Thursday, November 16, 2017

71% of California's Healthcare is Paid by Taxpayers

Obamacare achieved its goal.  71% of California's healthcare is now funded by taxpayers. It's hard to see how this reverses without some form of massive collapse or calamity.  


A Sign of the Times - Most Want More Government


Average Rate Hikes in California

Yeah, that's sustainable. From California Healthline
Molina Healthcare has the highest rate increase for 2018, at 44.7 percent. Valley Health Plan is lowest at 9.8 percent. 
Blue Shield of California, the largest insurer in Covered California by enrollment, fell in between with an average hike of 22.8 percent. HMO giant Kaiser Permanente will charge 11.6 percent more on average next year. (Kaiser Health News, which produces California Healthline, is not affiliated with Kaiser Permanente.) 

Monday, November 13, 2017

10 Ways Employees Can Make Themselves Ineligible for HSA Contributions

A great reminder during open enrollment season from HR Daily Advisor:  
The Top 10 List 
Without further delay, here is the Top 10 list of HSA disqualifications: 
  1. General-purpose health flexible savings account (FSA) or health reimbursement arrangement. This is among the most common disqualifications. It’s not that the employee’s employer allowed them in the general-purpose account, which reimburses any and all medical care expenses. These days employers will set up eligibility rules that only allow HSA-eligible employees in a limited purpose (dental, vision, preventive care only) or post-deductible health FSA or HRA (or a combination of the two). Instead, it is the employee’s spouse or domestic partner who has a general-purpose health FSA that covers the employee. It does not matter if the employee’s expenses are never reimbursed from the spouse’s general-purpose health FSA. That coverage is a disqualifier.
  1. Medicaid. Medicaid coverage is first-dollar medical coverage for low-income individuals. It is generally a payer of last resort, such that a low-paid new hire still might qualify for Medicaid and be eligible for employer-sponsored coverage. The HSA rules do not provide an exception for Medicaid.
  1. Medicare. Medicare enrollment, not eligibility, disqualifies a person from HSA contributions, starting on the first of the month in which Medicare begins. Age-based, disability-based, and end-stage renal disease-based Medicare all make one HSA ineligible. One rule often catches retirees by surprise. If someone retires within 6 months after reaching age 65, Medicare enrollment is retroactively effective to the first day of the birthday month. This means several months of HSA contributions could be reclassified as HSA-ineligible months.
  1. Indian Health Service (IHS) and U.S. Department of Veterans Affairs (VA) coverage. These two benefits have a lot in common when it comes to HSA eligibility. For one thing, IHS and VA coverage is based on your status (tribe membership and military service, respectively); they are not based on any type of election. Eligible individuals have this coverage whether they use it or not. Recognizing this fact, an individual can have either type of coverage and be HSA-eligible as long as they have not received care from IHS or received any VA benefits in the prior 3 months.
There are exceptions. For IHS benefits, if an individual receives dental, vision, or preventive care—even in the prior 3 months—he or she is still HSA-eligible. 
  1. TRICARE. This coverage pays benefits before the HDHP deductible is met and clearly makes one ineligible for HSA contributions. TRICARE coverage is available to active duty military personnel, including members of the Coast Guard, retired military veterans, their families, and survivors. TRICARE’s effect on HSAs is especially important to communicate for employers that hire veterans in large numbers.
  1. On-site medical clinics. This type of coverage is appealing to employers with large populations at one or more work locations. Time off can be minimized when the healthcare provider is on premises. However, clinics can jeopardize HSA eligibility, unless they do not provide significant benefits in the nature of medical care. The challenge is that the term has not been fully defined.
IRS confirmed that these services are insignificant for HSA eligibility purposes: 
  • Physicals
  • Immunizations
  • Antigen injections/allergy shots
  • Aspirin and other over-the-counter pain relievers
  • Medical care resulting from workplace accidents
On the other hand, a hospital charging less than fair market value for a wide range of medical services will be deemed to be operating an on-site clinic that makes its employees HSA-ineligible.Between those two ends of the spectrum is a gray area. The safe route is to charge participants in an HSA-eligible HDHP the fair market value (FMV) of services that are not included in the above list. 
  1. Telemedicine. This add-on service (also known as telehealth) has increased in popularity, particularly with employers in rural worksites where access to care may be limited. The standard telehealth offering is charged at simple copay and can be used for a lot of different medical treatments and diagnoses, including the issuance of prescription drugs. It is hard to argue that this is not a significant benefit in the nature of medical care, especially when telehealth is promoted as having a significant impact on medical plan costs.
Unfortunately, the IRS has not officially carved out a specific HSA exception for telehealth. So, the prevailing wisdom is to borrow some wood from a neighbor’s wood pile, so to speak. That neighbor is the on-site medical clinic. As long as the telehealth benefit charges HSA participants FMV for its services, the benefit should allow for continued HSA eligibility. We have seen FMV estimates in the range of $40 to $50 per visit. 
  1. Mini-med coverage. Mini-med plans became popular with the Affordable Care Act (ACA) individual mandate that took effect in 2014. The idea was that employers with a good many part-time employees might want to provide some level of basic coverage that would be more affordable than what they could obtain on the health insurance marketplace. The IRS said that mini-med plans invariably do not mix with HSA eligibility, particularly if they provide fixed-amount payments for office visits, outpatient treatment, or ambulance use. Bottom line: mini-meds are not HDHPs, and an individual must have an HDHP to be HSA-eligible.
  1. Incentivized HDHP coverage. Here is a riddle: when is an HDHP not an HDHP? The answer is when an employer can receive some type of incentive during the plan year that changes a fundamental characteristic of the HDHP. Here are two examples:
  • Wellness incentives. An employer offers a series of wellness incentives to participants in any of the medical plan options, including an HDHP. One incentive is a tobacco surcharge that adds to the employee contribution if an employee uses tobacco and does not satisfy the reasonable alternative standard. Another wellness incentive provides reduced cost-sharing (it could be in the form of a number of waived copayments or a deductible reduction) for completing several participatory wellness incentives.
  • Health insurance marketplace cost-sharing reductions. If someone enrolls in marketplace coverage, chances are they will qualify for some type of subsidy that eases the burden of out-of-pocket medical expenses. Based on household income, about five in six marketplace participants qualify for a premium reduction. There are no HSA issues there. However, about three in five marketplace participants also qualify for cost-sharing reductions.
In both cases, the adjustments to cost-sharing can result in either payment of medical care benefits before the deductible has been met or a decrease in deductible below the statutory minimum annual deductible ($1,350 (self-only)/$2,700 (family) in 2018). 
  1. Business travel accident (BTA) insurance. This is not among the “usual suspects” when it comes to making an individual ineligible for HSA contributions. That is because accident coverage is one of the listed benefits in the category of permitted coverage. A typical BTA policy will cover a certain amount of medical care expenses related to an accident while engaged in business travel. But beware: There are still policies that may provide additional medical coverage beyond what is accident-related, especially if the BTA policy is primarily designed for international travelers. If medical care is not tied to an accident, it is incompatible with HSA eligibility.
This could have been a Top 11 List. One disqualifier that did not make the cut is student health insurance. It typically provides coverage before the deductible is met. However, this is rarely a concern. Individuals who can be claimed as a tax dependent on someone else’s tax return are already HSA-ineligible. ...

Friday, November 10, 2017

Provisions in the House Republicans’ Tax Proposal Affecting Employee Benefits

From Nixon Peabody:
Provisions in the House Republicans’ tax proposal affecting employee benefits, which generally would become effective January 1, 2018, include the following:
  • The provision allowing employers to provide employees up to $5,250 of tax-free educational assistance would be repealed, and such benefits would become taxable.
  • Qualified tuition reduction benefits provided by educational institutions to their employees and their employees’ spouses and dependents would become taxable
  • Employer contributions to an Archer MSA would not be excluded from income.
  • The tax exclusion for certain employee achievement awards would be repealed and the value of such benefits would be taxable to the employee and deductible by the employer.
  • The exclusion for housing provided for the convenience of the employer and for employees of educational institutions would be limited and phased out for highly compensated individuals.
  • The tax exclusion for employer-provided dependent care assistance programs would be repealed.
  • The exclusion for employer-paid qualified moving expenses would be repealed.
  • Employees will be taxed on benefits provided under an employer- sponsored adoption assistance program.
  • The limits on employee pre-tax elective contributions to 401(k) plans would not change, but there would be a modest relaxation to some 401(k) plan rules. For example, employees taking hardship distributions would be permitted to continue making contributions to the plan. Additionally, hardship distributions could be made from employer contributions and investment earnings. Finally, employees whose plan terminates or who separate from employment while they have plan loans outstanding would have until the due date for filing their tax return for that year to contribute the loan balance to an IRA in order to avoid the loan being taxed as a distribution.
  • Frozen qualified defined benefit retirement plans would be given some relief to more easily pass nondiscrimination testing.

Legislative Alert: IRS Pay or Play Enforcement Guidance

Monday, November 6, 2017

IRS Reverses Policy on Certifying Individual Mandate Compliance - No Response No Longer an Option

Overview

The Internal Revenue Service (IRS) recently reversed a recent policy in how it monitors compliance with the Affordable Care Act’s (ACA) individual mandate. For the upcoming 2018 filing season (filing 2017 tax returns):
  • The IRS‎ will not accept electronically filed tax returns where the taxpayer does not certify whether the individual had health insurance for the year (as it did last year); and
  • Paper returns that do not certify compliance with the individual mandate may be suspended pending receipt of additional information, and any refunds due may be delayed.
The Individual Mandate

The ACA’s individual mandate took effect in 2014.  It requires most individuals to obtain acceptable health insurance coverage for themselves and their family members or pay a penalty.

The individual mandate is enforced each year on individual federal tax returns. Starting in 2015, individuals filing a tax return for the previous tax year indicated, by checking a box on their individual tax returns, which members of their family (including themselves) had health insurance coverage for the year (or qualified for an exemption from the individual mandate). Based on this information, the IRS will then assess a penalty for each nonexempt family member without coverage.

Previous Policy on “Silent Returns” 

Effective Feb. 6, 2017, the IRS announced that it would not automatically reject individual tax returns that did not provide this health insurance coverage information for 2016 (known as “silent returns”). Instead, silent returns would still be accepted and processed by the IRS.

This enforcement policy was intended to reduce the burden on taxpayers, including those who are expecting a tax refund. The IRS noted that taxpayers filing silent returns could still receive follow-up questions and correspondence from the IRS at a future date. 

Change in Enforcement Policy


The IRS recently reversed its previous enforcement policy on silent returns. As a result, the IRS will not accept any silent returns for the 2017 tax year that are filed electronically. In addition, any silent returns that are filed on paper may be suspended pending receipt of additional information, and any refunds due may be delayed.

Therefore, taxpayers should indicate on their 2017 tax returns whether they (and everyone in their family):
  • Had health coverage for the year; 
  • Qualified for an exemption from the individual mandate; or 
  • Will pay an individual mandate penalty. 
The 2018 filing season will be the first time the IRS will not accept tax returns that omit this health coverage information. The IRS reiterated that taxpayers remain obligated to follow the law and pay what they may owe at the point of filing‎. According to the IRS, identifying omissions and requiring taxpayers to provide health coverage information at the point of filing makes it easier for the taxpayer to successfully file a tax return and minimizes related refund delays. 
  
The move is likely to "set up a battle between Trump and a government agency headed by an Obama appointee, John Koskinen. According to CNBC, 'This hurts Trump's efforts to gut Obamacare, but still gives the White House the perfect opponent in the unpopular IRS.'" 
  

Friday, November 3, 2017

GOP Releases New Tax Platform: More Class Warfare, More Redistribution & Greater Reliance on Fewer Americans to Foot the Bill

There certainly are some improvements in this plan but it really reminds me of the whole healthcare situation.  It's been watered down immensely from what was originally promised as it is nowhere near a revolutionary cut.  Instead, it does offer some quality cuts for folks making less than about $80,000 a year.  But on the whole, our tax code will continue to be overly complicated and chock full of loopholes and nuances designed to pick some winners and losers while funneling far too much money through Washington D.C.  Here is a smattering of some of the bad news from quality publications. 

From the Wall Street Journal:
The dispiriting news is on the individual side. The House would double the standard deduction to $12,000 for individuals and $24,000 for married couples. This would improve simplicity for millions, and it compensates for the bill’s elimination of the personal exemption. But nearly half of American filers already owe no income taxes, and the larger deduction would make the federal fisc even more dependent on a smaller pool of taxpayers. 
This is far better than the House bill’s new “family credit,” which increases the child credit to $1,600 from $1,000 in a forlorn attempt to appease the income redistributionists of the right like Senators Mike Lee and Marco Rubio. The credit would also offer an additional $300 for each parent and another $300 for each “non-child dependent.” The credits would phase out for married couples at $230,000 of income. Does anyone think a mid-level manager at J.P. Morgan deserves a subsidy to raise children? 
The House also gradually makes more of the $1,600 credit refundable. In other words, this will be a check in the mail for those who owe nothing in taxes, which discourages work. The family credits cost $640 billion over 10 years in lost revenue with zero growth payoff. To make up the difference, the House keeps the top personal rate at 39.6%, on top of the 3.8% ObamaCare surcharge that Republicans failed to repeal. This would become the fourth tax bracket and kick in at $1 million for couples—half that for individuals—with 12%, 25% and 35% brackets below. 
This top rate is a surrender to Democratic class warriors, though Republicans also fear that President Trump would sandbag them. No Members want to vote for a lower top rate and then have Mr. Trump tweet that they’re “mean,” as he did on health care. This is where presidential flightiness and lack of principle have a policy cost. Ideological surrender also gets Republicans nothing politically as Democrats are still attacking the House plan as a sop to the rich....  
The overall impact of the individual tax changes is little reform but more income redistribution. The long-term damage to the tax-cutting cause will also be considerable. Adding credits and deductions for individuals makes rate-cutting that much harder since the affluent pay the vast bulk of all income taxes. The divorce of “pass through” and personal income rates will also make it even harder to reduce individual tax rates below 39.6%—ever.
From Rand Paul via LifeZette
"For the individuals, it's not as good as I would like. I would like to see every individual up and down get a lower rate, and particularly on the top part of the spectrum because the top part of the spectrum pays most of the taxes," Paul continued. 
But the Democrats have been particularly effective in pushing the narrative that tax breaks for the wealthiest Americans disadvantage poorer Americans, and many Republicans have found themselves convinced by portions of these emotional arguments, Paul suggested. 
"We have to understand that the owners of our businesses — the people we work for — are richer than us. They pay more taxes," Paul said. "But if you lower their taxes, they will either buy stuff or hire more people. If you raise their taxes, it goes into the nonproductive economy, which is Washington, D.C., and it will be squandered." 
"So really, even if rich people get a tax cut, we should all stand up and cheer because it means more jobs for us because you're leaving more money in the private sector," Paul continued. "So I'm one of the few that will stand up on TV and say everybody's taxes should go down, including the wealthy."
And The GOP’s hidden 46% tax bracket from Politico:
House Republicans claim the tax plan they introduced Thursday keeps the top individual rate unchanged at 39.6 percent—the level at which it’s been capped for much of the past quarter-century. But a little-noticed provision effectively creates a new band in which income is taxed at over 45 percent.
Thanks to a quirky proposed surcharge, Americans who earn more than $1 million in taxable income would trigger an extra 6 percent tax on the next $200,000 they earn—a complicated change that effectively creates a new, unannounced tax bracket of 45.6 percent.
It hasn’t been advertised by Republicans, who have described their plan as maintaining the current top tax rate of 39.6 percent. And it goes against decades of GOP orthodoxy that raising taxes on the rich discourages work and reduces economic growth. Reached by phone, Steve Moore, a tax expert at The Heritage Foundation, said the surcharge was news to him. “I was just in a briefing with the White House on this,” he said. “They didn’t mention that. It seems kind of bizarre to me.” ...

Tuesday, October 31, 2017

New California Law Prohibits Asking Job Applicants About Their Salary History

A new California law (AB 168) was signed by Governor Jerry Brown on October 12, 2017 that prohibits employers from inquiring about the salary histories of its job applicants. AB 168, which takes effect on January 1, 2018, and applies to all California employers (including state and local governments) represents an expansion of California’s fight against the gender wage gap. Gender wage discrimination is already unlawful in California, but AB 168 goes a step further by banning salary history inquiries in most circumstances. 
The Law 
AB 168 specifically provides for the following: 
  • Employers cannot seek salary history information (including compensation and benefits) for job applicants, whether it be done orally or in writing, or personally or through an agent. 
  • An employer cannot rely on the salary history information of a job applicant as a factor in determining both (1) whether to offer employment to the applicant or (2) what salary to offer the applicant.
  • Upon reasonable request, an employer must provide the pay scale for the job position to the job applicant.
Limited Exceptions 
AB 168 provides certain limited exceptions. The law does not apply:
  • To salary history information disclosable to the public pursuant to federal or state law, including the California Public Records Act or the federal Freedom of Information Act.
  • If the job applicant “voluntarily and without prompting” discloses his or her salary history information to the prospective employer.
In the latter case, the employer still cannot consider salary history information in determining whether or not to the hire applicant, but can consider salary history information in determining the applicant’s salary (if it hires the applicant). It is important to remember, however, that prior salary cannot, by itself, justify any disparity in compensation under California Labor Code Section 1197.5.
 

The Rationale Behind Getting Employers out of HSA-Account Selection

Whenever installing HSAs I encourage my clients to allow employees to select their own banks and set up their own accounts. Yes, if the employer is funding the HSA this is a small amount of extra work in the setup process - but no more work than setting up a person's paycheck via direct deposit.

My logic is that we nor HR needs to hear the complaints about any particular administrator or bank if and when that institution falls short of customer expectations.  (Think of the current events around Wells Fargo.) HSAs are owned by the employee themselves. So why tell them where they need to bank and/or invest their money? It is not like an HRA or an FSA for which the employer has ultimate responsibility. And it is just one less possible vendor's mistakes for which we and HR must answer.

There is now a reasonable legal argument to employe that practice so as to minimize the employer’s risk. The below is not saying an employer can't solely select one bank to use.  However, there is a very solid and practical argument to make that when an employer does select one bank that employer is necessarily restricting where and how an employee can and cannot not invest his or her money.

Hence, it would not surprise me in the least if this ultimately gets challenged by a group of aggrieved employees with an aggressive attorney. I say this especially since some HSA investment institutions are incredibly limited in how one can invest their money. Some institutions, for example, have only four mutual funds from which to choose. Well, if your employer is telling an employee that the employee can only invest in one of four funds, isn't your employer necessarily restricting investment options in such a way as to potentially run afoul of the below rules?

Maybe, maybe not. But for those of you wishing to install HSAs the way I historically have, you now have a good legal argument that doing so is the better risk management decision for the employer.

From InsuranceNewsNet.com

... HSAs often have an investment account option that allows their owners to invest in mutual funds and other investment vehicles much like they would in a 401(k) plan, EBRI said.

Employers may be impacted by the final rule if they: 1) provide investment advice to their employees concerning HSAs, or 2) benefit from such advice being given to their employees (such as revenue sharing in connection with a specific HSA investment, or compensation for directing employees towards a particular HSA vendor).

HSA mutual fund options charge annual fees and also may charge separate fees to administer the account. This could result in possible conflicts of interest can arise, and trigger liability under the DOL rule.

In a new white paper, HSA Bank, a large administrator of HSA plans, described how the DOL rule can affect employers who contract with HSA services firms. Alternatively, health insurers that administer the employer's HSA-eligible high-deductible health plan may contract with an HSA firm. In either case, the employer typically funds these accounts by transmitting employer contributions and workers’ own salary deferred dollars to the HSA administrator.

"Employers may be impacted by the [DOL's fiduciary] rule if they provide information to their employees about HSAs that crosses the line from general investment education to investment advice, or if they benefit in some way from the advice being given," said Kevin Robertson, a senior vice president at HSA Bank and the white paper's author, told SHRM. ...

7th Circuit Federal Court of Appeals Rules ADA does not Require "Extended" Leave - But 9th Circuit Still Does

Extended Leave and the ADA

The Americans with Disabilities Act (ADA) requires that employers provide “reasonable accommodations” for employees with disabilities unless the employer can demonstrate that an accommodation would cause undue hardship. The EEOC has argued that extended leave can be a reasonable accommodation and has brought suit where employers have a policy of automatically terminating employees after a specified period of leave. The EEOC also identifies leave as a potential accommodation in its regulations and enforcement guidance. This reasonable accommodation under the ADA, in the EEOC’s view, is in addition to an employee’s right to leave under the Family and Medical Leave Act (FMLA).

Severson v. Heartland Woodcraft

Our Legislative Alert covers a recent decision out of the U.S. Court of Appeals for the Seventh Circuit which disagreed with the EEOC’s position. In Severson v. Heartland Woodcraft, Seventh Circuit ruled that extended leave is not required under the ADA. The Court reasoned that the ADA was a statute that prevented discrimination and not one that mandated leave like the FMLA. The Court concluded that an ADA reasonable accommodation “is one that allows the disabled employee to ‘perform the essential functions of the employment position’” and that “not working is not a means” to that end. Therefore, in the Seventh Circuit’s view, a two to three month period of leave is not a reasonable accommodation under the ADA. The Court, however, noted that briefer or intermittent periods of leave, such as days or weeks, could be a reasonable accommodation under the ADA in some circumstances.

Takeaways

The Seventh Circuit’s decision only affects employers in Wisconsin, Indiana and Illinois. Employers subject to the ADA in other states should be aware that other federal court decisions may apply to them. For example, the U.S. Courts of Appeals for the First and Ninth Circuits have issued decisions holding that multi-month leave periods were reasonable accommodations under the ADA

As mentioned, the EEOC’s position is that extended leave can be a reasonable accommodation. Employers outside of the Seventh Circuit that are subject to the ADA should review federal court decisions regarding reasonable accommodations that apply in their states and confer with their legal counsel especially if they automatically terminate employees after a specified period of leave.

Our legislative alert provides an overview, action steps and considerations for employers as well as the background of Severson v. Heartland Woodcraft.

5 Ways to Keep Your Healthcare Costs Down