Health & Welfare Plans Newsletter

September 19, 2016

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[Official Guidance]

Text of IRS Notice 2016-55: Amounts Paid to Section 170(c) Organizations Under Employer Leave-Based Donation Programs to Aid Victims of Flooding in Louisiana (PDF)
"The Service will not assert that cash payments an employer makes to Section 170(c) organizations in exchange for vacation, sick, or personal leave that its employees elect to forgo constitute gross income or wages of the employees if the payments are: [1] made to the Section 170(c) organizations for the relief of victims of the Louisiana storms; and [2] paid to the Section 170(c) organizations before January 1, 2018. Similarly, the Service will not assert that the opportunity to make such an election results in constructive receipt of gross income or wages for employees.... The Service will not assert that an employer is permitted to deduct these cash payments exclusively under the rules of Section 170 rather than the rules of Section 162. Cash payments to which this guidance applies need not be included in Box 1, 3 (if applicable), or 5 of the Form W-2."
Internal Revenue Service [IRS]

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[Official Guidance]

Text of CMS FAQ on Compliance Safe Harbor for Issuers Affected by an Increase in Enrollment for the 2017 Plan Year (PDF)
"[F]or the 2017 plan year, CMS will not use formal enforcement remedies for non-compliance with the casework standards under 45 CFR 156.1010 or other customer service standards when issuers that have experienced a substantial increase in enrollment make reasonable efforts to address concerns in an appropriate time frame. CMS will take into account the QHP issuer's efforts to cooperate with CMS, address and resolve issues in a reasonable amount of time, and report on the progress of resolution."
Centers for Medicare & Medicaid Services [CMS], U.S. Department of Health and Human Services [HHS]

[Guidance Overview]

The Look Back Measurement Method: Part-Time, Variable Hour, and Seasonal Employees
"The employer will look at the following factors to determine if an employee should be classified as a part-time, a variable hour, or a full-time employee: [1] Whether the employee is replacing an employee who was or was not working 30 hours per week; [2] The extent to which employees in the same or comparable positions are or are not working 30 hours per week; [3] Whether the job was advertised, or otherwise communicated to the employee or otherwise documented (for example, through a contract or job description), as requiring hours of service that would average 30 or more hours of service per week or less than 30 hours of service per week ... Under no circumstances can the employer take into account the likelihood that the employee may terminate employment before the end of the initial measurement period when classifying an employee."
Accord Systems, LLC

[Guidance Overview]

Morristown NJ Passes Paid Sick Leave Ordinance
"Ordinance No. 35-2016 takes 'effect upon passage and publication' ... Therefore, most employers likely will have little time to comply ... The Ordinance ... requires employers with at least 10 employees to provide 40 hours of paid sick leave during a calendar year. Employers with fewer than 10 employees must provide at least 24 hours of paid sick leave during a calendar year."
Jackson Lewis P.C.

Hospital Health Plans Growing as Providers Want More Control Over Care
"As health care delivery and payment models continue to evolve, some hospitals have decided to take more control over their private payment options and offer their own health plans. By cutting out the middleman of other insurers, these integrated hospital systems are able to oversee health care spending and ensure that patients receive the services they need."
Wolters Kluwer Law & Business

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Deriving Risk Adjustment Payment Weights to Maximize Efficiency of Health Insurance Markets
"[The authors] assume that the objective of risk adjustment is to minimize the loss from service-level distortions due to adverse selection incentives, [and] derive expressions for the service-level distortions as a linear function of the risk adjustment payment weights.... [W]hen the number of risk adjustor variables exceeds the number of decisions plans make about service allocations, incentives for service-level distortion can always be eliminated."
Timothy J. Layton, Thomas G. McGuire, Richard C. van Kleef, via National Bureau of Economic Research [NBER]

Making Catch-Up Contributions to a Health Savings Account
"[Y]ou have to wait until the year you turn 55 to begin catch-up contributions for an HSA. As long as you have an HSA-eligible health insurance policy (with a deductible in 2016 of at least $1,300 for self-only coverage or $2,600 for family coverage), you can contribute an extra $1,000 to your HSA, even if it is before your birthday.... If you are not HSA-eligible for any part of the year, you will have to prorate your contributions, including your catch-up contributions[.]"
Kiplinger

Five Medicare Tips for New Retirees
"Moving to Medicare from employer health insurance can be a difficult transition.... [1] There is no family plan in Medicare.... [2] A cap on out-of-pocket costs isn't automatic.... [3] Be strategic in scheduling some procedures.... [4] Wellness features may be different.... [5] A little research may help limit your drug costs under Medicare."
TIME

Are Nongroup Marketplace Premiums Really High? Not in Comparison with Employer Insurance
"[N]ationally, nongroup marketplace premiums are 10 percent lower than the average employer sponsored insurance premium, after [adjustments to account for the differences in actuarial value, induced utilization, and age distribution of enrollees]. There is variation at across states and metropolitan areas, but more than three-quarters of states and more than 80 percent of metropolitan areas [have] lower marketplace [premiums] than employer premiums."
Urban Institute

[Opinion]

The Missing Debate Over Rising Healthcare Deductibles
"While the political world focuses on the [ACA], changes have been occurring for the many more Americans who get health insurance through work. The biggest change: rising deductibles, which are transforming the nature of health insurance from more comprehensive coverage to skimpier insurance with higher out-of-pocket costs.... The shift is not a result of Obamacare; the trend began well before the ACA was passed in 2010. The trend is not highly politicized or covered daily by the general news media. All of which contribute to making the changing nature of insurance the most important development in the U.S. health system the public is not debating."
The Wall Street Journal; subscription may be required

[Opinion]

Five Important Questions on Health Care Costs
"[W]hat is the net increase in the cost or price of a medicine over a period of time? ... [H]ow do policies that restrict access to key medicines impact overall health care costs and patient outcomes? ... [A]re certain participants within the health care system artificially inflating drug costs? ... [I]dentify patients who may require intense biopharmaceutical interventions.... [D]emand full disclosure of all data points and methodology."
Morning Consult

[Opinion]

The Vexing Economics of Obamacare
"As the carrot, the ACA provides robust subsidies ... The stick is a tax mandate to purchase insurance. So far, the carrot has been much more effective than the stick, and that's not a good thing for the markets."
The Atlantic

Benefits in General

Employee Benefit Issues in Mergers and Acquisitions (PDF)
"This article looks primarily at M&As involving ... 401(k) plans ... [and] explores other types of 'qualified' plans, health care plans, and 'nonqualified' deferred compensation plans.... [It] is critical that the buyer and seller engage in due diligence to understand the plans that exist and discover any problems, review and negotiate the terms of the purchase agreement, and take appropriate pre- and post-close actions to avoid creating problems and to facilitate any future plan mergers."
The ERISA Law Group, via The Advocate

Executive Compensation and Nonqualified Plans

[Guidance Overview]

Consider Amending Plans for Proposed Section 409A Regulations
"Although the changes do not necessarily require amending existing deferred compensation arrangements, employers may want to consider amendments to avoid contractual disputes about the benefits, to the extent that an employer intends to take advantage of the more liberal rules.... The following changes in the proposed regulations may warrant specific language[:] ... Beneficiary's intervening events ... Payment of legal expenses ... Delayed payment upon death ... Expansion of the short-term deferral exception."
Morgan Lewis

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BenefitsLink Health & Welfare Plans Newsletter, ISSN no. 1536-9595. Copyright 2016 BenefitsLink.com, Inc. All materials contained in this newsletter are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of BenefitsLink.com, Inc., or in the case of third party materials, the owner of that content. You may not alter or remove any trademark, copyright or other notice from copies of the content.

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