Before departing for the 2013 Thanksgiving holiday, the Obama administration released several new regulatory announcements and guidance relating to the implementation of the Affordable Care Act (ACA). The new guidance delays online enrollment for the Small Business Health Options Program (SHOP) Marketplace and addresses various taxes and fees that are being assessed to pay for the cost of the coverage reforms.

SHOP Delay

The Department of Health and Human Services (HHS) announced a one-year delay in the implementation of online access to the federally facilitated SHOP Marketplace. In 2014, small employers may still use SHOP plans, but will need to enroll directly with the applicable insurer or through an agent or broker. For coverage to begin January 1, the enrollment deadline is December 15, with an extension until December 23 for federally facilitated SHOP plans.

If the employer qualifies for the Small Employer Tax Credit, it will need to submit a paper application to obtain a SHOP eligibility determination before the end of the 2014 tax year. An eligibility determination is not required to enroll employees in a SHOP plan. Unlike the individual plan enrollment rules, an employer can elect to enroll employees in a SHOP plan any month of the year.

Taxes and Fees

The late November releases included guidance from HHS on the transitional reinsurance fee and certain other matters and from the IRS on health insurance provider fees, the additional Medicare tax, and the new tax on net investment income. 

  • HHS’s proposed Notice of Benefit and Payment Parameters for 2015 covers certain matters relating to insurance risks, including the transitional reinsurance fee, risk adjustments, risk corridors, cost-sharing, and user fees for federally facilitated exchanges.

    Most significantly, the proposed rule previews certain changes that may be made to the transitional reinsurance fee in 2015. For 2014, this fee is set at $63 per covered life. The proposed rule estimates that the transitional reinsurance fee for the 2015 benefit year will be at the rate of $44 per covered life.

    For 2014, the "contributing entities" required to pay the fee include self-funded plans, regardless of whether they use a third-party administrator. HHS proposes to modify its definition of “contributing entity” for 2015 and 2016 to exclude a self-funded plan that does not use a third-party administrator for claims processing. In defining when a third-party administrator is used, HHS suggests that it will look to certain core administrative functions, including the processing and adjudication of claims and appeals and plan enrollment, and seeks comments about other administrative services, including contracts for medical management services and provider networks.

    HHS is also interested in how to address circumstances where a self-insured group health plan uses a third-party administrator only for certain benefits such as benefits for pharmaceutical or behavioral health expenses. As defined in the proposed rule, the exception for self-administered plans is likely to affect few self-funded employer-sponsored plans. Such plans typically enter into service contracts with TPAs not only for their performance capabilities in claim administration, but also for purposes of gaining access to the TPA's provider network and corresponding discounts. 

  • Beginning in 2014, final rules on the annual Health Insurance Providers Fee will apply to health insurance issuers, HMOs, certain managed care companies offering Medicare Advantage, Medicare Part D, or Medicaid plans, and multiple employer welfare arrangements (MEWAs) that are not fully insured. An entity that is part of a self-insured employer plan, including voluntary employee beneficiary associations (VEBAs), and self-funded employer or union employer group waiver plans (EGWPs) are excluded from the fee.

    The fee is calculated on the net premiums written (in excess of $25 million) for individuals in the United States and its possessions (Puerto Rico and Guam) and is payable in September each year. Each covered entity must report its net premiums written on a Form 8963 by April 15 for 2014 (the fee year) based on 2013 data (the data year). The IRS will calculate and notify each covered entity's allocation of the final fee amount for the fee year by August 31 with payment due by September 30. The fee is to be treated as an excise tax.

    In addition, related guidance and an IRS ruling have been released on the fee.

  • The final regulations on the Additional Medicare Tax affirm the guidance issued in proposed regulations on this additional 0.9 percent tax that became effective in 2013. The tax applies to earned income in excess of certain threshold amounts of $250,000 for a married couple filing jointly, $125,000 for single filers, and $200,000 for all others. The final rules cover employer withholding obligations, adjustments for underpayments and overpayments, and the filing of returns and claims for refunds. 

  • The Net Investment Income releases include both final and proposed regulations and an FAQ that address the 3.8 percent tax imposed on certain net investment income of individuals, estates, and trusts, beginning in 2013. The new guidance includes exclusions for certain active partnership payments and special rules for charitable remainder trust (CRT) income.

As the federal health care reform effort gained steam, Ballard Spahr attorneys established the Health Care Reform Initiative to monitor and analyze legislative developments. With federal health care reform now a reality, our attorneys are assisting health care entities and employers in understanding the relevant changes and planning for the future. They also have launched the Health Care Reform Dashboard, an online resource center for news and analysis on developments under the Affordable Care Act. 

If you have questions about the marketplace or taxes and fees, contact Jean C. Hemphill at 215.864.8539 or hemphill@ballardspahr.com, or Edward I. Leeds at 215.864.8419 or leeds@ballardspahr.com.


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This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.

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