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September Health Insurance Compliance Tips: Q4 2020

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As we embark on our journey through the fourth quarter of 2020, our clients are asking more from us than ever before – especially during our socially distant pandemic. With all the focus on COVID-19 and upcoming insurance renewals, it can be easy – for some – to lose sight of other health insurance topics. Following are tips, reminders, and helpful updates to aid your discussions with employer clients during fourth quarter.  
 
California Individual Mandate and New Penalty Estimator
Although the Affordable Care Act (ACA) requires individuals to have health insurance, the penalty for non-compliance at the federal level has been reduced to $0.00, effective 1/1/2019. However, California created its own individual health insurance mandate effective 1/1/2020, which requires all California residents to maintain qualifying health insurance throughout the year – and all years moving forward, including 2021. Under the state law, California residents must either have qualifying health insurance coverage (which includes most employer-sponsored medical coverage), obtain an exception from the requirement to have coverage, or pay a penalty when filing state tax returns.
 
Unlike at the federal level, the California non-compliance penalty under the mandate is much greater than $0.00. The penalty varies based on a number of factors, including persons in household, month(s) without coverage, income, etc. Because each person’s penalty varies according to his or her own unique situation, the California Franchise Tax Board recently released a new penalty estimator calculator to help Californians estimate what it may cost to not have health coverage under the mandate. From a high level, the penalty is either a flat amount of $750/adult and $375/child (prorated by month), or a percentage of household income based on a person’s tax filing status and number of dependents.
Refer to Word & Brown’s previous column for additional information on the California Individual Mandate.
 
Special Open Enrollment Window: 11/15 – 12/15
The ACA requires health insurance carriers to allow employers to enroll in medical health insurance coverage, effective 1/1 each year, without having to meet standard participation and employer-contribution underwriting requirements. This is known as the ACA’s one-month “Special Open Enrollment Window” (SOEW).
 
The SOEW occurs November 15th through December 15th each year. Health insurance agents working with employers struggling to meet participation and contribution requirements will find this window especially attractive.
 
Health insurance carriers are usually strict about enforcing the SOEW’s deadline dates. If your employer client is looking to enroll in coverage during this window, it’s advised to submit enrollment paperwork to Word & Brown’s Underwriting team as early as possible. Stay tuned for updates at the end of October on the SOEW.
 
Refer to Word & Brown’s 2019 column for additional information on the annual Special Open Enrollment Window.
 
Mandatory Medicare Part D Disclosures Due by Mid-October
Medicare’s Annual Election Period (AEP) begins on October 15, 2020, and ends on December 7, 2020. During this time, Medicare beneficiaries can enroll in, or change, Medicare Advantage plans and Medicare Part D Prescription Drug plans. If a Medicare-eligible person does not have qualified, “creditable” prescription drug coverage, he or she will be penalized with a late-enrollee penalty upon future enrollment, and it will continue to apply for the remainder of the time enrolled in Medicare Part D coverage.
 
Because of this, employers (of any size) providing group prescription drug coverage to Medicare-eligible individuals – including both employees and dependents – must distribute notices to such individuals stating whether their employer-sponsored prescription drug coverage is creditable or non-creditable. Notices are due to all Medicare-eligible individuals annually before 10/15, which is the start of the Medicare AEP.
 
We at Word & Brown have surveyed our carriers and have placed all creditable/non-creditable designations in easy-to-reference charts for all carriers’ Small Group plans and Large Group plans. Refer to these charts to help determine whether the coverage sponsored by the employer is creditable or non-creditable.

 
The Centers for Medicare & Medicaid Services (CMS) provide model notices to meet these notification requirements, along with additional information on the required distribution.
 
For further detail of this compliance requirement, refer to Word & Brown’s in-depth column on Medicare Part D notices and disclosures.
 
Affordable Care Act IRS Reporting
If your employer client determined on January 1, 2020, that it is an Applicable Large Employer (ALE) under the ACA for all of 2020, then it must report the coverage it offered, or did not offer, to any person employed on a full-time basis for at least one full calendar month of 2020 to the IRS. 
 
This reporting is usually conducted in Q1 of the following year (e.g., 2021 for the 2020 tax year), utilizing IRS Forms 1094 and 1095. The IRS will likely announce special information related to COVID-19 hardship during the reporting year, but it has yet to do so. Watch for updates from Word & Brown for its annual ACA IRS Reporting webinar series, Don’t Fear the Forms, which will be hosted in December 2020 and January 2021. This webinar is intended for employers and brokers, and will address all aspects of ACA IRS reporting for fully insured groups.
 
IRS Forms 1095 are due to employees by February 1st. They are due to the IRS by March 1st if filing by paper, or March 31st if filing electronically. Note: The IRS may adjust these deadlines, as it has in previous years.
 
Compliance Responsibility for 2021 – ACA and COBRA
At the beginning of each year, on January 1st, an employer should compute its size by evaluating the size of its workforce for the previous calendar year.
 
To evaluate ACA Applicable Large Employer (ALE) status – and required compliance with the ACA’s employer mandate – the employer must total the number of Full Time (FT) employees and the number of Full Time Equivalent (FTE) employees for each of the 12 months of the calendar year, and then average all results. If the size is 50+, the business is an ALE for all of 2021 and must, therefore, comply with the employer mandate and report on such offers of coverage to the IRS in 2022. Refer to Word & Brown’s exclusive Group Size Calculators to help with this calculation.
 
At the same time each year, employers must also evaluate federal COBRA compliance (and Cal-COBRA compliance for employers domiciled in California), by evaluating the size of its workforce of the previous year. Although this calculation is conducted at the same time, it is a different calculation than the ACA ALE calculation.
 
Refer to Word & Brown’s “Count” Reference for a closer look at this COBRA calculation, as well as the ACA calculation:

 
Visit Word & Brown’s Q4 microsite for all-things Q4, including compliance, underwriting, quoting, sales support, enrollment, technology, and more.

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