2019 Year End Legislative Review
The Affordable Care Act
Employer Mandate Penalties Increase for 2020
Employers who fail to offer minimum essential coverage to 95% of their full time employees may pay a penalty for all employees, if even one employee qualifies for a subsidy in the state marketplace (penalty ‘A’). Employers who offer minimum essential coverage, but fail to offer coverage meeting minimum value requirements, or at an ‘unaffordable’ rate (more than 9.78% of income in 2020) may pay a penalty just for those employees who actually qualify for a subsidy (penalty ‘B’). In 2020, these penalties will increase as follows:
4980H(A)- Employer is subject to a penalty equal to $2,570 x every full time employee (minus 30)
4980H(B)- Employer is subject to a penalty equal to $3,860 x the number of full time employees that receive a subsidy to purchase insurance on the Health Exchange.
HIT Returns in 2020 Premiums, Repealed After That
Insurance carriers will be responsible for paying the Health Insurer Industry Tax (HIT) for the 2019 policy year, payable in 2020. Employer plans sponsors with fully insured health plans will see this reflected in their 2020 premiums. Pursuant to the Legislative bills signed late in 2019, the HIT is repealed following the 2020 effective year.
Cadillac Tax
The excise tax was originally scheduled to take effect for taxable years beginning after 2017, but it was delayed numerous times through legislation. The 40% excise tax on employer sponsored plans exceeding certain thresholds has been officially repealed as part of the spending bill signed on to avoid government shutdown as the 2019 calendar year comes to a close.
The Fate of the ACA
After months of deliberating, in this last week before the holidays kick off, the 5th Circuit Court of Appeals agreed with the lower court in Texas v Azar, finding the individual mandate to purchase health insurance or pay a penalty, unconstitutional. The Court specifically notes “the individual mandate is unconstitutional because it can no longer be read as a tax, and there is no other constitutional provision that justifies this exercise of congressional power.” Since the actual penalty associated with the individual mandate has been reduced to $0 since the start of 2019, this finding has no practical implications for employer health plans or individuals. However, the larger and more important question now, is what happens to the rest of the ACA? The case will now return to the lower court for an answer to that question. Regardless of which way the court comes out on the constitutionality of the remaining ACA, it is likely this case will make its way to the Supreme Court in the coming year.
Association Health Plans
Following the President’s October 2017 Executive Order, the Department issued final rules expanding the ability of individuals in related areas of business to affiliate formally and purchase Association Health Plans (AHPs). In response to suits filed by multiple attorneys general from states such as New York and California, the U.S. District Court in Washington ruled that the expansion of AHPs violates the ACA and ERISA, and as such, the final rules are unconstitutional. What does this mean? Nothing immediately changes, but this ruling could be a sign of things to come and groups that have taken advantage of the new AHP flexibility should be aware that it could be short lived.
Executive Order: Increasing Access to Affordable Care
On June 24, the President issued an Executive Order that directs the various departments to draft regulations “to enhance the ability of patients to choose the healthcare that is best for them.” The order itself does not contain substiative details on what these regulations will entail, rather its a directive to the Departments to act within 60 to 120 days (depending on the specific issue at hand). Once such regulations are released, there will then be a comment period before they become final.
Areas the Departments have been instructed to address include:
Price transparency for hospital charges, consumer out of pocket costs, and health quality report
Surprise Medical Bills
Increased to FSA carryover and increased flexibility for HSAs
Establishing a ‘health quality roadmap’ and easier access to related data for individuals
IRS Activity
Notice 2019-45 increases the list of services that can be provided without cost share or application of the deductible, while still maintaining the HSA eligibility for those enrolled in an HDHP. These services are aimed at treating chronic conditions such as heart disease and diabetes.
Employers have begun receiving penalty notices for late or incomplete 1095-C and 1094-C filings for the 2017 plan year. As we enter 2020, employers should continue to monitor for any IRS mailings and respond promptly.
The 2020 account contribution limits and out of pocket costs have been indexed for 2020 as follows:
HDHP minimum deductible amount
2019 Limit: $1,350/ $2,700
2020 Limit: $1,400/ $2,800
HDHP Maximum OOP Limit (determined by IRS)
2019 Limit: $6,750/ $13,500
2020 Limit: $6,900/ $13,800
NON-HDHP Maximum OOP Limits (determined by HHS in accord with ACA)
2019 Limit: $7,900/ $15,800
2020 Limit: $8,150/ $16,300
HSA Maximum Contribution Amount
2019 Limit: $3,500/$7,000
2020 Limit: $3,550/$7,100
FSA Contribution
2019 Limit: $2,700
2020 Limit: $2,750
Catch–up contributions (those age 55+)
2019 Limit: $1,000
2020 Limit: $1,000
Qualified Transportation Benefit
2019 Limit: $265 transportation / $265 parking
2020 Limit: $270 transportation / $270 parking
2019 State Specifics
State Level Individual Mandates
Massachusetts
Effective Date: 2006
Employer Reporting Date: By November 30th, annually via HIRD form
Penalty Amount: Up to $1,524
Washington DC
Effective Date: 2019
Employer Reporting Date: March 30, 2020
Penalty Amount: 2.5% of salary, or $700 per person (whichever is higher)
New Jersey
Effective Date: 2019
Employer Reporting Date: March 30, 2020
Penalty Amount: 2.5% of salary, or $695 per person (whichever is higher)
California
Effective Date: 2020
Employer Reporting Date: March 30, 2021
Penalty Amount: 2.5% of salary, or $695 per person /$395 per child to family cap of $2,085 (whichever is higher)
Rhode Island
Effective Date: 2020
Employer Reporting Date: TBD
Penalty Amount: 2.5% of salary, or $695 per person /$395 per child (whichever is higher)
Vermont
Effective Date: 2020
Employer Reporting Date: TBD
Penalty Amount: TBD
State Paid Family Leave and Anti-Harassment Training Requirements
Massachusetts
Payroll withholding to fund MA paid family leave began October 1, 2019 (after an extension from the original July effective date) with benefits becoming available as of January, 2021.
New York
NY PFL remains at a maximum of 10 weeks for 2020, with the benefit increasing from 55% of wages up to the state weekly wage max in 2019, to 60% ($840.70) in 2020. Employee annual contributions increase to 0.27% of wages, to a maximum of $196.72.
Beginning with calendar year 2019, all employers with NY employees need to conduct annual anti-harassment training (resources provided by the NYC. gov site here for NYC employers and here for NY state employers)
New hires in NY need to receive the training within 30 days of hire date
New Jersey
NJ has had paid family leave (FMLI) since 2009, but in 2019 the definition of ‘family’ under this law was expanded significantly, and the payroll withholding will increase in 2020. The time off in 2020 will increase from 6 weeks to 12 weeks, and on an intermittent basis, the maximum will be 56 days. Additionally, victims of sexual assault and domestic violence are eligible for leave.
Maine
First state requiring ‘unrestricted’ paid leave (up to 40 hours) for employers with 10 or more employees, available to employees who work 120 hours in the year
Nevada
Paid Leave effective January 1, 2020 for employers with 50 or more employees.
Leave will be available for eligible employees, up to 40 hours without having to give a reason for the leave (similar to Maine)
Connecticut
Effective in 2021, the CT PFML will become the most generous benefit in the country. The benefit will be funded through a 0.5% payroll tax on wages subject to Social Security, and withholding begin January 1, 2021 (benefit becomes payable in 2022).
Washington DC
Universal paid Leave was passed in 2017, with an effective date for benefits beginning July 1, 2020. Employers have been making contributions based on payroll (0.62% of gross wages each quarter) since July 31, 2019. Note this is solely an employer paid benefit, unlike paid family leave in most other states. Any employer who pays unemployment insurance for any employee in Washington D.C must contribute/participate in the paid leave program.
Oregon
Paid Family leave beginning in 2023, with up to 12 weeks off, at 100% of pay up to $1,215 a week. Leave will be available to every employee working in Oregon state, funded by payroll tax paid by employees (1% of wages up to $132,900), and employers with 25 or more employees. Eligible individuals will include victims of harassment, stalking or sexual assault.
California
In July 2020, PFL in CA will increase from a maximum of 6 weeks to 8 weeks. Its expected the leave will increase to 12 weeks by 2021.
HRA Expansion Has Arrived- Most Helpful to Small Employers
The Departments have released final rules greatly expanding the use of employer provided health reimbursement arrangements (HRAs) beginning in 2020. Since the 2013 regulations had drastically restricted the permitted uses of these plans under IRS Notice 2013-54, this is welcome news for many employers.
The birth of qualified small employer health reimbursements (QSEHRAs) a few years ago was a step in this new expansive direction, but still fairly limited in application (for example, no group health plan could be offered at all and only ‘small’ employers could offer this). Two forms of HRAs can now be offered even if an employer offers a traditional group health plan to certain groups of employees: Individual Coverage HRAs and Excepted benefit HRAs. The individual HRA cannot be offered alongside a group health plan to the same employees- rather employers must offer one or the other. For example, an employer may offer a group plan to one group of employees at one office location, and offer instead an individual coverage HRA to another group of employees located at a different geographic location. This approach of course should be taken with caution in classifying such employee groups.