CMS Releases Reminders on Broker Use of Personally Identifiable Information (PII)

CMS released another slide deck to help brokers understand and comply with Marketplace Requirements. The newest deck is titled “Part II: Marketplace Privacy & Security Requirements for Agents and Brokers.” The slide deck addresses the use and protection of Personally Identifiable Information (PII). This latest information updates materials and guidance published last September.

PII is defined as “information that can be used to distinguish or trace an individual’s identity, either alone or when combined with other information that is linked or linkable to a specific individual.”  Examples of PII include everyday information; a person’s name, their address, email address, date of birth and Social Security number.

A broker must make available a Privacy Notice Statement prior to obtaining a person’s PII. The statement must be provided electronically or prominently displayed on a public-facing website. The statement should be on any paper form used to request or gather PII.

While CMS doesn’t provide a model Privacy Notice Statement, the slide deck provides some basic language for a statement. The statement is meant to inform applicants about any uses or disclosures of the information that will be collected. The statement does not require a signature by the consumer.

Proper security control to protect consumer PII is a responsibility of those collecting the data. This includes physical safeguards to the data as well as operational and administrative steps to protect the privacy of the information. Any submission of PII electronically must be done in a secure manner such as encryption.

Many of the suggested steps to secure PII should already be familiar to brokers who are accustomed to handling Private Health Information (PHI).

The CMS slide deck can be reviewed here.

NAHU has developed a sample notice titled Personally Identifiable Information PII) Privacy Notice.  This notice in intended to be used as a template. It has not been approved by CMS. The template should not be used without review and revision that represents your practices and specific situation. NAHU believes any documents of this nature should be reviewed by legal counsel.

These recent slide decks likely reflect recent analyses by CMS that indicates that brokers play a significant role in Marketplace enrollments. The 2018 Trends Report shows the following:

  • For plan year 2018, 49,100 agents and brokers registered with Federal platform Exchanges, supporting 42 percent of overall enrollments.
  • The biggest concerns for agents and brokers are lack of competition in the individual market and availability of commissions from insurance carriers.
  • To date, CMS has implemented 93 percent of recommendations from agent and broker partners.
  • CMS increased efforts to leverage the capabilities of the private sector by expanding the role of health insurance agents and brokers who supported 3,660,668 health plan enrollments, 42 percent of plan year 2018 open enrollments on Federal platform Exchanges. In contrast, Navigators enrolled less than 1 percent of total enrollees.

The 2018 Trends Report can be reviewed here.

CMS Offers Compliance Tips to Brokers in Marketplace

In a newly released slide deck, CMS, the Centers for Medicare and Medicaid Services, offers tips to brokers who assist clients with Marketplace coverage. The slide deck is titled “Compliance with Marketplace Requirements: Considerations for Agents and Brokers.”

The guidance reflects concerns CMS has expressed regarding consumer complaints, including some about brokers. CMS is considering a program to advise individual brokers if they have received complaints or have reason to believe that a broker has not adhered to Marketplace rules. The program which is under review and has been described to NAHU would be advisory in nature and would not be reported to state regulators.

By instituting the best practices in the slide deck, brokers will head off the likelihood of some of the more egregious claims from consumers that they were enrolled in coverage without their knowledge. Chief among the best practices is the recording of consumer consent to help a person apply for financial help and enroll in a Marketplace plan.

Consumer consent is required to assist a consumer and should acknowledge “the functions and responsibilities” that a broker has in the Marketplace.

A record of consent should include:

  • Consumer’s name
  • Date of consent
  • Identification of any brokers to whom consent is given.

The advice notes that a signed Broker of Record form from a state or carrier satisfies the consumer consent requirement.

A broker who wishes to speak with the Marketplace Call Center regarding a consumer’s application or with questions specific to a consumer must provide a separate authorization. This authorization can be valid for one call or up to 365 days. A consumer has to be on the phone with the broker for the initial contact to provide the authorization.

The guidance also cautions that brokers should never use their or their firm’s email address on behalf of a consumer. Mailing addresses must also be that of the consumer. If a consumer does not have an email address the broker can assist the consumer in establishing a personal email account. Consumers may enroll without an email in some instances but will need an email address to access online notices or to make changes to their account.

Brokers are also cautioned that creation of a account is limited to consumers or their legal representatives. A broker can assist in creating the account but the consumer must enter their own information. Also, brokers cannot log in to using the consumer’s account.

The presentation includes contact information for brokers to report suspected fraudulent activity. Examples of fraud and abuse identified by CMS include:

  • A client reports they have been contacted by an individual seeking his personal and financial information
  • A client, or colleague, submits false documentation to the Marketplace
  • An agent or broker is enrolling consumers without their consent
  • An agent or broker is assisting consumers without a valid health license or without completing Marketplace registration
  • A registered agent or broker with a valid health license is assisting consumers but is not licensed in the state where the consumer lives
  • An agent or broker has disclosed a consumer’s personally identifiable information
  • Unauthorized changes were made to the client’s online application
  • A consumer or insurance company is suspected of providing false or misleading information to the Marketplace.

The slide deck can be found here.

IRS Insight on Letter 227 – Hint: It’s in Reply to Letter 226J

Those lucky employers who have already received a 226J letter from the IRS have a Letter 227 to look forward to! The Letter 227 is the acknowledgement letter Applicable Large Employers (ALEs) receive following their response to the Letter 226J.

The Letter 226J provides a preliminary calculation of the amount that an ALE may owe as a result of employer shared responsibility (ESR) penalties. So far Letters 226J have been issued reflecting tax year 2015. The Compliance Cornered Blog post on Letter 226J can be found here.

In recent guidance, the IRS notes that Letters 227 are meant to close ESR penalty inquiries or provide next steps regarding penalties. There are five (5) different 227 letters.

  1. Letter 227-J acknowledges receipt of a signed Form 14764. An ALE uses this form to indicate that it agrees with the penalty amount calculated by the IRS in Letter 226J. Payment of the amount calculated is submitted with Form 14764. No response is required for Letter 227-J after the case will be closed.
  2. Letter 227-K acknowledges receipt of information provided by the ALE and shows that the employer does not owe a penalty. This letter closes the case and does not require a response.
  3. Letter 227-L is used when the ESRP (Employer Shared Responsibility Payment) has been revised based on the information submitted by the employer. It includes an updated Form 14765 with revised calculations. The Form 14765 lists an ALE’s assessable full-time employees. An ALE receiving this letter can agree with the revised calculations or request a meeting to appeal the amount.
  4. Letter 227-M acknowledges the employer’s submission but shows that the ESRP did not change. The ALE can agree or request a meeting with the IRS.
  5. Letter 227-N reflects the decision reached following an appeals review. The letter will also close the case without further action by the employer.

A Letter 227 is not a bill demanding payment from the employer. Once the amount of the penalty has been assessed a CP220J which is a bill will be sent.

Letters 227-L and 227-M require a response. The due date for the response is noted in the letter.

The IRS web page explaining Letter 227 can be found here.

These new 227 letters – and the Letters 226J – underscore the complexity of the ACA’s Employer Shared Responsibility (ESR) reporting process. And, many of these letters would have been avoided had the called-for notification process to employers when an employee applied for subsidized coverage in the exchanges been fully implemented.

As a step toward reforming the ACA information reporting and Exchange verification process, the bipartisan Commonsense Reporting Act of 2017 (S 1908 and H.R. 3919) would provide individual consumers with much-needed safety nets, employers with relief from the burdensome reporting requirements and state and federally-facilitated Exchanges with an additional tool to verify tax credit and subsidy eligibility.
The National Association of Health Underwriters (NAHU) is part of a coalition, “Partnership for Employer-Sponsored Coverage (P4ESC),” supporting measures that would ease employer reporting and call for a prospective reporting system.

ACA Affordability Measure for 2019 Announced

The IRS published Revenue Procedure 2018-34 announcing the affordability percentage measure for plan years beginning after calendar year 2018. The new amount is 9.86%.

This new amount is an increase from the 2018 affordability percentage of 9.56%. Affordability was pegged at 9.69% in 2017.

Employers who are applicable large employers (ALEs) use the affordability percentage to ensure that employer-sponsored coverage is “affordable” and thereby avoid the ACA’s employer penalty. A simplified example of affordability is shown below:

Year       Affordability %   Annual W-2     Affordability      Max. Contribution

2017      9.69%                   $45,000               $4360.50               $363.38

2018      9.56%                   $45,000               $4302.00               $358.50

2019      9.86%                   $45,000               $4437.00               $369.75

The IRS Revenue Procedure announcing the 2019 affordability measure is here.

IRS Provides Limited Bare-Counties SHOP Relief

IRS Notice 2018-27 provides limited relief for employers who wished to utilize the small employer health insurance tax credit but there were no available plans in their county.

As a reminder, the tax credit is available for a two-consecutive tax year period. It was first available for tax years beginning after December 31, 2009. To qualify for the credit, eligible small employers had to offer coverage to employees through a SHOP exchange. Employers had to claim the credit using Form 8941. The credit was available to tax exempt organizations as well.

Transition relief was previously available for tax years 2014, 2015 and 2016 for some small employers where the employer’s principal business address was in a county in which no qualified health plans (QHPs) through the exchange were available. Notice 2018-27 builds on this prior relief for 2017 and 2018.

This latest relief is more limited than prior relief in that an eligible employer must have claimed the credit for all or part of a taxable year beginning after December 31, 2015. An employer may take the credit for any remaining credit period for health insurance coverage, if no SHOP coverage was available, provided that the coverage would have qualified for the credit under the rules applicable before January 1, 2014.

The relief does not extend availability of the credit beyond the two years of the credit’s availability.

Employers have to determine whether a county had coverage available through the SHOP. The notice advises that this information is available for 2017 here. Information on whether a particular county has SHOP coverage available for 2018 and beyond can be found by checking .

The notice provides examples that illustrate which employers might qualify for the tax credit.

The notice also advises that Hawaii’s State Innovation Waiver prohibits employers in Hawaii from claiming the tax credit for plan years beginning in calendar years 2017-2021/

IRS Notice 2018-27 can be found here.

IRS information on the Small Business Health Care Tax Credit can be found here.

Déjà vu — IRS Revises HSA Family limit

IRS Revenue Procedure 2018-27 returns the annual limit for 2018 HSA family contributions to $6,900. This follows and supersedes Revenue Procedure 2018-18 which was published this past March.

The IRS acknowledged that the $50 reduction to the limit on HSA deductions for family HDHP coverage imposed “administrative and financial burdens.” The notice reflected that these burdens fell on individuals who had already made the maximum contribution for the year based on the announcement made in 2017 (Revenue Procedure 2017-37) but also on employer plans where individuals had established annual salary reductions based on the $6,900 limit.

The notice provides procedures for repaying the $50 if the amount had been returned as an “excess contribution” based on the March announcement. Revenue Procedure 2018-18 notes, however, that “in accordance with Q&A-76 of Notice 2004-50, a trustee or custodian is not required to allow individuals to repay mistaken distributions.”

IRS Revenue Procedure 2018-27 can be found here.

“Grandmother” Rallies – Transition Relief Extended

As Mark Twain once wrote in a cable to a New York newspaper, “The report of my death was an exaggeration.” So, it is with “grandmothered” plans!

CMS gave “grandmother” new life in an announcement on April 9, 2018 extending the transition relief known as “grandmothered” plans.

Rather than terminating “grandmothered” policies at the end of 2018, this extension applies to policy years beginning “on or before October 1, 2019, provided that all such policies end by December 31, 2019.” The transitional relief applies to individual and small group markets.

The notice includes an attachment to be used if a cancellation notice has been sent to the policyholder and the carrier will now continue to policy. The notice provides guidance on differences between “grandmothered” plans and ACA-compliant plans. The notice also explains steps to take to choose a different policy.

As before, the extension of transitional relief allows states to decide whether and to what extent to  allow transitional relief. As such, brokers and consumers should look to their state’s insurance regulators for further guidance.

Grandmothered Plans — On Life Support?

Plans that are not fully in compliance with the Affordable Care Act (ACA) but are not “grandfathered” are referred to as “grandmothered” plans. “Grandfathered” plans had to be in effect prior to enactment of the ACA on March 23, 2010. “Grandmothered” plans could have been purchased subsequent to March 23, 2010 but before December 31, 2013. Both “grandfathered” and “grandmothered” plans have been able to be renewed depending on meeting regulatory or state requirements.

“Grandmothered” plans came about as the result of transitional relief offered by CMS in November 2013. The relief described in a letter allowed health insurance coverage in the individual and small group market that would be renewed between January 1, 2014 and October 1, 2014 to avoid certain insurance market reforms. The rationale for allowing the transition relief was that ACA compliant policies would have been significantly more expensive in many cases.

States could decide whether or not to allow these transitional policies. If a state allowed transitional policies, insurers could decide if they wanted to continue them or not. As many as 35 states allowed “grandmothered” policies.

There have been subsequent renewals of this transition relief. The most recent extension of “grandmothered” plans – and to date the last extension – was issued on February 23, 2017. This letter extended the period of transition relief to policy years beginning on or before October 1, 2018. The relief further limited the relief by noting that “provided all such policies end by December 31, 2018.”

The extension to the end of the 2018 calendar year was to align the end of the policies with the calendar year policy in the individual market.

States could elect to comply with this extension of the transitional relief or they could choose not to do so. They could also selectively elect shorter periods but were precluded from extending transition relief beyond the end of 2018.

Many small group employers and their insurance broker advisors are asking if “grandmothered” policies will survive to see 2019. Hope had flickered when a leaked version of a recent Republican reconciliation bill included an extension for these plans. This legislation never came to a vote.

As things currently stand, “grandmothered” plans will come to an end as of December 31, 2018. As has been the case with a number of ACA provisions, however, “grandmother” may make a miraculous recovery. Only time will tell.

Electronic Notice Distribution Requirements — Challenging and in Need of Change

Employers and employees have embraced benefit portals to enroll in coverage and access benefit information. Despite the near ubiquity of electronic benefits media, rules that govern the electronic distribution of materials required to be disclosed by ERISA haven’t kept pace – having been written more than a decade ago.

Today’s rules have an over-arching requirement for distribution of plan documents – that the employer or plan administrator must use a means that is “reasonably calculated to ensure actual receipt” of required notices by plan participants. The method also has to achieve “full” distribution. These sweeping requirements have led many employers to provide documents by first-class mail as this continues to be the “gold standard” for sending notices.

For a variety of reasons, including the cost of printing and mailing documents, employers want to use electronic means to send notices. In a recent comment letter NAHU sent to the ERISA Advisory Council they recounted an employer’s expense of $35,000 to prepare and mail ERISA required documents.

The rules on electronic distribution consider two groups of employees:

  1. Those employees with regular work-related computer access
  2. Employees without regular work-related computer access.

Employers may distribute documents to employees with regular access to computers as a part of their workday without obtaining consent from employees to receive them electronically. The employees don’t have to have a means to print the documents but only to access them. Importantly, the employee must be able to access the documents where they are performing their duties. As such, a computer kiosk in the break room does not meet these requirements.

For all others, the employer must provide paper copies of documents unless an employee “affirmatively consents” to electronic distribution of documents. This consent must be obtained prospectively, i.e., before any documents are distributed. Furthermore, the consent must include an electronic address to receive the information.

An employer must provide the following information as a part of affirmative consent to receive documents electronically:

  • If documents will be sent electronically, then the employee must affirmatively consent from the email address that they agree to use to receive information
  • A statement regarding the types of documents that will be provided electronically
  • Notice that the employee can withdraw consent, how to do so and that paper copies can be requested and whether there is a charge to receive paper documents
  • How to notify the employer of changes to the address for electronic disclosure
  • Any requirements relative to hardware or software to obtain the information.

The method must also result in actual receipt of the information. This may require a confirmation of receipt of transmitted notices or a process to address undelivered electronic mail.

Confidentiality of electronic documents that contain personal information is also required.

There are also format requirements that must be met. In short, the electronic documents must be consistent with the style, format and content requirements applicable to the particular document.

And, it must be clear to the recipient that the information has significance. For example, if the document relates to changes in the benefits, that should be evident in the transmittal.

DOL rules on disclosure can be found here. Technical release 2011-03 on the topic can be found here.

Electronic Distribution of Forms 1095-B and 1095-C

The rules to distribute the Employer Shared Responsibility Forms to individuals are similar to those established by the DOL for ERISA purposes. Any electronic notice must contain all of the required information that also complies with the guidelines in IRS Publication 5223. Publication 5223 is titled “General Rules and Specifications for Affordable Care Act Substitute Forms 1095-A, 1094-B, 1095-B, 1094-C and 1095-C.”

Affirmative consent to receive the statements electronically is required and must not have been withdrawn prior to the statement being issued. As with the ERISA document distribution rules, the consent must be made electronically in a way that shows that the individual can access the statement in the electronic format in which the form will be furnished.

The employer must also inform the recipient that the statement is ready to be accessed and printed, if desired. The employer may provide this information by mail or electronically. Notably, this notice must include the capitalized statement “IMPORTANT TAX RETURN DOCUMENT AVAILABLE.” This statement would be the subject line if the notice is being sent by email.

The IRS has not provided a safe harbor for distribution of the 1095-B and 1095-C by electronic means. As such, the rules should be strictly followed.

In the letter to the ERISA Advisory Council as well as other communications with the federal Departments of Labor and Treasury, NAHU has called for an update to the electronic distribution guidance for employers to make use of electronic means more flexible. NAHU has called for making use of a “reasonably accessible” standard where an employee could acknowledge through online enrollment that disclosure documents provided online are reasonably available.

NAHU has also recommended accommodation for apps to store and access notices and plan documents. And, reflecting on today’s electronic media norms, NAHU suggested that a valid address for electronic delivery notifications should include phone numbers for text messages as well as social media accounts.

NAHU’s recommendations also include a call for harmonizing requirements for electronic distribution across government agencies. Employers would gain administrative and compliance efficiencies if the DOL and Department of the Treasury had the same disclosure requirement rules.

In the meantime, employers sanguine about these distribution requirements do so at their peril. A 2015 court case, Thomas v. CIGNA Group Ins., found in favor of the employee’s beneficiary because there was no evidence that the participant received the SPD on the company intranet.




Tax Reform Changes HSA Limit

In the spirit of “beware what you wish for” the recent tax reform law included a small surprise for those with health savings accounts (HSAs). Page 400 of IRS Bulletin number 2018-10 contains a revision -downward – of the HSA family contribution limit.

The revision is due to a change in how the amount is calculated. “Chained CPI” will be used for annual inflation adjustments beginning with the 2018 tax year instead of using the CPI (Consumer Price Index).

For the tax year 2018 the new “chained CPI” calculation will reduce the HSA contribution limit for family coverage to $6,850 instead of $6,900. This is a reduction of $50. The self-only limit remains unchanged from the previously announced amount of $3,450.

As a reminder, the self-only limit for 2017 was $3,400. The family limit for 2017 was $6,750.

Anyone who has contributed an amount in excess of $6,850 for 2018 should contact their HSA administrator to address the excess contribution.

The complete IRS bulletin 2018-10 can be found here.