Major Health Insurance Changes for the New Year

Covered CA 2016 ChangesCovered California is reminding consumers and small businesses about important changes in 2016. Starting January 1, Covered California increased access to plans and providers and offered more health plans, and increased the number of benefits that are not subject to a deductible. Here is a run-down of the changes:

Most California Consumers Get New Forms for the 2015 Tax Year
This year, consumers who are insured through their employer or a government program, like Medi-Cal, will get Form 1095-B or Form 1095-C. The forms show who maintained minimum essential coverage and is not liable for the tax penalty. Consumers under Covered California will continue to get a Form 1095-A. For more information, visithttps://www.irs.gov/Affordable-Care-Act/Questions-and-Answers-about-Health-Care-Information-Forms-for-Individuals.

The Penalty for Not Buying Affordable Insurance Is Going Up — A Lot
The IRS penalty applies to people who go without insurance when they can afford to buy it. It will increase for 2016 to at least $695 per adult and $347.50 per child under 18 or 2.5% of household income, whichever is greater. A recent study by the Henry J. Kaiser Family Foundation estimates that the average household penalty in 2016 will be $969, which is a 47% increase from 2015. For more information, visit www.taxpayeradvocate.irs.gov/estimator/isrp.

New Requirements and New Options for Many of California’s Small Businesses
Employers with more than 50 full-time-equivalent (FTE) employees must offer health insurance to employees or pay a penalty. Through 2015, this requirement applied only to businesses with more than 100 employees. Any of these employers with an employee who does not take their offer of coverage will have to pay a penalty if the employee goes on to get financial assistance to purchase coverage through Covered California. For more information, visit https://www.irs.gov/Affordable-Care-Act/Employers/ACA-Information-Center-for-Applicable-Large-Employers-ALEs.

Covered California for Small Business will expand beyond the ceiling of 50 employees to serve companies employing 100 or fewer FTE employees. For more information, visit www.CoveredCA.com/ForSmallBusiness.

Major Improvements in Choice, Access and Benefits
Covered California used its power as an active purchaser to hold down rate changes for a second year. Before the Affordable Care Act, consumers regularly experienced double-digit premium increases. For 2016, Covered California negotiated a weighted average change of 4%, which is lower than last year’s change of 4.2%. In addition, nearly 90% of Covered California enrollees get some financial assistance to help pay premiums. On average, those subsidies resulted in more than $5,200 for each household in 2014.

Benefit Changes for the 2016 coverage year:

  • The majority of Bronze plan consumers now get three office visits a year to a primary care provider or specialist with no deductible. Other needed services, such as lab tests and rehabilitation, will not be subject to a deductible.
  • Covered California’s Silver plan will combine copay and coinsurance into a single product. Every doctor visit, lab test, and prescription will not be subject to a deductible in this single product. Consumers with chronic conditions will be protected by a cap on specialty drugs. The vast majority of consumers will see their specialty drugs capped at $250 per month, per prescription. Plus, because of Covered California’s standard benefit design, the caps must be offered by every health insurance plan in the individual market and by all plans offered by the exchange. For more information, visit http://news.CoveredCA.com/2015/05/covered-california-board-protects.html.
  • Adult dental coverage is now offered as an add-on.
  • 6% of Covered California consumers will be able to choose from at least three health insurance companies thanks to the addition of two new health insurance companies — UnitedHealthcare Benefits Plan of California and Oscar Health Plan of California as well as the expansion of Blue Shield of California and Health Net.
  • More than 90% of hospitals (general acute centers as designated by the California Office of Statewide Health Planning and Development) in California will be available through at least one health insurance company, and 74% will be available through three or more companies.

 Medi-Cal Coverage for Undocumented Children

  • Medi-Cal will be expanded to all children regardless of their immigration status. The new law goes into effect in May 2016.

Health Care Improvements for All Californians
Starting July 1, health plans must publish and maintain printed and online provider directories. Health plans must maintain accurate provider directories, including routine updates. For more information, visithttp://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201520160SB137.

A new state law will require health plans and insurers to implement formula-tier requirements and cost-sharing caps similar to products offered through Covered California. Assembly Bill 339 requires plans and insurers to have formularies that do not discourage the enrollment of people with certain health conditions. It also sets requirements regarding access to in-network retail pharmacies, standardized formularies, and coverage for certain single-tablet HIV and AIDS treatments. For more information, visithttp://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201520160AB339.

ACA Reporting Could Be a Security Nightmare

Under the ACA, employers must now track and provide private healthcare information to the IRS, which could be a security nightmare, according to Greatland Corp. Starting this filing season, reporting is mandatory for any company with at least 50 full-time equivalent (FTE) employees. They must provide employees’ personal information from tax systems and health insurance information. This opens the door for simple errors, and could lead to misuse or abuse of personal information. Combining this information from two very different regulated databases and importing the data into the unfamiliar 1095 form can create security issues.

Employers use the 1095 form to report the offer of coverage to employees and to the IRS. The 1095 form requires data that is typically stored in the employer’s payroll system and HIPAA-protected benefit information. It is most often included in the employer’s HR software.

With the increase in filing regulations this tax season, Greatland has noted an increase in businesses claiming to offer these services. Often, these opportunistic companies fail to understand the detailed documentation; they don’t have the skills to navigate ongoing changes; and they don’t offer the software with security measures to keep the information safe.

Employers must send 1095 forms by the end of January. Because January 31 falls on a Sunday in 2016, statements must be mailed by February 1, 2016. Employers have until the end of February to provide this information to the IRS if filing paper forms or until the end of March if filing electronically. Employers with 250 or more forms must file them electronically. While incorrect filings will not be penalized for calendar year 2015 filing (reported in 2016), employers and insurers are still required to file on time and make a good faith effort to comply

IRS Proposes Rule On FTE Employees

On Jan. 2, the IRS proposed a new regulation clarifying the requirements for companies to provide health insurance to full-time equivalent (FTE) employees under the Affordable Care Act. Companies with 50 or more full-time employees (or an equivalent combination of full- and part-time employees) are required to provide ”affordable” health insurance coverage to workers that meet time-in-service qualifications.

The proposed rule states that an FTE employee working 130 hours in a calendar month satisfies the 30 hours of work per week requirement. The proposal would prescribe three different methods to determine whether a non-hourly employee qualifies:

1. Counting actual hours of service.
2. Using a days-worked equivalency, in which eight hours of service counts as a day.
3. Using a weeks-worked equivalency, in which 40 hours of service per week counts as a week.

Companies can apply the methods to different classifications of non-hourly employees, as long as it is done consistently and does not understate their hours in service so as to disqualify them from health coverage.

New hires will be under a 12-week grace period before their status is reviewed under a look-back formula, which lays out how to classify variable-hour employees and new hires whose statuses have changed in the first three months of work.

The proposed rule would require employer plans to offer coverage to a qualifying employee’s dependents, defined as children under the age of 26. Companies will not be required to include an employee’s spouse in their medical plans. For more information, see the proposed IRS FTE regulations here.

Last Updated 05/25/2022

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