Healthcare Reform FAQs
Healthcare Reform is a common term for what is officially known as the Patient Protection and Affordable Care Act (ACA) which was signed into law in 2010. The ACA is meant to provide affordable, quality health care for all Americans and reduce the growth in health care spending, among other goals.
What is a grandfathered plan, and are the Medical Trust plans considered grandfathered plans under the ACA?
A grandfathered plan is a plan that was created on or before March 23, 2010 that is exempt from some provisions of ACA. Plans or policies lose their “grandfathered” status if they make certain changes that reduce benefits or increase the required employee contribution. With one exception, the health plan available to members in the Diocese of Hawaii, the Medical Trust plans are not grandfathered plans under the ACA. Specific information about Hawaii’s plans for 2016 will be included in the plan documents. The Medical Trust’s non-grandfathered plans comply with all applicable provisions of the ACA. See Healthcare Reform for additional details.
The Small Employer Health Care Tax Credit, a provision of the Affordable Care Act, was created to encourage small employers to continue to offer healthcare coverage to their employees. The credit was implemented for the 2010 tax year, and is due to continue through the 2016 tax year. Beginning with the 2014 tax year, eligibility and certain other criteria and features of the program were changed. For full information, see Small Employer Health Care Tax Credit.
What is a Medical Loss Ratio (MLR) and does the Medical Trust comply with the MLR provisions of the ACA?
The minimum MLR requirement under the ACA provides that, beginning with 2012, health insurers must spend a minimum percentage (80% in the individual and small group market and 85% in the large group market) of their adjusted premium revenues on healthcare claims and healthcare quality improvement expenses. Insurers that fail to achieve this target must pay a rebate to their enrollees (individuals for non-group plans and employers for group plans) based on the extent to which the insurer’s actual MLR falls short of the statutory minimum.
Under the ACA, the Medical Trust is not required to comply with this provision, as it is not an “insurer.” Nonetheless, our aggregate MLR exceeds the statutory minimum. The Medical Trust’s current loss ratio is approximately 90%, and we are continually looking for additional ways to deliver cost effective benefits to our members.
The ACA imposes various new fees and taxes. As the sponsor of the plans, the Medical Trust will pay two of those fees - the Patient Centered Outcomes Research Fee and the Transitional Reinsurance Fee - for all members enrolled in the Medical Trust plans.
The ACA also mandates other fees that insurers need to pay, but are not applicable to the Medical Trust or employers participating in the Medical Trust plans. One example is the Health Insurer Provider Fee, an excise tax that health insurers started paying in 2014. This tax is estimated to increase fully-insured premiums by 1.7% to 2.4%.
Episcopal employers that offer plans other than those provided by the Medical Trust should contact the plan issuer or administrator for information on the fees associated with those plans. See the final regulations at www.gpo.gov.
Can we impose a 90-day waiting period before enrolling employees into a Medical Trust plan, as permitted under the ACA?
No. Although the ACA allows a waiting period of no more than 90 days, the Medical Trust’s administrative guidelines require that eligible employees who do not waive coverage for acceptable reasons under the Denominational Health Plan be enrolled effective the first of the month following the date of hire.
No. The Medical Trust has not had any pre-existing conditions limitations for more than 15 years. Under the ACA, beginning in 2014, all plans were required to remove pre-existing condition limitations for all enrollees.
The ACA imposes new reporting requirements on employers and plan sponsors that will assist the IRS in determining compliance with two ACA mandates - the Employer Mandate and the Individual Mandate. See Healthcare Reform and More Information About Reporting for details.
Should we be reporting the value of the Medical Trust health benefits we provide on our employees’ Forms W-2 under the ACA?
No, not until further guidance is issued by the IRS. The IRS has ruled that an employer that provides coverage through self-funded church plans, such as the plans sponsored by the Medical Trust, is exempt from the Form W-2 reporting requirement under the ACA until further guidance is issued from the IRS. This guidance also provides a temporary exemption for employers that file fewer than 250 Forms W-2 in the previous year. Episcopal employers that offer plans other than those provided by the Medical Trust may wish to contact their payroll administrator to determine their reporting requirements. Note that the reporting requirement is informational only and does not mean that employer-provided coverage will be subject to income tax.
Does the Medical Trust comply with the ACA’s provision that adult children up to age 26 are eligible to enroll in their parents’ health plan?
Yes. In fact, since January 1, 2007, the Medical Trust has allowed adult children up to age 30 to be enrolled in their parent’s health plan. To comply with the ACA, the Medical Trust removed restrictions to allow these adult children to enroll even if they are married, have access to other health benefits, and are not enrolled in school.
Please be aware that if an adult child is age 27 or older before December 31st, and is not the employee’s tax dependent, the value of the coverage provided to such child should be reported on the employee’s Form W-2 as imputed income.
The ACA's automatic enrollment provision was designed to expand access to health coverage by requiring large employers (those with more than 200 full-time employees) that are subject to the Fair Labor Standards Act to automatically enroll full-time employees in an employer's health plan.
Employers have been in limbo about auto-enrollment since December 2010, when the Department of Labor advised in a Frequently Asked Question that because the statute requires implementation of the requirement "[i]n accordance with regulations promulgated by the Secretary [of Labor]," and no regulations had been issued, employers were not required to comply with the automatic enrollment requirements until the DOL completed its rulemaking.
Employers no longer need to worry about this ACA requirement as the President recently signed the "Bipartisan Budget Act of 2015" which, among other things, repealed the automatic enrollment provision.
Effective January 1, 2014, given the ACA’s restriction on annual limits, regulations were issued clarifying that only HRAs that are integrated with a group health plan may impose an annual limit. From a practical standpoint, this means that employers cannot offer “stand-alone” HRAs. For example, you generally cannot offer an HRA to an employee who is enrolled in an individual plan (e.g., a Marketplace Plan). However, a “stand-alone” HRA that covers only retirees could be exempt under a separate rule that applies to retiree only plans and an HRA that provides only “excepted” benefits (for example, vision and dental benefits only) may also be exempt from the restriction on annual limits. Recognizing the potential hardship to existing stand-alone HRAs, the regulations include a special rule for amounts credited or made available under HRAs in effect prior to January 1, 2014. For more information, please see Questions 2-4 in the Department of Labor’s FAQs about Affordable Care Act Implementation Part XI
The ACA sets a cap on the deductibles and out-pocket costs for certain employer-sponsored plans. The final rules issued on these limits clarify that self-insured plans, such as the Medical Trust, are not subject to the deductible limits. As of 2014, ACA places an overall limit on consumers’ annual out-of-pocket costs for deductibles, copayments, and coinsurance. This is sometimes referred to as the annual limit on out-of pocket maximums or the new cost sharing rules.
- Beginning in 2015, the Medical Trust plans provided annual out-of-pocket maximums for medical plans and pharmacy benefits. Both medical/behavioral and pharmacy benefit member cost share apply to our-of-pocket maximum amount. These will run separately for most plans. However, in all instances when totaled together, they will result in plan’s overall out-of –pocket maximum being at or below the ACA required levels.
The Health Insurance Marketplace is also known as the Exchange. The ACA requires that states either create, partner with other states or the federal government to create, or rely on the federal government to create a Health Insurance Marketplace on which individuals, and in some cases small employers, can purchase health insurance. Beginning in 2017, large employers may also be able to purchase insurance through the Marketplace. The Marketplace became effective January 1, 2014.
Health plans offered through the Marketplace must meet standards for affordability and provide Essential Health Benefits and consumer protections to be certified as a qualified health plan on a Marketplace.
Individuals are not required to purchase coverage through the Marketplace, and those who work at least 1,500 hours annually for dioceses, congregations, and Episcopal entities (when the diocese mandates participation) are required to purchase medical benefits through the Medical Trust, unless they qualify for a premium tax credit on the Marketplace and complete a Waiver of Health Benefits form. Those who work at least 1,000 hours per year are eligible to purchase medical benefits through the Medical Trust.
Currently, the Medical Trust cannot offer its plans on the Marketplace, but it is working with the Church Alliance (a coalition of major church denominations) to amend the ACA to treat our members and participating employers as if they were purchasing health coverage through a Marketplace.
Should employers provide the required Notice of Coverage Options Available through the Marketplace to members?
Yes. Under the ACA, employers subject to the Fair Labor Standards Act were required to provide a written notice to existing employees by October 1, 2013, and after that to new employees within 14 days of their date of hire.
The Department of Labor (DOL) has issued a template for the required notice, which the Medical Trust’s participating employers may use. See Model Policy Notices for your plan. It should be noted that the DOL announced there will be no penalty for non-compliance with this notice requirement.
The ACA originally required that, beginning in 2014, large employers with 50 or more “full-time” employees (including full-time equivalent employees) are subject to a tax penalty, called a Shared Responsibility Payment, if the employer does not offer health coverage to full-time employees (and their dependents) or coverage is offered, but it is either “unaffordable” or does not provide “minimum value.” The penalties vary depending upon whether health coverage is offered by the large employer and whether any employee receives a premium tax credit through a Marketplace.
The White House and the U.S. Department of the Treasury postponed the Employer Shared Responsibility Provisions to 2015 and further extended the Employer Shared Responsibility Provisions for Employers with 50-99 full time employees and full time equivalent employees to 2016.
A full-time employee is defined as an individual employed on average 30 or more hours per week. To calculate the number of full-time equivalent employees, the employer must add all hours worked by part-time employees for the month and divide by 120. Seasonal workers who work less than 120 days in a year are generally excluded from this calculation. You must count all full-time employees and full-time equivalent employees in your controlled group when determining whether you are a large employer. See Healthcare Reform FAQs for guidance on how the controlled group rules apply to tax-exempt employers.
Large employers that participate in the Medical Trust plans and offer coverage to their full time employees and dependents will satisfy the requirement to provide minimum value (defined as providing at least 60% of the cost of benefits). As noted above, to avoid the penalty, the coverage must also be affordable. The coverage offered to the full-time employee will be considered affordable if the employee’s contribution for single coverage for the lowest cost plan the employer offers does not exceed 9.5% (9.66% for 2016) of the employee’s wages reported in Box 1 of the employee’s Form W-2. There are other alternative methods for determining whether the coverage is affordable.
Employers with 50 or more full-time employees and full-time equivalent employees are also required to complete a new Form 1094-C and Form 1095-C for 2015.
The Employer Shared Responsibility Provision is complicated. The Medical Trust has provided a guide to the Employer Shared Responsibility Provision. It is available on cpg.org for administrators who have access to MLPS or ER.
- Sign in to your CPG account. You’ll find a link to the document on the Administration page after you sign in.
We recommend that you review this guide and consult with your chancellor or tax advisor if you have any questions.
A large employer must offer coverage to all full-time employees (those working 30 hours or more per week) and their dependents. The ACA does not mandate coverage for part-time employees or spouses.
Our Diocesan office runs the payroll for all parishes within the Diocese, using our tax identification number. How do the provisions of the ACA apply to us?
The answer depends on whether the various entities within the Diocese are considered to be under “common control” and thus part of what is called a “controlled group.” All organizations within the same controlled group are treated as a single employer.
New church plan legislation was passed as part of the Protecting Americans from Tax Hikes Act (PATH Act or Act) in December of 2015 that describes how to determine whether two or more churches or church-related employers are part of a controlled group. Section 336(a) of the Act adds new language to section 414(c) of the Internal Revenue Code and provides that common control (and thus a controlled group) for churches exists if:
- One parish or other organization (such as the diocese) provides directly or indirectly at least 80% of another parish or church-affiliated organization’s (such as a parish school’s) operating funds during the preceding taxable year, and
- there is a degree of common management or supervision between the entities so that the parish or other organization providing the operating funds is directly involved in the day-to-day operation of the other parish or church-affiliated organization.
The Employee Identification Number (EIN) or Federal Tax Identification Number (TIN) is thus not the determining factor. Two organizations could have different EINs or TINs and still be considered part of a controlled group under the special rules described above. For example, a parish day-care center or school could be considered to be part of the same controlled group with the parish even if they have different EINs—but only if the financial control test described above is met.
The specific facts of each case are thus important and depend on the financial relationship between the specific organizations within the diocese. Episcopal employers should contact the diocesan chancellor or other legal or tax advisor for assistance in determining whether they are part of a controlled group. If you are part of a controlled group, you must count all employees within the controlled group when determining the application of certain provisions under the ACA, including the (1) determination of whether you are eligible for the Small Employer Health Care Tax Credit and (2) determination of whether you are a large employer for purposes of the Employer Shared Responsibility Provision.
Note: This answer applies only if the entities described above are churches and what are called “qualified church-controlled organizations,” or QCCOs. If an organization is a church-affiliated employer but is not a church or QCCO, different controlled group rules apply.
What is the Individual Shared Responsibility Provision (also referred to as the Individual Mandate) under the ACA?
Starting in 2014, the individual shared responsibility provision calls for each individual to have minimum essential coverage for each month, qualify for an exemption, or make a payment when filing his or her federal income tax return. Minimum essential coverage includes at a minimum all of the following:
- Employer-sponsored coverage (including COBRA coverage and retiree coverage)
- Coverage purchased in the individual market
- Medicare coverage (including Medicare Advantage)
- Medicaid coverage
- Children's Health Insurance Program (CHIP) coverage
- Certain types of Veterans health coverage
Minimum essential coverage does not include specialized coverage, such as coverage only for vision care or dental care, workers' compensation, disability policies, or coverage only for a specific disease or condition. The provision applies to individuals of all ages, including children. The adult or married couple who can claim a child or another individual as a dependent for federal income tax purposes is responsible for making the payment if the dependent does not have coverage or an exemption. Individuals who have medical coverage through the Medical Trust have complied with the individual mandate.
The ACA provides that certain individuals that access health coverage through the Marketplace will be eligible for a premium tax credit. To be eligible, an individual must have household income between 100% and 400% of the Federal Poverty Level, file a tax return (a joint return if married), not be eligible for affordable coverage that provides minimum value through their employer and be enrolled in a plan offered through the Marketplace. A plan is affordable if the required employee contribution for single coverage does not exceed 9.56% (9.66% for 2016)of household income, excluding housing. A plan provides minimum value when the plan’s share of the costs is at least 60%.
Based on available data, the Medical Trust estimates that very few of its current members would be eligible for a subsidy for coverage purchased through the Marketplace.
For those few, the Church Pension Group provides an opportunity for the member to opt out of the DHP and purchase a plan on the Marketplace. There are various factors that a member should consider before choosing to opt out of the DHP, including the loss of employer contributions to help pay for the coverage and the loss of the pre-tax treatment of employee contributions to pay for the health coverage.
Do the Medical Trust’s Plans provide Minimum Essential Coverage, Minimum Value and Essential Health Benefits under the ACA?
Yes. Minimum Essential Coverage is the type of coverage an individual must have in order to meet the individual shared responsibility provision under the ACA. This includes job-based coverage. As such, the coverage offered by employers through the Medical Trust plans would be considered Minimum Essential Coverage.
Minimum Value is defined as covering at least 60% of the costs of benefits under the plan. All of the Medical Trust’s plans provide Minimum Value.
Essential Health Benefits is a set of 10 general healthcare service categories that must be covered by health plans in order to be certified and offered on the Marketplace. Additionally, health plans that provide these services cannot impose lifetime or annual dollar limits for these services. The Medical Trust provides Essential Health Benefits and has removed annual and lifetime dollar limits for these services. See Healthcare Reform for more information on what the Medical Trust has done to comply with the ACA.
Under the ACA, health insurance issuers and sponsors of self-funded group health plans (such as the Medical Trust) will be assessed an excise tax on any benefit provided to employees that exceeds a pre-determined threshold. The excise tax was originally scheduled to take effect January 1, 2018, but a law delaying the excise tax until January 1, 2020 was enacted in December 2015.
The amount of the excise tax is 40% of the amount the cost of healthcare benefits exceeds the annual limit of $10,200 for self-only coverage and $27,500 for self and spouse or family coverage. The threshold amounts will be adjusted for certain high-risk professions, age, and gender, as well as annual cost-of-living. These thresholds will be updated when the final regulations are issued and indexed for inflation in future years.
The exact rules for determining the cost of coverage and how the tax will be paid are still to be determined.
The Medical Trust is responsible for paying the excise tax for self-funded coverage. The IRS is expected to issue guidance for the administration of this excise tax, including the method and timing for payment. The IRS issued Notice 2015-16 and Notice 2015-52, which provide some preliminary guidance on the Cadillac Tax and also asks for comments from the public.
Please note that content is provided to you for informational purposes only and should not be viewed as investment, tax, legal or other advice. Please consult with your own professional advisors for further guidance. The Church Pension Fund and its affiliates expressly disclaim all liability in respect to actions taken or not taken based on the contents of this document.
Unless otherwise noted, websites referenced herein that are outside the www.cpg.org domain are not associated with The Church Pension Fund and its affiliates (collectively, the Church Pension Group) and the Church Pension Group is not responsible for the content of any such websites.
Health benefits are offered through plans maintained by Church Pension Group Services Corporation (doing business as The Episcopal Church Medical Trust), 19 East 34th Street, New York, NY 10016.