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2016 Open Enrollment Checklist
To prepare for open enrollment, group health plan sponsors should be aware of the legal changes affecting the design and administration of their plans for plan years beginning on or after Jan. 1, 2016. Employers should review their plan documents to confirm that they include these required changes.
In addition, any changes to a health plan’s benefits for the 2016 plan year should be communicated to plan participants through an updated summary plan description (SPD) or a summary of material modifications (SMM).
Health plan sponsors should also confirm that their open enrollment materials contain certain required participant notices, when applicable—for example, the summary of benefits and coverage (SBC). There are also some participant notices that must be provided annually or upon initial enrollment. To minimize cost and streamline administration, employers should consider including these notices in their open enrollment materials.
PLAN DESIGN CHANGES
Grandfathered Plan Status
A grandfathered plan is one that was in existence when the Affordable Care Act (ACA) was enacted on March 23, 2010. If you make certain changes to your plan that go beyond permitted guidelines, your plan is no longer grandfathered. Contact Associated Financial Consultants if you have questions about changes you have made, or are considering making, to your plan.
□ If you have a grandfathered plan, determine whether it will maintain its grandfathered status for the 2016 plan year. Grandfathered plans are exempt from some of the ACA’s requirements. A grandfathered plan’s status will affect its compliance obligations from year to year.
□ If your plan will lose grandfathered status for 2016, confirm that the plan has all of the additional patient rights and benefits required by the ACA. This includes, for example, coverage of preventive care without cost-sharing requirements.
Effective for plan years beginning on or after Jan. 1, 2014, non-grandfathered health plans are subject to limits on cost-sharing for essential health benefits (EHB). Effective for plan years beginning on or after Jan. 1, 2016, a health plan’s out-of-pocket maximum for EHB may not exceed $6,850 for self-only coverage and $13,700 for family coverage. The ACA’s out-of-pocket maximum applies to all non-grandfathered group health plans, including self-insured health plans and insured plans.
Also, effective for plan years beginning on or after Jan. 1, 2016, the ACA’s self-only out-of-pocket maximum applies to all individuals, regardless of whether they have self-only or family coverage under a non-grandfathered plan. This means that, effective for 2016 plan years, non-grandfathered health plans are required to embed an individual out-of-pocket maximum in the plan’s family coverage when the family out-of-pocket maximum exceeds the ACA’s out-of-pocket maximum for self-only coverage.
This requirement applies to all non-grandfathered group health plans, including self-funded plans and insured plans of all sizes. It also applies to high deductible health plans (HDHPs).
Example: If an HDHP’s family coverage has a $10,000 out-of-pocket maximum and one individual in the family coverage incurs $20,000 in expenses from a hospital stay, then that individual would only be responsible for paying the cost-sharing related to the costs of the hospital stay covered as an EHB up to the annual limit on cost-sharing for self-only coverage ($6,850 for 2016).
□ Review your plan's out-of-pocket maximum to make sure it complies with the ACA's limits for the 2016 plan year ($6,850 for self-only coverage and $13,700 for family coverage).
□ If you have a HDHP that is compatible with a health savings account (HSA), keep in mind that your plan's out-of-pocket maximum must be lower than the ACA's limit. For 2016, the out-of-pocket maximum limit for HDHPs is $6,550 for self-only coverage and $13,100 for family coverage.
□ If your plan uses multiple service providers to administer benefits, confirm that the plan coordinates all claims for EHB across the plan's service providers or divides the out-of-pocket maximum across the categories of benefits, with a combined limit that does not exceed the maximum for 2016.
□ Group health plans with a family out-of-pocket maximum that is higher than the ACA’s self-only out-of-pocket maximum limit must embed an individual out-of-pocket maximum in family coverage so that no individual’s out-of-pocket expenses exceed $6,850 for the 2016 plan year.
Health FSA Contributions
The ACA imposes a dollar limit on employees’ salary reduction contributions to a health flexible spending account (FSA) offered under a cafeteria plan. An employer may impose its own dollar limit on employees’ salary reduction contributions to a health FSA, as long as the employer’s limit does not exceed the ACA’s maximum limit in effect for the plan year.
The ACA’s limit on employees’ pretax health FSA contributions first became effective for plan years beginning on or after Jan. 1, 2013. The ACA set the health FSA contribution limit at $2,500. For years after 2013, the dollar limit is indexed for cost-of-living adjustments. The health FSA limit stayed at $2,500 for 2014, but it increased to $2,550 for plan years beginning on or after Jan. 1, 2015.
It is expected that the Internal Revenue Service (IRS) will announce later this year whether the health FSA limit will remain at $2,550 or will increase for 2016 plan years.
□ Work with your advisors to monitor IRS guidance on the health FSA limit for 2016.
□ Once the 2016 limit is announced by the IRS, confirm that your health FSA will not allow employees to make pretax contributions in excess of that amount for 2016. Also, communicate the health FSA limit to employees as part of the open enrollment process.
Transition Policy for Small Group Health Plans
Some non-grandfathered health plans in the small group market have been allowed to renew without adopting all of the ACA’s market reforms under a temporary transition policy adopted by the Obama Administration. The transition policy applies to policy years beginning on or before Oct. 1, 2016.
The transition relief is not available to all small group health plans. It only applies to small businesses with coverage that was in effect on Oct. 1, 2013. Also, because the insurance market is primarily regulated at the state level, state governors or insurance commissioners must allow for the transition relief. In addition, health insurance issuers are not required to follow the transition relief and renew plans.
Even if transition relief was available for a small group plan in the past, it may not be available in 2016 and later years due to insurance market regulations or issuer decisions. If the transition relief no longer applies to your small group plan, confirm that your plan includes the following ACA market reforms for 2016:
□ Pre-existing Condition Exclusions—The ACA prohibits health plans from imposing pre-existing condition exclusions (PCEs) on any enrollees. (PCEs for enrollees under 19 years of age were eliminated by the ACA for plan years beginning on or after Sept. 23, 2010.)
□ Coverage for Clinical Trial Participants—Non-grandfathered health plans cannot terminate coverage because an individual chooses to participate in a clinical trial for cancer or other life-threatening diseases, and they cannot deny coverage for routine care that would otherwise be provided just because an individual is enrolled in a clinical trial.
□ Comprehensive Benefits Package—Insured plans in the individual and small group market must cover each of the essential benefits categories listed under the ACA. Each state has a specific benchmark plan for determining the essential health benefits for insurance coverage in that state. More information on the benchmark plans, including the benchmark plan for each state, is available on the Center for Consumer Information & Insurance Oversight (CCIIO) website.
Expansion of Small Group Market
Currently, most states define their small group insurance market as including employers with up to 50 employees. For plan years beginning in 2016, the ACA expands the small group market in every state to include employers with up to 100 employees.Under this expanded definition, employers with 51 to 100 employees may be subject to the ACA’s market reforms for the small group market for the first time for the 2016 plan year. These reforms include:
□ Premium Rating Restrictions: Issuers may vary the premium rate charged to a non-grandfathered plan in the small group market from the rate established for that particular plan only based on the following factors—age, family size, geography and tobacco use. All other rating factors are prohibited. This means that several factors commonly used by issuers in the past to set higher premiums, such as health status, claims history, duration of coverage, gender, occupation, small employer size and industry, can no longer be used.
□ Comprehensive Benefits Package—Insured plans in the small group market must cover each of the essential benefits categories listed under the ACA. Each state has a specific benchmark plan for determining the essential health benefits for insurance coverage in that state.
The small group rules apply to fully insured plans; they do not apply to employers that self-insure their group health plans.
In addition, transition relief may apply to employers that currently purchase insurance in the large group market, but, as of Jan. 1, 2016, that will be redefined by the ACA as small employers purchasing insurance in the small group market. At the option of the states and health insurance issuers, these employers may renew their current policies through policy years beginning on or before Oct. 1, 2016, without their policies being considered to be out of compliance with the ACA reforms that apply to the small group market but not to the large group market.
□ If you are a medium-sized employer (51 to 100 employees) with a fully insured plan and the transition relief does not apply to your plan, confirm that your plan includes coverage for the essential health benefits package under your state’s benchmark plan for the 2016 plan year.
Employer Penalty Rules
Under the ACA’s employer penalty rules, applicable large employers (ALEs) that do not offer health coverage to their full-time employees (and dependent children) that is affordable and provides minimum value will be subject to penalties if any full-time employee receives a government subsidy for health coverage through an Exchange.
To qualify as an ALE, an employer must employ, on average, at least 50 full-time employees, including full-time equivalent employees (FTEs), on business days during the preceding calendar year. All employers that employ at least 50 full-time employees, including FTEs, are subject to the ACA’s pay or play rules, including for-profit, nonprofit and government employers.
The ACA sections that contain the employer penalty requirements are known as the “employer shared responsibility” provisions or “pay or play” rules. These rules were set to take effect on Jan. 1, 2014, but the IRS delayed the employer penalty provisions and related reporting requirements for one year, until Jan. 1, 2015.
On Feb. 10, 2014, the IRS released final regulations implementing the ACA’s employer shared responsibility rules. Among other provisions, the final regulations established an additional one-year delay for medium-sized ALEs. This delay gave ALEs with fewer than 100 full-time employees (including FTEs) an additional year, until 2016, to comply. Thus, the employer mandate generally applies to:
· ALEs with 100 or more full-time employees (including FTEs) starting in 2015; and
· ALEs with 50 to 99 full-time employees (including FTEs) starting in 2016.
This delay applies for all calendar months of 2015 plus any calendar months of 2016 that fall within the 2015 plan year. However, ALEs that change their plan year after Feb. 9, 2014, to begin on a later calendar date are not eligible for the delay.
Medium-sized employers that will be subject to the ACA’s employer mandate starting in 2016 should consider taking the following key steps:
□ Confirm whether you will use the monthly measurement method or the look-back measurement method for identifying full-time employees (those working 30 or more hours per week) and offering plan coverage;
□ Update plan eligibility rules and communicate changes to participants with the plan’s open enrollment materials; and
□ Test your health plan for affordability and minimum value and make any necessary adjustments.
For more information on the ACA’s employer penalty rules, please contact your representative at Associated Financial Consultants.
HDHP and HSA Limits for 2016
If you offer an HDHP to your employees that is compatible with an HSA, you should confirm that the HDHP’s minimum deductible and out-of-pocket maximum comply with the 2016 limits. Also, the 2016 increased HSA contribution limits should be communicated to participants.
The following table contains the HDHP and HSA contribution limits for 2016.
HDHP Minimum Deductible Amount
HDHP Maximum Out-of-pocket Amount
HSA Maximum Contribution Amount
Catch-up Contributions (age 55 or older) $1,000
ACA DISCLOSURE REQUIREMENTS
□ Summary of Benefits and Coverage
The ACA requires health plans and health insurance issuers to provide a summary of benefits and coverage (SBC) to applicants and enrollees to help them understand their coverage and make coverage decisions. Plans and issuers must provide the SBC to participants and beneficiaries who enroll or re-enroll during an open enrollment period. The SBC also must be provided to participants and beneficiaries who enroll other than through an open enrollment period (including individuals who are newly eligible for coverage and special enrollees).
Federal agencies have issued a template for SBCs, which should be used for 2016 plan years. The template includes information on whether the plan provides minimum essential coverage and meets minimum value requirements. The SBC template (and sample completed SBC) are available on the Department of Labor (DOL) website.
In connection with your plan’s 2016 open enrollment period, the SBC should be included with the plan’s application materials. If plan coverage automatically renews for current participants, the SBC must generally be provided no later than 30 days before the beginning of the new plan year.
For self-funded plans, the plan administrator is responsible for providing the SBC. For insured plans, both the plan and the issuer are obligated to provide the SBC, although this obligation is satisfied for both parties if either one provides the SBC. Thus, if you have an insured plan, you should confirm that your health insurance issuer will assume responsibility for providing the SBCs. Please contact your representative at Associated Financial Consultants for assistance.
□ Grandfathered Plan Notice
If you have a grandfathered plan, make sure to include information about the plan’s grandfathered status in plan materials describing the coverage under the plan, such as SPDs and open enrollment materials. Model language is available from the DOL.
□ Notice of Patient Protections
Under the ACA, non-grandfathered group health plans and issuers that require designation of a participating primary care provider must permit each participant, beneficiary and enrollee to designate any available participating primary care provider (including a pediatrician for children). Also, plans and issuers that provide obstetrical/gynecological care and require a designation of a participating primary care provider may not require preauthorization or referral for obstetrical/gynecological care.
If a non-grandfathered plan requires participants to designate a participating primary care provider, the plan or issuer must provide a notice of these patient protections whenever the SPD or similar description of benefits is provided to a participant, such as open enrollment materials. If your plan is subject to this notice requirement, you should confirm that it is included in the plan’s open enrollment materials. Model language is available from the DOL.
Group health plan sponsors should consider including the following enrollment and annual notices with the plan’s open enrollment materials.
□ Initial COBRA Notice
Plan administrators must provide an initial COBRA notice to participants and certain dependents within 90 days after plan coverage begins. The initial COBRA notice may be incorporated into the plan’s SPD. A model initial COBRA Notice is available from the DOL.
□ Notice of HIPAA Special Enrollment Rights
At or prior to the time of enrollment, a group health plan must provide each eligible employee with a notice of his or her special enrollment rights under HIPAA.
□ Annual CHIPRA Notice
Group health plans covering residents in a state that provides a premium subsidy to low-income children and their families to help pay for employer-sponsored coverage must send an annual notice about the available assistance to all employees residing in that state. The DOL has provided a model notice.
□ WHCRA Notice
Plans and issuers must provide notice of participants’ rights under the Women’s Health and Cancer Rights Act (WHCRA) at the time of enrollment and on an annual basis. Model language for this disclosure is available on the DOL’s website in the compliance assistance guide.
□ Medicare Part D Notices
Group health plan sponsors must provide a notice of creditable or non-creditable prescription drug coverage to Medicare Part D eligible individuals who are covered by, or who apply for, prescription drug coverage under the health plan. This creditable coverage notice alerts the individuals as to whether or not their prescription drug coverage is at least as good as the Medicare Part D coverage. The notice generally must be provided at various times, including when an individual enrolls in the plan and each year before Oct. 15 (when the Medicare annual open enrollment period begins). Model notices are available at www.cms.gov/creditablecoverage.
□ Michelle’s Law Notice
Group health plans that condition dependent eligibility on a child’s full-time student status must provide a notice of the requirements of Michelle’s Law in any materials describing a requirement for certifying student status for plan coverage. Under Michelle’s Law, a plan cannot terminate a child’s coverage for loss of full-time student status if the change in status is due to a medically necessary leave of absence.
□ HIPAA Opt-out for Self-funded, Non-federal Governmental Plans
Sponsors of self-funded, non-federal governmental plans may opt out of certain federal mandates, such as the mental health parity requirements and the WHCRA coverage requirements. Under an opt-out election, the plan must provide a notice to enrollees regarding the election. The notice must be provided annually and at the time of enrollment. Model language for this notice is available for sponsors to use.