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Employer COVID-19 Updates

As we monitor the spread of COVID-19, we want to assure you that we will continue to deliver the excellent service you expect from us. Here is the latest update from our team.

Consolidated Appropriations Act, 2021

On Sunday, December 27, President Trump signed a COVID-19 relief and government spending package called the Consolidated Appropriations Act, 2021. As part of the relief bill, the government has expanded upon earlier-provided relief for flexible spending accounts (FSA) and dependent care flexible spending accounts (DCA).

Employers may choose to adopt any or all of the following provisions; however they are not mandatory.

  1. Rollovers – Allow employees to carry over all unused amounts in a FSA and/or DCA from the 2020 or 2021 plan year to the next plan year.
  2. Grace Periods – Extend the FSA grace period from 2 1/2 months to 12 months following the end of the plan years for those plan years that end in 2020 or 2021.
  3. Qualifying Dependent Age – Allow reimbursement for expenses incurred for a child through the plan year where the child attains age 14 (this helps address a situation where a child attained age 13 during the pandemic, therefore, the parent may not have been able to use the funds because school or daycare was closed).
  4. Election Changes – Permit prospective mid-year election changes without regard to a change in status in order to accommodate these updates.
  5. Reimbursements Post-Termination – Allow reimbursements through the end of 2020 or 2021 plan year in which participation ends, including any grace period or extended grace period even if those reimbursements were incurred after the employee was employed with the employer.

Deadline for Making Plan Amendments

Employers wanting to adopt one or more of the above provisions must amend their applicable plan documents by the last day of the first calendar year beginning after the end of the plan year in which the amendment is effective. This means changes for the 2020 plan year need to be adopted by December 31, 2021, and changes for the 2021 plan year need to be adopted by December 31, 2022.

Colorado Hospitals Rank in Watson Health 100 Top Hospitals Study

Several Colorado hospitals made the Watson Health annual list of top 100 hospitals in the US: UCHealth Poudre Valley Hospital, Medical Center of the Rockies, Rose Medical Center in Denver, UCHealth University of Colorado Hospital in Aurora, Sky Ridge Medical Center in Lone Tree and Swedish Medical Center in Englewood. 3,134 hospitals in the U.S. were analyzed based on clinical outcomes including numbers of complications, mortality and short-term readmission rates, and operating with financial efficiency. UCHealth and HealthONE in Denver were also named among the Top 15 health systems in the country. More details here.

Senate Bill 215 Passed

In Denver – With his signature, Gov. Jared Polis helped tens of thousands of Coloradans take a step closer to the quality health care they need by expanding access to more affordable health insurance.

Polis signed Senate Bill 20 – 215 into law, ensuring the continuation of the state’s successful reinsurance program as well as expanding subsidies for tens of thousands of Coloradans who purchase their insurance on the individual marketplace. State lawmakers approved the plan during their recent legislative session and Polis signed that plan into law.

“To say that this is a huge step forward for Colorado would be an understatement. Literally hundreds of thousands of people across the entire state will benefit,” said Adam Fox, director of strategic engagement of the Colorado Consumer Health Initiative. “Now more than ever, we all understand the health of all of us depends on the health of each one of us. Helping more Coloradans get access to quality health care isn’t just the right and moral thing to do, it is the smart thing to do.”

The law continues a federal fee on insurance carriers set to expire this year and reinvests that fee – with no cost to the state budget – in three ways:

  1. Continue Colorado’s successful reinsurance program, which lowered premiums for those purchasing on the individual market by 20 percent in its first year.
  2. Make insurance more affordable for individual-market consumers who don’t benefit from reinsurance, namely lower income Coloradans that receive federal subsidies under the Affordable Care Act.
  3. Create affordable health insurance options for people left out of the Affordable Care Act, including individuals in the “family glitch” and those who lack proper documentation.

“This is a monumental piece of legislation for Colorado and the nation,” said Healthier Colorado executive director Jake Williams. “The pandemic propelled us to create innovative solutions to healthcare affordability and ensure that people who have suffered the most from the economic downturn are not left holding the bill. We are not only the first state in the nation to provide a path forward for people without proper documentation to secure private health insurance so they can seek the care they need and deserve, but we found a way to support hardworking families by fixing a common barrier to care known as the family glitch. When Coloradans are healthy, so is our economy.”

Specifically, the new law will help all Coloradans by stabilizing the health insurance market. Also helped will be the 250,000 individuals and families who purchase their health insurance on the individual market through the continuation of the state’s reinsurance program. This bill will provide increased purchasing power for tens of thousands of Coloradans who receive financial assistance to help with the cost of their insurance coverage, but for whom coverage remains expensive and often carries high deductibles. In addition, Colorado is one of the first states to further expand financial assistance and coverage to thousands of Coloradans who have been left out of the Affordable Care Act including people in the “family glitch,” which ties what is considered affordable employer coverage to the cost of the employee, rather than factoring in the much higher cost of covering the entire family. Finally, Coloradans who lack proper documentation will also be helped.

“Given the tough budget situation created by COVID-19 and our restrictive and unfair tax policy this kind of bipartisan health care expansion is nothing short of amazing. The ability to take an existing fee already paid by the insurance industry and reinvest it where it will do the most good for the largest number of Coloradans is a powerful demonstration of Colorado’s commitment to the health of its residents,” said Erin Miller, Vice President of Health Initiatives at the Colorado Children’s Campaign. “With this bill, Colorado continues to lead the nation in implementing creative health insurance reforms to make coverage more affordable and accessible. The three-legged policy stool created by this policy held together a strong and diverse group of advocates and ensured this new law will benefit kids and families in all parts of our state, including those who have historically and repeatedly been left behind by our policies.”

2020 Employer Mandate

Employers must offer health insurance or pay a penalty

Employer mandate overview

Employers must offer health insurance that is affordable and provides minimum value to 95% of their full-time employees and their children up to the end of the month in which they turn age 26, or be subject to penalties. This is known as the employer mandate. It applies to employers with 50* or more full-time employees, and/or full-time equivalents (FTEs). Employees who work 30 or more hours per week are considered full-time.

Employer mandate requirements

Affordable coverage

Coverage is considered “affordable” if employee contributions for employee-only coverage do not exceed a certain percentage of an employee’s household income (9.86% in 2019 and 9.78% in 2020).

Based on IRS safe harbors, coverage is affordable if the cost of self-only coverage is less than the indexed percentage of the following:

  • Employee’s W-2 wages (reduced by any salary reductions under a 401(k) plan or cafeteria plan)
  • Employee’s monthly wages (hourly rate x 130 hours per month),
    OR
  • Federal Poverty Level for a single individual

In applying wellness incentives to the employee contributions used to determine affordability, assume that each employee earns all wellness incentives related to tobacco use, but no other wellness incentives.

Minimum value

A plan provides “minimum value” if it pays at least 60% of the cost of covered services (deductibles, copays and coinsurance). The U.S. Department of Health & Human Services has developed a minimum value calculator that can be used to determine if a plan provides minimum value.

Employer mandate penalties

This graphic summarizes the coverage requirements and the penalties that apply if any full-time employee purchases coverage on the Marketplace and receives a federal premium subsidy.

Overview of the coverage requirements and the penalties that apply if any full-time employee purchases coverage on the Marketplace and receives a federal premium subsidy.

Additional details on the Employer Mandate

Employer mandate coverage requirements since 2016

Employers with 50 or more full-time and/or FTE employees must offer affordable/minimum value medical coverage to their full-time employees and their dependents up to the end of the month in which they turn age 26, or they may be subject to penalties. The amount of the penalty depends on whether or not the employer offers coverage to at least 95% of its full-time employees and their dependents.

  • Employers who fail to offer coverage to at least 95% of full-time employees and dependents may be subject to a penalty of $2,320 per full-time employee minus the first 30.
  • Employers who offer coverage may still be subject to a penalty if the coverage is not affordable or does not provide minimum value. This penalty is the lesser of either $3,480 per full-time employee receiving a federal subsidy for coverage purchased on the Marketplace, or $2,320 per full-time employee minus the first 30.

Employers must treat all employees who average 30 hours a week as full-time employees.

Dependents include children up to age 26, excluding stepchildren and foster children. At least one medical plan option must offer coverage for children through the end of the month in which they reach age 26. Spouses are not considered dependents in the legislation, so employers are not required to offer coverage to spouses.

Examples of the requirement to cover 95% of full-time employees

Assume each employer has 1,000 full-time employees who work at least 30 hours per week.

  • Employer 1 currently offers medical coverage to all 1,000 and their dependents. The company is considered to offer coverage since it offers coverage to more than 95% of its full-time employees and their dependents.
  • Employer 2 currently offers medical coverage to 800 full-time employees and their dependents. The company will need to offer coverage to 150 more full-time employees and their dependents to meet the 95% requirement to be treated as offering coverage.
  • Employer 3 has 500 full-time, salaried employees who are offered coverage and 500 full-time hourly employees who are not offered coverage. The company will need to offer coverage to at least 450 hourly employees (and their dependents) to meet the 95% requirement to be treated as offering coverage.
  • Employer 4 offers coverage to 950 full-time employees and their dependents. Only 600 of those employees actually enroll in coverage. The company is compliant no matter how many employees actually enroll in affordable coverage that offers minimum value.
Determining how many full-time employees an employer has

The regulations allow various calculation methods for determining full-time equivalent status. Because these calculations can be complex, employers should consult with their legal counsel.

  • Full-time employees work an average of 30 hours per week or 130 hours per calendar month, including vacation and paid leaves of absence.
  • Part-time employees’ hours are used to determine the number of full-time equivalent employees for purposes of determining whether the employer mandate applies.
  • FTE employees are determined by taking the number of hours worked in a month by part-time employees, or those working fewer than 30 hours per week, and dividing by 120.
Counting part-time and seasonal employees

Here are some considerations to help determine how part-time and seasonal employees equate to full-time and FTE employees.

  • Only employees working in the United States are counted.
  • Volunteer workers for government and tax-exempt entities, such as firefighters and emergency responders, are not considered full-time employees.
  • Teachers and other education employees are considered full-time employees even if they don’t work full-time year-round.
  • Seasonal employees who typically work six months or less are not considered full-time employees. This includes retail workers employed exclusively during holiday seasons.
  • Schools with adjunct faculty may credit 21/4 hours of service per week for each hour of teaching or classroom time.
  • Hours worked by students in federal or state-sponsored work-study programs will not be counted in determining if they are full-time employees.
Waiting periods to become eligible for coverage

Employers may not impose enrollment waiting periods that exceed 90 days for all plans beginning on or after January 1, 2014. Shorter waiting periods are allowed. Coverage must begin no later than the 91st day after the hire date. All calendar days, including weekends and holidays, are counted in determining the 90-day period.

Plans subject to the employer mandate

U.S.-issued expatriate plans meet the employer mandate.

Effective July 16, 2014, the employer mandate no longer applies to insured plans issued in the U.S. territories (Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa and the Northern Mariana Islands). A territory may enact a comparable provision under its own law.

Employer mandate reporting

All applicable large employers are required to file an annual report that ensures compliance with the employer mandate. The reporting will include information on all employees who were offered and accepted coverage, and the cost of that coverage on a month-by-month basis.

What happens if an employee receives subsidized coverage

Each year, public Marketplaces should send notices to employers that may owe a penalty for not complying with the employer mandate. These notices will alert employers if any of their employees received a subsidy through the Marketplace.

Employers that receive these notices will have 90 days to file an appeal if they believe the eligibility determination was made in error. It’s important that employers maintain documentation and records to provide proof of compliance with the employer mandate.

Read more about the employer notice process from the Centers for Medicare and Medicaid Services.

Employer mandate penalty amounts and processes

Examples of employer penalties
The employer does not offer coverage to full-time employees
The penalty is $2,320 per full-time employee, excluding the first 30 employees. This example shows how the penalty would be calculated.
Employer Trigger Penalty
500 full-time employees

No coverage offered

 One employee purchases coverage on the Marketplace and is eligible for a federal premium subsidy $2,320 per full-time employee, minus the first 30 employees

500 – 30 = 470 employees

470 x $2,320 = $1,090,400 penalty
The employer offers coverage that does not meet the minimum value and affordability requirements

The penalty is the lesser of the two results, as shown in this example.

Employer Trigger Penalty
1,200 full-time employees

Employer offers coverage, but coverage is not affordable and/or doesn’t provide minimum value

 The penalty is triggered if one employee purchases coverage on the Marketplace and receives a federal premium subsidy

250 employees purchase coverage on the Marketplace and are eligible for a subsidy

 Lesser of $2,320 per full-time employee, minus the first 30 employees, OR $3,480 per full-time employee receiving a federal premium subsidy

1,170 x $2,320 = $2,714,400 penalty

250 x $3,480 = $870,000 penalty (lesser penalty applies)
Penalty assessment process

Here is a snapshot of the penalty assessment process:

Employer offers health coverage compliant with the employer mandate

  • The Marketplace should notify the employer if an employee receives subsidized coverage during this same plan year
  • Employer may gather facts for response or file an appeal within 90 days of Marketplace notification
Employer reports coverage offer and respective data during the applicable tax season
Marketplace reports Minimum Essential Coverage data on employees, including subsidy information
IRS sends Letter 226J, with an Employer Shared Responsibility Payment assessment based on the data they have processed

  • Employer sends Form 14764 (response to Letter 226J) with Form 14765 (lists employees receiving subsidized coverage) and any updated or corrected data to previously reported Forms 1095-C
IRS sends Notice 220J, confirming the final penalty amounts owed, which could state no amount is owed after final audit review.
How an employer will know if a penalty has been assessed

If an employee receives subsidized coverage, the employer should be notified by the public Marketplace. The employer will then be provided an opportunity to respond and appeal if the employee was offered coverage that meets the minimum value and affordability standards.

Once the IRS has received individual tax returns and employer reporting for a given calendar year, it may determine that an employer did not meet its employer mandate requirements and is subject to a financial penalty, known as the Employer Shared Responsibility Payment (ESRP). The IRS will send the employer an IRS Letter 226J.

How an employer can appeal a penalty assessment

Any employer who receives a 226J letter should take immediate action to respond to the IRS. The employer has 30 days to respond with documentation and corrected reporting data (if applicable). Doing this may help the employer reduce or eliminate the ESRP assessed.

After the employer responds with documentation of corrected data previously reported on the Forms 1095-C, the IRS will complete their review and send a Notice 220J to the employer. This notice confirms the final penalty amounts being charged, by month. The Notice 220J may also indicate that no penalty is being charged based on the IRS’s review of any data or documentation provided by the employer in response to the initial Letter 226J.

Read more about employers’ options on the IRS web page, Employer Shared Responsibility Payment Q&As, questions 55-58.

How penalties apply to companies with a common owner

Companies that have a common owner are combined for purposes of determining whether they are subject to the mandate. However, any penalties would be the responsibility of each individual company.

* Before January 2016, employers with 50-99 employees were not required to offer coverage, and employers with 100 or more complied if they offered coverage to at least 70% of their full-time or FTE employees.

Final Regulations – 2021 Notice of Benefit and Payment Parameters

On May 7, 2020, the Centers for Medicare & Medicaid Services (CMS) issued final regulations and related guidance on a number of Affordable Care Act (ACA) provisions and related health care topics including out-of-pocket (OOP) maximums, prescription drug coupons and cost-sharing, Medical Loss Ratio (MLR) calculations, and Exchange updates and reforms. These regulations are generally effective for plan years beginning on and after Jan. 1, 2021.

2021 OOP maximums

The 2021 OOP maximums will increase to $8,550 for individual coverage and $17,100 for family coverage. These coverage limits apply to all non-grandfathered plans, regardless of size or funding type.

Prescription drug coupons

Beginning in 2021, plans are permitted, but not required, to include coupon amounts and other drug manufacturer direct assistance for prescription drugs as amounts paid toward a covered person’s annual OOP maximum, regardless of whether a generic equivalent is available. This applies to individual, small group, large group, and self-funded plans, to the extent permitted by state laws.

Medical Loss Ratio

Beginning with the 2022 MLR reporting year (i.e., MLR reports filed in 2023), issuers must report expenses of functions outsourced to, or services provided by, other entities consistently with issuers’ non-outsourced expenses. It also requires issuers to deduct prescription drug rebates and price concessions from MLR incurred claims. These rebates and price concessions must be deducted not only when received by the issuer, but also when received and retained by an entity that provides pharmacy benefit management services to the issuer.

Exchange regulations

The final rule includes a number of provisions that impact the Health Insurance Exchanges, including:

  • Maintain user fees from the 2020 plan year for Federally-facilitated Exchanges and State-based Exchanges on the Federal platform, 3.0% and 2.5% of total monthly premiums, respectively;
  • Finalize how Qualified Health Plan (QHP) issuers could voluntarily incorporate value-based insurance design principles into their QHPs;
  • Exchange eligibility enrollment and termination requirements;
  • Establish quality-rating information-display standards for Exchanges; and
  • Finalize changes to the risk adjustment program for insurers with high-cost enrollees.

The final rule also makes improvements, some beginning in January 2022, to Special Enrollment Period (SEP) rules.

Review the information at these links for additional details: