their agents and brokers by removing broker commissions from the MLR calculation in those markets.

The Access to Independent Health Insurance Advisors Act of 2012 is a complement bill to H.R. 1206, the bipartisan measure introduced in the House by Representatives Mike Rogers (R-MI) and John Barrow (D-GA). However, the Senate bill does differ from H.R. 1206 in a few key ways. S. 2068:

• Limits the MLR exclusion to the individual and small group health insurance markets, where the impact is most severe;
• Clarifies that any bonuses agents may receive remain a carrier administrative expense. Unlike commissions, bonuses are paid by the carrier and can be reasonably deemed administrative expenses;
• Strikes language to expand the state MLR adjustments, as the majority of states that applied have already received their determination from the Department of Health and Human Services (HHS). Under S. 2068, the waiver process will remain as is.

There are a few things you can do to help advance S. 2068. First, please click here to send an Operation Shout! message to your senators. If your senators are not sponsors of the measure already, you will be provided a link to a letter that you can customize to encourage co-sponsorship of S. 2068. If you are represented by a senator who is already an original co-sponsor, you will be able to send him or her a thank you letter for their support.

Second, keep a close watch on your e-mail this week. The sponsors of the new measure have asked NAHU to provide them with updated economic data about the impact of the PPACA MLR requirements on health insurance agents and brokers. NAHU will be sending an updated version of its economic survey to all members on Wednesday. Please watch for it and fill it out completely. The more responses we get, the more valid the results. 

Finally, continue to work on adding House co-sponsors to the complement to our Senate legislation, H.R. 1206.  We want to continue to build momentum for both bills, with the hope of encouraging prompt action on both of them. Click here to send a message to your congressional representative about H.R. 1206. As with the Senate bill, if he or she is already a co-sponsor, a thank you message will be sent. If not, you can send a letter asking for your representative’s support on H.R. 1206.

Read more: http://www.politico.com/news/stories/0212/72353.html#ixzz1ldfVzFUJ

More abundant in the news, however, have been references to the “annual limit waivers,” which have been granted to many prominent restaurant chains and labor unions. The annual limit waiver was brought about due to the fact that health care reform first restricts, and then later prohibits (in 2014), annual dollar limits on the value of “essential health benefits.” Until 2014, restricted annual limits on essential health benefits are permissible under a three-year phased approach.

• $750,000 for plan years beginning on or after Sept. 23, 2010, but before Sept. 23, 2011
• $1.25 million for plan years beginning on or after Sept. 23, 2011, but before Sept. 23, 2012
• $2 million for plan years beginning on or after Sept. 23, 2012, and Jan. 1, 2014

For plans issued or renewed beginning Jan. 1, 2014, all annual dollar limits on coverage of essential health benefits will be prohibited.

A class of group health plans and health insurance coverage generally known as “limited benefit” plans or “mini-med” plans often has annual limits well below the restricted annual limits set out in the interim final regulations. Because this is often the only type of private insurance available to some workers, temporary waivers from the restricted annual limit requirements were previously available. For plan years beginning before Jan. 1, 2014, the interim final regulations allowed HHS to establish a program under which the requirements relating to restricted annual limits may be waived for plans that were offered prior to Sept. 23, 2010 — if compliance would result in a significant decrease in access to benefits or a significant increase in premiums.

However, in June 2011, HHS issued guidance to revise the waiver program to establish new procedures and impose an application cutoff of Sept. 22, 2011, for all waiver extensions and new waiver requests. This means that the waiver process has now concluded, and no waivers will be granted for new waiver applications received after Sept. 22, 2011. Applications received after Sept. 22, 2011, will not be accepted, which means that any plan or policy that did not receive a waiver must be in compliance with the annual dollar limits on essential health benefits described above.

If a plan was granted a waiver by Sept. 22, 2011, that plan will be required to submit an Annual Limit Update in order to retain eligibility for the annual limit waiver through 2014. The first Annual Limit Update must be submitted by Dec. 31, 2012, and the second by Dec. 31, 2013.

Click here for additional information about the waiver process.

Publication 503 describes the requirements that taxpayers must meet in order to claim the dependent care tax credit (DCTC) under IRC § 21 for child and dependent care expenses. The 2011 version includes an explanation of how to calculate the DCTC when the taxpayer has multiple qualifying individuals, but one of them has no dependent care expenses. Following a similar concept of Publication 502, employers relying on Publication 503 should do so with caution, as the expenses reimbursable under an employer-sponsored dependent care assistance program may have different rules than the DCTC.

Click here to view Publication 502.

Click here to view Publication 503.

Click here to view IRS Publication 969.

Technical Information Release 12- 2  Massachusetts

Department of

Revenue

Individual Mandate Penalties for Tax Year 2012

Pursuant to G.L. c. 111M, § 2, the Department of Revenue is issuing this Technical Information Release to announce the penalty schedule for individuals who fail to comply in 2012 with the requirements under the Massachusetts Health Care Reform Act (the Act). See St. 2006, c. 58, as amended. The Act requires most adults 18 and over with access to affordable health insurance to obtain it. In 2012, individuals must be enrolled in health insurance policies that meet minimum creditable coverage standards defined in regulations adopted by the Commonwealth Health Insurance Connector Authority (the Connector). Individuals who are deemed able to afford health insurance but fail to comply are subject to penalties for each month of non-compliance in the tax year (provided that there is no penalty in the case of a lapse in coverage of 63 consecutive days or less). The penalties, which will be imposed through the individual’s personal income tax return, shall not exceed 50% of the minimum monthly insurance premium for which an individual would have qualified through the Connector.[1] 

These penalties apply only to adults who are deemed able to afford health insurance. On an annual basis, the Connector establishes separate standards that determine whether individuals, married couples and families can afford health insurance, based on their incomes and affordable health insurance premiums. Those who are not deemed able to afford health insurance pursuant to these standards will not be penalized. Individuals also have the opportunity to file appeals with the Connector asserting that hardship prevented them from purchasing health insurance (and, thus, that they should not be subject to tax penalties).[2]

For 2012:

• Individuals with incomes up to 150% of the Federal Poverty Level are not subject to any penalty for non-compliance, as those at this income level are not required to pay an enrollee premium for Commonwealth Care health insurance. 

• Penalties for individuals with incomes from 150.1 to 300% of the Federal Poverty Level will be half of the lowest priced Commonwealth Care enrollee premium that could be charged to an individual at the corresponding income level, based on the Connector’s Commonwealth Care enrollee premiums as of January 1, 2012.

• Penalties for individuals with incomes greater than 300% of the Federal Poverty Level will be:

• ages 18-26: half of the lowest priced individual Commonwealth Choice Young Adult Plan premium without drug coverage; and 
• ages 27 and above: half of the lowest priced individual Commonwealth Choice Bronze premium with drug coverage, based on the Connector’s prices for these plans as of January 1, 2012.

• The Department anticipates issuing an updated penalty schedule for tax year 2013.

• Penalties for married couples who do not comply with the individual mandate rules (with or without children) will equal the sum of individual penalties for each spouse.

* Compare individual’s annual family household income to chart immediately below to determine applicable Federal Poverty Level (FPL).

** Yearly penalty amounts listed above based on non-compliance for entire year.

 Federal Poverty Level – Annual Income Standards

This Schedule reflects the Federal Poverty Level standards for 2011 and will be updated when the 2012 Federal Poverty Level standards are published in 2012.

 A. This individual can take one of two approaches. 

General Rule: “Sum of the Monthly Contribution Limits Rule.” Accountholders’ annual HSA contributions are pro-rated based on the number of months they are HSA eligible under each contract type during the year. When this individual is enrolled in a self-only contract, she can contribute $254.17 per month (the statutory maximum annual contribution of $3,050 divided by 12 months). During the months that she is enrolled on a family contract, she can contribute $512.50 per month (the $6,150 statutory maximum annual contribution divided by 12 months). In this case, her month-by-month maximum contribution is as follows:

Special Rule: “Last-Month Rule.” This special rule (which comes with a testing period requirement noted below) permits the individual to make a full year’s family contribution as long as she is enrolled in a family contract as of Dec. 1, 2011, regardless of when during the first 11 months of 2011 she is married and switches to a family contract. If she takes this approach, she must remain eligible through the end of the following 12-month “testing period.” The testing period ends on December 31 of the following year (2012 in the above example). If she loses HSA eligibility any time before December 31, 2012, she must include any contributions for months during which they were not eligible, except for the last-month rule, in her taxable income in the year she loses eligibility. In addition, excess contributions are subject to a 10% additional tax that year. Accountholders incur this penalty regardless of age.

If she loses HSA eligibility during the testing period, she must include in her 2012 taxable income any contribution she made in 2011 that is in excess of the pro-rated contribution maximum. Her maximum contribution would be $4,858.33, and any amount above that figure would be included in her 2012 taxable income, and she would pay an additional 10% tax on the excess contribution as well.

The W2 reporting requirements were created under PPACA and for informational purposes only so that employees are provided with comparable consumer information on the cost of their health care coverage. Notice 2012-9 restates and amends the interim guidance initially provided in Notice 2011-28 and includes the following changes:

• States that the reporting requirement does not apply to coverage under a health FSA if contributions occur only through employee salary reduction elections (Q&A-19).
• Clarifies that employers may include the cost of coverage under programs not required to be included under applicable interim relief, such as the cost of coverage under an HRA (Q&A-33).
• Employers are not required to include the cost of coverage under an employee assistance program, wellness program, or on-site medical clinic in the reportable amount if the employer does not charge a premium with respect to that type of coverage provided under COBRA to a qualifying beneficiary (Q&A-32).
• Employers do have to include the cost of any supplemental health benefits, such as cancer insurance that they pay for, but they do not have to include the cost of supplemental health benefits that the employees pay for with after-tax dollars (Q&A-38).

The guidance is applicable beginning with 2012 Forms W2 (forms required for the 2012 calendar year that employers are required to give employees by the end of January 2013). In addition, employers may rely on the guidance provided in this notice if they voluntarily choose to report the cost of coverage on 2011 Forms W2, even though this reporting is not required for 2011.

Click here to read Notice 2012-9.